McCray v. United States
24 S. Ct. 769, 195 U.S. 27, 1904 U.S. LEXIS 818 (1904)
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Rule of Law:
A federal excise tax that is otherwise within Congress's constitutional power to tax is not invalid simply because the tax is so high that it becomes destructive or because Congress may have had a regulatory motive in enacting it.
Facts:
- Congress passed an act, amended in 1902, that imposed an excise tax on oleomargarine.
- The act imposed a tax of ten cents per pound on oleomargarine artificially colored to look like butter.
- A much lower tax of one-quarter of one cent per pound was imposed on oleomargarine that was not artificially colored.
- McCray, a licensed retail dealer in oleomargarine, purchased for resale a 50-pound package of oleomargarine that was of a yellow color, causing it to look like butter.
- The yellow color was imparted to the oleomargarine during its manufacture by the use of artificially colored butter as an ingredient.
- The manufacturer had paid the lower tax of one-quarter cent per pound on the product, not the higher ten-cent rate.
Procedural Posture:
- The United States filed a lawsuit in the District Court for the Southern District of Ohio against McCray to recover a statutory penalty.
- McCray filed an answer admitting to the facts but asserting that the oleomargarine tax act was unconstitutional.
- The United States demurred to the answer, arguing that even if the facts were true, the constitutional defense was legally insufficient.
- The District Court sustained the demurrer, finding the law constitutional.
- Following McCray's decision not to amend his answer, the District Court entered a final judgment against him for the penalty.
- McCray then brought the case to the Supreme Court of the United States on a writ of error.
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Issue:
Does a federal excise tax on artificially colored oleomargarine violate the Constitution because the tax is so high as to be prohibitive and because it infringes upon the police powers reserved to the states under the Tenth Amendment?
Opinions:
Majority - Justice White
No, the federal excise tax does not violate the Constitution. The authority to impose an excise tax is a power expressly granted to Congress, and the judiciary may not inquire into the motives of the legislature or invalidate a facially valid tax because of its economic effects. The power to tax is plenary and knows no limits except those expressly stated in the Constitution. As long as the tax is within this grant of power, courts cannot restrain its exercise because it is oppressive or destructive. The responsibility for the abuse of this power lies with the people through the political process, not with the courts. Furthermore, the tax does not violate the Due Process Clause of the Fifth Amendment, as Congress has the discretion to select the objects of taxation, and the distinction between colored oleomargarine and colored butter is a valid classification. Since the tax is a valid exercise of a constitutionally delegated power, it does not infringe on the powers reserved to the states by the Tenth Amendment.
Dissenting - The Chief Justice, Justice Brown and Justice Peckham
The Chief Justice, Mr. Justice Brown and Mr. Justice Peckham dissented without a written opinion.
Analysis:
This case solidifies the doctrine that courts will not probe the motives of Congress when evaluating the constitutionality of a facially valid tax. By upholding a tax that was clearly designed to be regulatory and destructive to the oleomargarine industry, the Court effectively granted Congress a de facto federal police power through its taxing authority. This precedent became crucial for future legislation where Congress used taxes to regulate or discourage activities it could not directly prohibit, such as the regulation of narcotics, firearms, and gambling. It establishes that as long as a law generates some revenue and is structured as a tax, its regulatory or even prohibitive effects do not render it unconstitutional.
