Steward Machine Company v. Davis
| Steward Machine Company v. Davis | |
|---|---|
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| Argued April 8–9, 1937 Decided May 24, 1937 |
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| Full case name | Steward Machine Company, Petitioner v. Harwell G. Davis, Individually and as Collector of Internal Revenue |
| Citations | 301 U.S. 548 (more) |
| Holding | |
| The unemployment compensation sections of the Social Security Act are constitutional. | |
| Court membership | |
| Case opinions | |
| Majority | Cardozo, joined by Hughes, Brandeis, Stone, Roberts |
| Dissent | Butler |
| Dissent | Sutherland, joined by Van Devanter |
| Dissent | McReynolds |
| Laws applied | |
| U.S. Const., art. I, §8 | |
Steward Machine Company v. Davis, 301 U.S. 548 (1937), was a case in which the Supreme Court of the United States upheld the unemployment compensation provisions of the Social Security Act of 1935. The Act established a national taxing structure designed to induce states to adopt laws for funding and payment of unemployment compensation. The decision in Steward signaled the Court’s acceptance of a broad interpretation of Congressional power to influence state laws.
The primary challenges to the Act were based on the argument that the Act went beyond the powers granted to the federal government in the Constitution and that the Act involved coercion of the states in contravention of the Tenth Amendment—calling for a surrender by the states of powers essential to their quasi-sovereign existence.
In the first months of 1937, the Court handed down decisions that affirmed both national and state prerogative to legislate regarding social welfare. The decisions were the first wave of what has become known as the constitutional revolution of 1937.
There are three additional issues that set the stage in early 1937:
By 1937, it had been well-established that regulatory taxes controlling commercial economic actions were within the power of Congress. In Hampton & Co. v. United States, the U.S. Supreme Court held that a regulatory tax is valid even if the revenue purpose of the tax may be secondary. The Supreme Court had also held that a tax statute does not necessarily fail because it touches on activities that Congress might not otherwise regulate. In Magnano Co. v. Hamilton, the Court stated:
Further emphasizing the broad power of taxation, the Court in Sonzinsky v. United States concluded that a tax does not cease to be valid merely because it regulates, discourages, or even definitely deters the activities taxed. In that case the Court held (regarding a tax on dealers in firearms):
The Supreme Court had recently decided U.S. v. Butler. The main issue presented in that case was whether certain provisions of the Agricultural Adjustment Act of 1933 conflicted with the Constitution. In the Act, a tax was imposed on processors of farm products, with the proceeds to be paid to farmers who would reduce their area and crops. The intent of the act was to increase the prices of certain farm products by decreasing the quantities produced.
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