Brief Fact Summary. The Agricultural Adjustment Act (Act) was devised in order to stabilize agriculture production. Congress enacted the Act pursuant to its powers under the United States Constitution (Constitution) to lay and collect taxes and provide for the general welfare of the United States.
Synopsis of Rule of Law. Congress cannot use its tax and spend powers to coerce citizens to do what it otherwise, under the Constitution, cannot compel them to do.
The Act was devised for the purpose of stabilizing production in agriculture. To this end, the Act imposed a tax on processors of agricultural commodities and gave the proceeds of the tax to farmers who agreed to restrict their agricultural production. Congress enacted the Act pursuant to its powers under the Constitution to lay and collect taxes and provide for the general welfare.
Issue. Is the Act a proper exercise of the federal taxing power?
Held. No. The decision of the lower court is affirmed.
The Act invades the rights reserved to the States. The regulation and control of agriculture production is a matter beyond the powers delegated to the federal government.
Moreover, Congress cannot use its tax and spend powers to coerce citizens to do what it cannot, otherwise, under the Constitution compel them to do.
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Justice Harlan Stone (J. Stone) stated that the Act amounts to coercion and is unsupported on the record. Threat of loss, not chance of gain, constitutes coercion. Discussion.
At issue in this case is Congress’ spending power. Through its power to spend, Congress enjoys an alternative means of enacting federal regulation. In light of the recent restrictions placed on the federal government under the Commerce Clause (See, United States v. Lopez), Congress’ spending power takes on a higher degree of importance. The Supreme Court announces here that there are limits on the way Congress may use its spending power as well, however: Congress may encourage but not coerce.