U.S. Supreme Court Steward Mach. Co. v. Collector, 301
U.S. 548 (1937) Steward Machine Co. v. Collector of
Internal Revenue No. 837 Argued April 8, 9,
1937 Decided May 24, 1937 301
U.S. 548 CERTIORARI TO THE CIRCUIT COURT OF
APPEALS FOR THE FIFTH
CIRCUIT Syllabus 1. The tax imposed by Title IX of the Social Security Act of
August 14, 1935, upon the employer of labor, described as "an
excise tax with respect to having individuals in his employ," and
which is measured by prescribed percentages of the total wages
payable by the employer during the calendar year, is either an
"excise," a "duty," or an "impost," within the intent of Art. I,
Sec. 8, of the Constitution, and complies with the requirement of
uniformity throughout the United States. Pp. 301 U. S. 578 , 301 U. S.
583 .

															2. The enjoyment of common rights, such as the right to employ
labor, may constitutionally be taxed. P. 301 U. S.
578 .

															Such taxation was practiced in England and among the Colonies
before the adoption of the Constitution. P. 301 U. S.
579 .

															3. The fact that the Social Security Act, Title IX, supra, exempts from the tax employers of less than eight,
and does not apply in respect of agricultural labor, domestic
service in private homes, and some other classes of employment does
not render it obnoxious to the Fifth Amendment. P. 301 U. S.
584 .

															A classification supported by considerations of public policy
and practical convenience, which would be valid under the equal
protection clause of the Fourteenth Amendment if adopted by a
State, is lawful, a fortiori, in the legislation of
Congress, since the Fifth Amendment contains no equal protection
clause.

															4. The proceeds of the tax imposed on employers by Title IX of
the Social Security Act, supra, go into the Treasury of
the United States without earmark, like internal revenue
collections generally. The taxpayer is entitled to credit against
the federal tax (up to 90% thereof) what he has contributed during
the tax year under a state unemployment law, provided that the
state law shall have been certified by the Federal Social Security
Board to the Secretary of the Treasury as satisfying certain
conditions designed to assure that the state law is genuinely an
unemployment compensation law and that contributions will Page 301 U. S. 549 be used solely in the payment of compensation and be protected
against loss after the payment to the State. To these ends, Title
IX provides, among other things, that, to be approved by the
federal Commission, the state law shall direct that all money
received in the state unemployment fund shall immediately upon such
receipt be paid over to the Secretary of the Treasury to the credit
of an "Unemployment Trust Fund," and that all money withdrawn from
the Unemployment Trust Fund by the state agency shall be used
solely in the payment of compensation, exclusive of expenses of
administration. The Secretary is empowered to invest in Government
securities any portion of this fund which, in his judgment, is not
required to meet current withdrawals, and out of it he is directed
to pay to any competent state agency such sums as it may duly
requisition from the amount standing to its credit. The taxpayer's
credit against the federal tax depends on compliance with these
statutory conditions; the State, however, is under no contractual
obligation to comply, but, at its pleasure, may repeal its
unemployment law, and withdraw its deposit from the federal
Treasury. Held: (1) Assuming that the federal tax cannot be treated as a revenue
provision standing apart, but must be tested in combination with
the 90% credit provision, the tax is not void as involving an
unconstitutional attempt to coerce the States to adopt unemployment
compensation legislation approved by the Federal Government. P. 301 U. S.
585 .

															(2) The problem of unemployment is national as well as local,
and in promotion of the general welfare moneys of the Nation may be
used to relieve the unemployed and their dependents in economic
depressions and to guard against such disasters. P. 301 U. S.
586 .

															(3) Title IX may be sustained as a cooperative plan whereby
States may be set free to provide unemployment compensation without
subjecting themselves to economic disadvantages resulting from the
absence of such provision in other States, and whereby, through the
assumption of such burdens by the States generally, the financial
burden of tho Nation due to unemployment may be correspondingly
decreased. P. 301 U. S.
587 .

															Duplicated taxes, or burdens that approach them, are hardships
that government, state or national, may properly avoid. P. 301 U. S.
589 .

															(4) Every rebate from a tax, when conditioned upon conduct, is
in some measure a temptation; but motive or temptation is not
equivalent to coercion. P. 301 U. S. 589 . Page 301 U. S. 550 (5) If it be true to say that a power akin to undue influence
may be exerted by the national Government on the States, the
location of the point at which pressure turns into compulsion, and
ceases to be inducement, would be a question of degree -- at times,
perhaps, of fact. The point had not been reached when Alabama, by
passing her unemployment compensation law, evinced her choice to
have relief administered under laws of her own making, by agents of
her own selection, instead of under federal laws, administered by
federal officers. P. 301 U. S.
589 .

															It is one thing to impose a federal tax dependent upon the
conduct of the taxpayers, or of the State in which they live, where
the conduct to be stimulated or discouraged is unrelated to the
fiscal need subserved by the tax in its normal operation, or to any
other end legitimately national. It is quite another thing to say
that a tax will be abated upon the doing of an act that will
satisfy the fiscal need, the tax and the alternative being
approximate equivalents. In such circumstances, if in no others,
inducement or persuasion does not go beyond the bounds of power. P. 301 U. S.
591 .

															5. No surrender of powers essential to the quasi -sovereign existence of States is required by § 903
of Title IX of the Social Security Act, which defines the minimum
criteria to which a state compensation system is required to
conform if it is to be accepted by the Social Security Board as the
basis for credits against the taxes laid on employers by that
Title; nor by § 904, which deals with the deposit, investment and
withdrawal of the moneys credited. P. 301 U. S.
593 .

															6. Semble that the States may constitutionally make
with Congress such agreements as do not impair the essence of their
statehood. P. 301 U. S.
597 .

															7. Title III of the Social Security Act, which appropriates no
money but authorizes the making of future appropriations for the
purpose of assisting the States in the administration of their
unemployment compensation laws, is severable from Title IX, and its
validity is not in issue. P. 598.

															89 F.2d 207, affirmed.

															This was a review, on certiorari, 300 U.S. 652, of a judgment of
the court below affirming the dismissal of the complaint in an
action for the recovery of money paid by the plaintiff as a tax
under Title IX of the Social Security Act. Page 301 U. S. 573 MR. JUSTICE CARDOZO delivered the opinion of the Court.

															The validity of the tax imposed by the Social Security Act on
employers of eight or more is here to be determined.

															Petitioner, an Alabama corporation, paid a tax in accordance
with the statute, filed a claim for refund with the Commissioner of
Internal Revenue, and sued to recover the payment ($46.14),
asserting a conflict between the statute and the Constitution of
the United States. Upon demurrer the District Court gave judgment
for the defendant dismissing the complaint, and the Circuit Court
of Appeals for the Fifth Circuit affirmed. 89 F.2d 207. The
decision is in accord with judgments of the Supreme Judicial Court
of Massachusetts ( Howes Brothers Co. v. Massachusetts
Unemployment Compensation Comm'n, December 30, 1936, 5 N.E.2d
720), the Supreme Court of California ( Gillum v.
Johnson, 7 Cal. 2d 744 ,
62 P.2d 1037), and the Supreme Court of Alabama ( Beeland
Wholesale Co. v. Kaufman, 174 So. 516). It is in conflict with
a judgment of the Circuit Court of Appeals for the First Circuit,
from which one judge dissented. Davis v. Boston & Maine R.
Co., 89 F.2d 368. An important question of constitutional law
being involved, we granted certiorari. Page 301 U. S. 574 The Social Security Act (Act of August 14, 1935, c. 531, 49
Stat. 620, 42 U.S.C. c. 7 (Supp.)) Is divided into eleven separate
titles, of which only Titles IX and III are so related to this case
as to stand in need of summary. The caption of Title IX is "Tax on
Employers of Eight or More." Every employer (with stated
exceptions) is to pay for each calendar year "an excise tax, with
respect to having individuals in his employ," the tax to be
measured by prescribed percentages of the total wages payable by
the employer during the calendar year with respect to such
employment. § 901. One is not, however, an "employer" within the
meaning of the act unless he employs eight persons or more. §
907(a). There are also other limitations of minor importance. The
term "employment" too has its special definition, excluding
agricultural labor, domestic service in a private home and some
other smaller classes. § 907(c). The tax begins with the year 1936,
and is payable for the first time on January 31, 1937. During the
calendar year 1936, the rate is to be one percent, during 1937 two
percent, and three percent thereafter. The proceeds, when
collected, go into the Treasury of the United States like internal
revenue collections generally. § 905(a). They are not earmarked in
any way. In certain circumstances, however, credits are allowable.
§ 902. If the taxpayer has made contributions to an unemployment
fund under a state law, he may credit such contributions against
the federal tax, provided, however, that the total credit allowed
to any taxpayer shall not exceed 90 percentum of the tax against
which it is credited, and provided also that the state law shall
have been certified to the Secretary of the Treasury by the Social
Security Board as satisfying certain minimum criteria. § 902. The
provisions of § 903 defining those criteria are stated in the Page 301 U. S. 575 margin. [ Footnote 1 ] Some of
the conditions thus attached to the allowance of a credit are
designed to give assurance that the state unemployment compensation
law shall be one in substance as well as name. Others are designed
to give assurance that the contributions shall be protected against
loss after payment to the state. To this last end, there Page 301 U. S. 576 are provisions that, before a state law shall have the approval
of the Board it must direct that the contributions to the state
fund be paid over immediately to the Secretary of the Treasury to
the credit of the "Unemployment Trust Fund." Section 904
establishing this fund is quoted below. [ Footnote 2 ] For the moment, it is enough to say that
the Fund is to be held by the Secretary of the Treasury, who is to
invest in government securities any portion not required in his
judgment to meet current withdrawals. He is authorized and directed
to pay out of the Fund to any competent state agency such sums as
it may duly requisition from the amount standing to its credit. §
904(f). Page 301 U. S. 577 Title III, which is also challenged as invalid, has the caption
"Grants to States for Unemployment Compensation Administration."
Under this title, certain sums of money are "authorized to be
appropriated" for the purpose of assisting the states in the
administration of their unemployment compensation laws, the maximum
for the fiscal year ending June 30, 1936, to be $4,000,000, and
$49,000,000 for each fiscal year thereafter. § 301. No present
appropriation is made to the extent of a single dollar. All that
the title does is to authorize future appropriations. Actually only
$2,250,000 of the $4,000,000 authorized was appropriated for 1936
(Act of Feb. 11, Page 301 U. S. 578 1936, c. 49, 49 Stat. 1109, 1113) and only $29,000,000 of the
$49,000,000 authorized for the following year. Act of June 22,
1936, c. 689, 49 Stat. 1597, 1605. The appropriations, when made,
were not specifically out of the proceeds of the employment tax,
but out of any moneys in the Treasury. Other sections of the title
prescribe the method by which the payments are to be made to the
state (§ 302) and also certain conditions to be established to the
satisfaction of the Social Security Board before certifying the
propriety of a payment to the Secretary of the Treasury. § 303.
They are designed to give assurance to the Federal Government that
the moneys granted by it will not be expended for purposes alien to
the grant, and will be used in the administration of genuine
unemployment compensation laws.

															The assault on the statute proceeds on an extended front. Its
assailants take the ground that the tax is not an excise; that it
is not uniform throughout the United States, as excises are
required to be; that its exceptions are so many and arbitrary as to
violate the Fifth Amendment; that its purpose was not revenue, but
an unlawful invasion of the reserved powers of the states, and that
the states, in submitting to it, have yielded to coercion and have
abandoned governmental functions which they are not permitted to
surrender.

															The objections will be considered seriatim, with such
further explanation as may be necessary to make their meaning
clear. First. The tax, which is described in the statute as an
excise, is laid with uniformity throughout the United States as a
duty, an impost or an excise upon the relation of employment.

															1. We are told that the relation of employment is one so
essential to the pursuit of happiness that it may not be burdened
with a tax. Appeal is made to history. From the precedents of
colonial days, we are supplied with Page 301 U. S. 579 illustrations of excises common in the colonies. They are said
to have been bound up with the enjoyment of particular commodities.
Appeal is also made to principle or the analysis of concepts. An
excise, we are told, imports a tax upon a privilege; employment, it
is said, is a right, not a privilege, from which it follows that
employment is not subject to an excise. Neither the one appeal nor
the other leads to the desired goal.

															As to the argument from history: doubtless there were many
excises in colonial days and later that were associated, more or
less intimately, with the enjoyment or the use of property. This
would not prove, even if no others were then known, that the forms
then accepted were not subject to enlargement. Cf. Pensacola
Telegraph Co. v. Western Union, 96 U. S.
1 , 96 U. S. 9 ; In
re Debs, 158 U. S. 564 , 158 U. S. 591 ; South Carolina v. United States, 199 U.
S. 437 , 199 U. S. 448 , 199 U. S. 449 .
But, in truth, other excises were known, and known since
early times. Thus, in 1695 (6 & 7 Wm. III, c. 6), Parliament
passed an act which granted "to His Majesty certain Rates and
Duties upon Marriage, Births and Burials," all for the purpose of
"carrying on the War against France with Vigour." See Opinion of the Justices, 196 Mass. 603, 609, 85 N.E. 545. No
commodity was affected there. The industry of counsel has supplied
us with an apter illustration where the tax was not different in
substance from the one now challenged as invalid. In 1777, before
our Constitutional Convention, Parliament laid upon employers an
annual "duty" of 21 shillings for "every male Servant" employed in
stated forms of work. [ Footnote
3 ] Page 301 U. S. 580 Revenue Act of 1777, 17 George III, c. 39. [ Footnote 4 ] The point is made as a distinction
that a tax upon the use of male servants was thought of as a tax
upon a luxury. Davis v. Boston & Maine R. Co., supra. It did not touch employments in husbandry or business. This is to
throw over the argument that historically an excise is a tax upon
the enjoyment of commodities. But the attempted distinction,
whatever may be thought of its validity, is inapplicable to a
statute of Virginia passed in 1780. There, a tax of three pounds,
six shillings and eight pence was to be paid for every male
tithable above the age of twenty-one years (with stated
exceptions), and a like tax for "every white servant whatsoever,
except apprentices under the age of twenty one years." 10 Hening's
Statutes of Virginia, p. 244. Our colonial forbears knew more about
ways of taxing than some of their descendants seem to be willing to
concede. [ Footnote 5 ]

															The historical prop failing, the prop or fancied prop of
principle remains. We learn that employment for lawful gain is a
"natural" or "inherent" or "inalienable" right, and not a
"privilege" at all. But natural rights, so called, are as much
subject to taxation as rights of less importance. [ Footnote 6 ] An excise is not limited to
vocations or activities Page 301 U. S. 581 that may be prohibited altogether. It is not limited to those
that are the outcome of a franchise. It extends to vocations or
activities pursued as of common right. What the individual does in
the operation of a business is amenable to taxation just as much as
what he owns, at all events if the classification is not tyrannical
or arbitrary. "Business is as legitimate an object of the taxing
powers as property." Newton v. Atchison, 31 Kan. 151, 154
(per Brewer, J.), 1 Pac. 288. Indeed, ownership itself, as we had
occasion to point out the other day, is only a bundle of rights and
privileges invested with a single name. Henneford v. Silas
Mason Co., 300 U. S. 577 . "A
state is at liberty, if it pleases, to tax them all collectively,
or to separate the faggots and lay the charge distributively." Ibid. Employment is a business relation, if not itself a
business. It is a relation without which business could seldom be
carried on effectively. The power to tax the activities and
relations that constitute a calling considered as a unit is the
power to tax any of them. The whole includes the parts. Nashville, C. & St.L. Ry. Co. v. Wallace, 288 U.
S. 249 , 288 U. S. 267 , 288 U. S.
268 .

															The subject matter of taxation open to the power of the Congress
is as comprehensive as that open to the power of the states, though
the method of apportionment may at times be different. "The
Congress shall have power to lay and collect taxes, duties, imposts
and excises." Art. 1, § 8. If the tax is a direct one, it shall be
apportioned according to the census or enumeration. If it is a
duty, impost, or excise, it shall be uniform throughout the United
States. Together, these classes include every form of tax
appropriate to sovereignty. Cf. Burnet v. Brooks, 288 U. S. 378 , 288 U. S. 403 , 288 U. S. 405 ; Brushaber v. Union Pacific R. Co., 240 U. S.
1 , 240 U. S. 12 .
Whether the tax is to be Page 301 U. S. 582 classified as an "excise" is in truth not of critical
importance. If not that, it is an "impost" ( Pollock v. Farmers'
Loan & Trust Co., 158 U. S. 601 , 158 U. S. 622 , 158 U. S. 625 ; Pacific Insurance Co. v.
Soble , 7 Wall. 433, 74 U. S. 445 ),
or a "duty" ( Veazie Bank v.
Fenno , 8 Wall. 533, 75 U. S. 546 , 75 U. S. 547 ; Pollock v. Farmers' Loan & Trust Co., 157 U.
S. 429 , 157 U. S. 570 ; Knowlton v. Moore, 178 U. S. 41 , 178 U. S. 46 ). A
capitation or other "direct" tax it certainly is not.

															"Although there have been from time to time intimations that
there might be some tax which was not a direct tax nor included
under the words 'duties, imposts and excises,' such a tax for more
than one hundred years of national existence has as yet remained
undiscovered, notwithstanding the stress of particular
circumstances has invited thorough investigation into sources of
powers." Pollock v. Farmers' Loan & Trust Co., 157 U.
S. 429 , 157 U. S. 557 .
There is no departure from that thought in later cases, but rather
a new emphasis of it. Thus, in Thomas v. United States, 192 U. S. 363 , 192 U. S. 370 ,
it was said of the words "duties, imposts and excises" that

															"they were used comprehensively to cover customs and excise
duties imposed on importation, consumption, manufacture and sale of
certain commodities, privileges, particular business transactions,
vocations, occupations and the like."

															At times taxpayers have contended that the Congress is without
power to lay an excise on the enjoyment of a privilege created by
state law. The contention has been put aside as baseless. Congress
may tax the transmission of property by inheritance or will, though
the states and not Congress have created the privilege of
succession. Knowlton v. Moore, supra, p. 178 U. S. 58 .
Congress may tax the enjoyment of a corporate franchise, though a
state and not Congress has brought the franchise into being. Flint v. Stone Tracy Co., 220 U.
S. 107 , 220 U. S. 155 .
The statute books of the states are strewn with illustrations of
taxes laid on Page 301 U. S. 583 occupations pursued of common right. [ Footnote 7 ] We find no basis for a holding that the
power in that regard which belongs by accepted practice to the
legislatures of the states, has been denied by the Constitution to
the Congress of the nation.

															2. The tax being an excise, its imposition must conform to the
canon of uniformity. There has been no departure from this
requirement. According to the settled doctrine the uniformity
exacted is geographical, not intrinsic. Knowlton v. Moore,
supra, p. 178 U. S. 83 ; Flint v. Stone Tracy Co., supra, p. 220 U. S. 158 ; Billings v. United States, 232 U.
S. 261 , 232 U. S. 282 ; Stellwagen v. Clum, 245 U. S. 605 , 245 U. S. 613 ; LaBelle Iron Works v. United States, 256 U.
S. 377 , 256 U. S. 392 ; Poe v. Seaborn, 282 U. S. 101 , 282 U. S. 117 ; Wright v. Vinton Branch Mountain Trust Bank, 300 U.
S. 440 . "The rule of liability shall be the same in all
parts of the United States." Florida v. Mellon, 273 U. S. 12 , 273 U. S.
17 . Second. The excise is not invalid under the provisions
of the Fifth Amendment by force of its exemptions. Page 301 U. S. 584 The statute does not apply, as we have seen, to employers of
less than eight. It does not apply to agricultural labor, or
domestic service in a private home or to some other classes of less
importance. Petitioner contends that the effect of these
restrictions is an arbitrary discrimination vitiating the tax.

															The Fifth Amendment, unlike the Fourteenth, has no equal
protection clause. LaBelle Iron Works v. United States, supra;
Brushaber v. Union Pacific R. Co., supra, p. 240 U. S. 24 . But
even the states, though subject to such a clause, are not confined
to a formula of rigid uniformity in framing measures of taxation. Swiss Oil Corp. v. Shanks, 273 U.
S. 407 , 273 U. S. 413 .
They may tax some kinds of property at one rate, and others at
another, and exempt others altogether. Bell's Gap R. Co. v.
Pennsylvania, 134 U. S. 232 ; Stebbins v. Riley, 268 U. S. 137 , 268 U. S. 142 ; Ohio Oil Co. v. Conway, 281 U. S. 146 , 281 U. S. 150 .
They may lay an excise on the operations of a particular kind of
business, and exempt some other kind of business closely akin
thereto. Quong Wing v. Kirkendall, 223 U. S.
59 , 223 U. S. 62 ; American Sugar Refining Co. v. Louisiana, 179 U. S.
89 , 179 U. S. 94 ; Armour Packing Co. v. Lacy, 200 U.
S. 226 , 200 U. S. 235 ; Brown-Forman Co. v. Kentucky, 217 U.
S. 563 , 217 U. S. 573 ; Heisler v. Thomas Colliery Co., 260 U.
S. 245 , 260 U. S. 255 ; State Board of Tax Comm'rs v. Jackson, 283 U.
S. 527 , 283 U. S. 537 , 283 U. S. 538 .
If this latitude of judgment is lawful for the states, it is
lawful, a fortiori, in legislation by the Congress, which
is subject to restraints less narrow and confining. Quong Wing
v. Kirkendall, supra. The classifications and exemptions directed by the statute now
in controversy have support in considerations of policy and
practical convenience that cannot be condemned as arbitrary. The
classifications and exemption would therefore be upheld if they had
been adopted by a state and the provisions of the Fourteenth
Amendment were invoked to annul them. This is held in two cases Page 301 U. S. 585 passed upon today in which precisely the same provisions were
the subject of attack, the provisions being contained in the
Unemployment Compensation Law of the State of Alabama. Carmichael v. Southern Coal & Coke Co., and Carmichael v. Gulf States Paper Corp., ante, p. 301 U. S. 495 . The
opinion rendered in those cases covers the ground fully. It would
be useless to repeat the argument. The act of Congress is therefore
valid, so far at least as its system of exemptions is concerned,
and this though we assume that discrimination, if gross enough, is
equivalent to confiscation, and subject under the Fifth Amendment
to challenge and annulment. Third. The excise is not void as involving the coercion
of the States in contravention of the Tenth Amendment or of
restrictions implicit in our federal form of government.

															The proceeds of the excise when collected are paid into the
Treasury at Washington, and thereafter are subject to appropriation
like public moneys generally. Cincinnati Soap Co. v. United
States, ante, p. 301 U. S. 308 . No
presumption can be indulged that they will be misapplied or wasted.
[ Footnote 8 ] Even if they were
collected in the hope or expectation that some other and collateral
good would be furthered as an incident, that, without more, would
not make the act invalid. Sonzinsky v. United States, 300 U. S. 506 .
This indeed is hardly questioned. The case for the petitioner is
built on the contention that, here, an ulterior aim is wrought into
the very structure of the act, and what is Page 301 U. S. 586 even more important that the aim is not only ulterior, but
essentially unlawful. In particular, the 90 percent credit is
relied upon as supporting that conclusion. But before the statute
succumbs to an assault upon these lines, two propositions must be
made out by the assailant. Cincinnati Soap Co. v. United
States, supra. There must be a showing in the first place that
separated from the credit the revenue provisions are incapable of
standing by themselves. There must be a showing in the second place
that the tax and the credit in combination are weapons of coercion,
destroying or impairing the autonomy of the states. The truth of
each proposition being essential to the success of the assault, we
pass for convenience to a consideration of the second, without
pausing to inquire whether there has been a demonstration of the
first.

															To draw the line intelligently between duress and inducement
there is need to remind ourselves of facts as to the problem of
unemployment that are now matters of common knowledge. West
Coast Hotel Co. v. Parrish, 300 U. S. 379 . The
relevant statistics are gathered in the brief of counsel for the
Government. Of the many available figures a few only will be
mentioned. During the years 1929 to 1936, when the country was
passing through a cyclical depression, the number of the unemployed
mounted to unprecedented heights. Often the average was more than
10 million; at times a peak was attained of 16 million or more.
Disaster to the breadwinner meant disaster to dependents.
Accordingly, the roll of the unemployed, itself formidable enough,
was only a partial roll of the destitute or needy. The fact
developed quickly that the states were unable to give the requisite
relief. The problem had become national in area and dimensions.
There was need of help from the nation if the people were not to
starve. It is too late today for the argument to be heard with
tolerance that, in a crisis so extreme, the use of the moneys of
the nation to relieve the unemployed Page 301 U. S. 587 and their dependents is a use for any purpose narrower than the
promotion of the general welfare. Cf. United States v.
Butler, 297 U. S. 1 , 297 U. S. 65 , 297 U. S. 66 , Helvering v. Davis, decided herewith, post, p. 301 U. S. 619 . The
nation responded to the call of the distressed. Between January 1,
1933 and July 1, 1936, the states (according to statistics
submitted by the Government) incurred obligations of $689,291,802
for emergency relief; local subdivisions an additional
$775,675,366. In the same period, the obligations for emergency
relief incurred by the national government were $2,929,307,125, or
twice the obligations of states and local agencies combined.
According to the President's budget message for the fiscal year
1938, the national government expended for public works and
unemployment relief for the three fiscal years 1934, 1935, and 1936
the stupendous total of $8,681,000,000. The parens patriae has many reasons -- fiscal and economic as well as social and moral
-- for planning to mitigate disasters that bring these burdens in
their train.

															In the presence of this urgent need for some remedial expedient,
the question is to be answered whether the expedient adopted has
overlept the bounds of power. The assailants of the statute say
that its dominant end and aim is to drive the state legislatures
under the whip of economic pressure into the enactment of
unemployment compensation laws at the bidding of the central
government. Supporters of the statute say that its operation is not
constraint, but the creation of a larger freedom, the states and
the nation joining in a cooperative endeavor to avert a common
evil. Before Congress acted, unemployment compensation insurance
was still, for the most part, a project, and no more. Wisconsin was
the pioneer. Her statute was adopted in 1931. At times, bills for
such insurance were introduced elsewhere, but they did not reach
the stage of law. In 1935, four states (California, Massachusetts,
New Hampshire and New York) passed unemployment Page 301 U. S. 588 laws on the eve of the adoption of the Social Security Act, and
two others did likewise after the federal act and later in the
year. The statutes differed to some extent in type, but were
directed to a common end. In 1936, twenty-eight other states fell
in line, and eight more the present year. But if states had been
holding back before the passage of the federal law, inaction was
not owing, for the most part, to the lack of sympathetic interest.
Many held back through alarm lest, in laying such a toll upon their
industries, they would place themselves in a position of economic
disadvantage as compared with neighbors or competitors. See House Report No. 615, 74th Congress, 1st session, p.
8; Senate Report No. 628, 74th Congress, 1st session, p. 11.
[ Footnote 9 ] Two consequences
ensued. One was that the freedom of a state to contribute its fair
share to the solution of a national problem was paralyzed by fear.
The other was that, insofar as there was failure by the states to
contribute relief according to the measure of their capacity, a
disproportionate burden, and a mountainous one, was laid upon the
resources of the Government of the nation.

															The Social Security Act is an attempt to find a method by which
all these public agencies may work together to a common end. Every
dollar of the new taxes will continue in all likelihood to be used
and needed by the Page 301 U. S. 589 nation as long as states are unwilling, whether through timidity
or for other motives, to do what can be done at home. At least the
inference is permissible that Congress so believed, though
retaining undiminished freedom to spend the money as it pleased. On
the other hand, fulfillment of the home duty will be lightened and
encouraged by crediting the taxpayer upon his account with the
Treasury of the nation to the extent that his contributions under
the laws of the locality have simplified or diminished the problem
of relief and the probable demand upon the resources of the fisc.
Duplicated taxes, or burdens that approach them, are recognized
hardships that government, state or national, may properly avoid. Henneford v. Silas Mason Co., supra; Kidd v. Alabama, 188 U. S. 730 , 188 U. S. 732 ; Watson v. State Comptroller, 254 U.
S. 122 , 254 U. S. 125 .
If Congress believed that the general welfare would better be
promoted by relief through local units than by the system then in
vogue, the cooperating localities ought not, in all fairness, to
pay a second time.

															Who then is coerced through the operation of this statute? Not
the taxpayer. He pays in fulfillment of the mandate of the local
legislature. Not the state. Even now, she does not offer a
suggestion that, in passing the unemployment law, she was affected
by duress. See Carmichael v. Southern Coal & Coke Co., and Carmichael v. Gulf States Paper Corp., supra. For all
that appears, she is satisfied with her choice, and would be sorely
disappointed if it were now to be annulled. The difficulty with the
petitioner's contention is that it confuses motive with
coercion.

															"Every tax is in some measure regulatory. To some extent, it
interposes an economic impediment to the activity taxed as compared
with others not taxed." Sonzinsky v. United States, supra. In like manner,
every rebate from a tax when conditioned upon conduct is in some
measure a temptation. But to hold that motive Page 301 U. S. 590 or temptation is equivalent to coercion is to plunge the law in
endless difficulties. The outcome of such a doctrine is the
acceptance of a philosophical determinism by which choice becomes
impossible. Till now, the law has been guided by a robust common
sense which assumes the freedom of the will as a working hypothesis
in the solution of its problems. The wisdom of the hypothesis has
illustration in this case. Nothing in the case suggests the
exertion of a power akin to undue influence, if we assume that such
a concept can ever be applied with fitness to the relations between
state and nation. Even on that assumption, the location of the
point at which pressure turns into compulsion, and ceases to be
inducement, would be a question of degree -- at times, perhaps, of
fact. The point had not been reached when Alabama made her choice.
We cannot say that she was acting, not of her unfettered will, but
under the strain of a persuasion equivalent to undue influence,
when she chose to have relief administered under laws of her own
making, by agents of her own selection, instead of under federal
laws, administered by federal officers, with all the ensuing evils,
at least to many minds, of federal patronage and power. There would
be a strange irony indeed if her choice were now to be annulled on
the basis of an assumed duress in the enactment of a statute which
her courts have accepted as a true expression of her will. Beeland Wholesale Co. v. Kaufman, supra. We think the
choice must stand.

															In ruling as we do, we leave many questions open. We do not say
that a tax is valid, when imposed by act of Congress, if it is laid
upon the condition that a state may escape its operation through
the adoption of a statute unrelated in subject matter to activities
fairly within the scope of national policy and power. No such
question is before us. In the tender of this credit Congress, does
not intrude upon fields foreign to its function. The purpose Page 301 U. S. 591 of its intervention, as we have shown, is to safeguard its own
treasury and, as an incident to that protection, to place the
states upon a footing of equal opportunity. Drains upon its own
resources are to be checked; obstructions to the freedom of the
states are to be leveled. It is one thing to impose a tax dependent
upon the conduct of the taxpayers, or of the state in which they
live, where the conduct to be stimulated or discouraged is
unrelated to the fiscal need subserved by the tax in its normal
operation, or to any other end legitimately national. The Child
Labor Tax Case, 259 U. S. 20 , and Hill v. Wallace, 259 U. S. 44 , were
decided in the belief that the statutes there condemned were
exposed to that reproach. Cf. United States v.
Constantine, 296 U. S. 287 . It
is quite another thing to say that a tax will be abated upon the
doing of an act that will satisfy the fiscal need, the tax and the
alternative being approximate equivalents. In such circumstances,
if in no others, inducement or persuasion does not go beyond the
bounds of power. We do not fix the outermost line. Enough for
present purposes that, wherever the line may be, this statute is
within it. Definition more precise must abide the wisdom of the
future. Florida v. Mellon, 273 U. S. 12 ,
supplies us with a precedent, if precedent be needed. What was in
controversy there was § 301 of the Revenue Act of 1926, which
imposes a tax upon the transfer of a decedent's estate while at the
same time permitting a credit, not exceeding 80 percent, for "the
amount of any estate, inheritance, legacy, or succession taxes
actually paid to any State or Territory." Florida challenged that
provision as unlawful. Florida had no inheritance taxes, and
alleged that, under its constitution, it could not levy any. 273 U. S. 273 U.S.
12, 273 U. S. 15 .
Indeed, by abolishing inheritance taxes, it had hoped to induce
wealthy persons to become its citizens. See 67 Cong.Rec.
Part 1, pp. 735, 752. It argued at our bar that "the Estate Tax
provision was not passed for the purpose Page 301 U. S. 592 of raising federal revenue" ( 273 U. S. 273 U.S.
12, 14 [argument of counsel -- omitted]), but rather "to coerce
States into adopting estate or inheritance tax laws." 273 U. S. 273 U.S.
12, 13 [argument of counsel -- omitted]. In fact, as a result of
the 80 percent credit, material changes of such laws were made in
36 states. [ Footnote 10 ] In
the face of that attack, we upheld the act as valid. Cf.
Massachusetts v. Mellon, 262 U. S. 447 , 262 U. S. 482 ; also Act of August 5, 1861, c. 45, 12 Stat. 292; Act of
May 13, 1862, c. 66, 12 Stat. 384. United States v. Butler, supra, is cited by petitioner
as a decision to the contrary. There, a tax was imposed on
processors of farm products, the proceeds to be paid to farmers who
would reduce their acreage and crops under agreements with the
Secretary of Agriculture, the plan of the act being to increase the
prices of certain farm products by decreasing the quantities
produced. The court held (1) that the so-called tax was not a true
one (pp. 297 U.S. 297 U. S. 56 , 297 U. S. 61 ),
the proceeds being earmarked for the benefit of farmers complying
with the prescribed conditions, (2) that there was an attempt to
regulate production without the consent of the state in which
production was affected, and (3) that the payments to farmers were
coupled with coercive contracts (p. 297 U. S. 73 ),
unlawful in their aim and oppressive in their consequences. The
decision was by a divided court, a minority taking the view that
the objections were untenable. None of them is applicable to the
situation here developed.

															(a) The proceeds of the tax in controversy are not earmarked for
a special group.

															(b) The unemployment compensation law which is a condition of
the credit has had the approval of the state and could not be a law
without it.

															(c) The condition is not linked to an irrevocable agreement, for
the state, at its pleasure, may repeal its unemployment law, §
903(a)(6), terminate the credit, Page 301 U. S. 593 and place itself where it was before the credit was
accepted.

															(d) The condition is not directed to the attainment of an
unlawful end, but to an end, the relief of unemployment, for which
nation and state may lawfully cooperate. Fourth. The statute does not call for a surrender by
the states of powers essential to their quasi -sovereign
existence.

															Argument to the contrary has its source in two sections of the
act. One section (903 [ Footnote
11 ]) defines the minimum criteria to which a state compensation
system is required to conform if it is to be accepted by the Board
as the basis for a credit. The other section (904 [ Footnote 12 ]) rounds out the requirement
with complementary rights and duties. Not all the criteria or their
incidents are challenged as unlawful. We will speak of them first
generally, and then more specifically insofar as they are
questioned.

															A credit to taxpayers for payments made to a State under a state
unemployment law will be manifestly futile in the absence of some
assurance that the law leading to the credit is, in truth, what it
professes to be. An unemployment law framed in such a way that the
unemployed who look to it will be deprived of reasonable protection
is one in name, and nothing more. What is basic and essential may
be assured by suitable conditions. The terms embodied in these
sections are directed to that end. A wide range of Judgment is
given to the several states as to the particular type of statute to
be spread upon their books. For anything to the contrary in the
provisions of this act they may use the pooled unemployment form,
which is in effect with variations in Alabama, California,
Michigan, New York, and elsewhere. They may establish a system of
merit ratings applicable at Page 301 U. S. 594 once or to go into effect later on the basis of subsequent
experience. Cf. §§ 909, 910. They may provide for employee
contributions, as in Alabama and California, or put the entire
burden upon the employer, as in New York. They may choose a system
of unemployment reserve accounts by which an employer is permitted,
after his reserve has accumulated, to contribute at a reduced rate,
or even not at all. This is the system which had its origin in
Wisconsin. What they may not do, if they would earn the credit, is
to depart from those standards which, in the judgment of Congress,
are to be ranked as fundamental. Even if opinion may differ as to
the fundamental quality of one or more of the conditions, the
difference will not avail to vitiate the statute. In determining
essentials, Congress must have the benefit of a fair margin of
discretion. One cannot say with reason that this margin has been
exceeded, or that the basic standards have been determined in any
arbitrary fashion. In the event that some particular condition
shall be found to be too uncertain to be capable of enforcement, it
may be severed from the others, and what is left will still be
valid.

															We are to keep in mind steadily that the conditions to be
approved by the Board as the basis for a credit are not provisions
of a contract, but terms of a statute, which may be altered or
repealed. § 903(a)(6). The state does not bind itself to keep the
law in force. It does not even bind itself that the moneys paid
into the federal fund will be kept there indefinitely, or for any
stated time. On the contrary, the Secretary of the Treasury will
honor a requisition for the whole or any part of the deposit in the
fund whenever one is made by the appropriate officials. The only
consequence of the repeal or excessive amendment of the statute, or
the expenditure of the money, when requisitioned, for other than
compensation uses or administrative expenses, is Page 301 U. S. 595 that approval of the law will end, and with it the allowance of
a credit, upon notice to the state agency and an opportunity for
hearing. § 903(b)(c).

															These basic considerations are, in truth, a solvent of the
problem. Subjected to their test, the several objections on the
score of abdication are found to be unreal.

															Thus, the argument is made that, by force of an agreement, the
moneys, when withdrawn, must be "paid through public employment
offices in the State or through such other agencies as the Board
may approve." § 903(a)(1). But, in truth, there is no agreement as
to the method of disbursement. There is only a condition which the
state is free at pleasure to disregard or to fulfill. Moreover,
approval is not requisite if public employment offices are made the
disbursing instruments. Approval is to be a check upon resort to
"other agencies" that may, perchance, be irresponsible. A state
looking for a credit must give assurance that her system has been
organized upon a base of rationality.

															There is argument again that the moneys, when withdrawn, are to
be devoted to specific uses, the relief of unemployment, and that,
by agreement for such payment, the quasi -sovereign
position of the state has been impaired, if not abandoned. But,
again, there is confusion between promise and condition. Alabama is
still free, without breach of an agreement, to change her system
overnight. No officer or agency of the national Government can
force a compensation law upon her or keep it in existence. No
officer or agency of that Government, either by suit or other
means, can supervise or control the application of the
payments.

															Finally and chiefly, abdication is supposed to follow from § 904
of the statute and the parts of § 903 that are complementary
thereto. § 903(a)(3). By these, the Secretary of the Treasury is
authorized and directed to receive and hold in the Unemployment
Trust Fund all Page 301 U. S. 596 moneys deposited therein by a state agency for a state
unemployment fund and to invest in obligations of the United States
such portion of the Fund as is not in his judgment required to meet
current withdrawals. We are told that Alabama, in consenting to
that deposit, has renounced the plenitude of power inherent in her
statehood.

															The same pervasive misconception is in evidence again. All that
the state has done is to say, in effect, through the enactment of a
statute, that her agents shall be authorized to deposit the
unemployment tax receipts in the Treasury at Washington. Alabama
Unemployment Act of September 14, 1935, § 10(i). The statute may be
repealed. § 903(a)(6). The consent may be revoked. The deposits may
be withdrawn. The moment the state commission gives notice to the
depositary that it would like the moneys back, the Treasurer will
return them. To find state destruction there is to find it almost
anywhere. With nearly as much reason, one might say that a state
abdicates its functions when it places the state moneys on deposit
in a national bank.

															There are very good reasons of fiscal and governmental policy
why a State should be willing to make the Secretary of the Treasury
the custodian of the fund. His possession of the moneys and his
control of investments will be an assurance of stability and safety
in times of stress and strain. A report of the Ways and Means
Committee of the House of Representatives, quoted in the margin,
develops the situation clearly. [ Footnote 13 ] Nor is there risk of loss Page 301 U. S. 597 or waste. The credit of the Treasury is at all times back of the
deposit, with the result that the right of withdrawal will be
unaffected by the fate of any intermediate investments, just as if
a checking account in the usual form had been opened in a bank.

															The inference of abdication thus dissolves in thinnest air when
the deposit is conceived of as dependent upon a statutory consent,
and not upon a contract effective to create a duty. By this we do
not intimate that the conclusion would be different if a contract
were discovered. Even sovereigns may contract without derogating
from their sovereignty. Perry v. United States, 294 U. S. 330 , 294 U. S. 353 ;
1 Oppenheim, International Law, 4th ed., §§ 493, 494; Hall,
International Law, 8th ed., § 107; 2 Hyde, International Law, §
489. The states are at liberty, upon obtaining the consent of
Congress, to make agreements with one another. Constitution, Art.
I, § 10, par. 3. Poole v.
Fleeger , 11 Pet. 185, 36 U. S. 209 ; Rhode Island v.
Massachusetts , 12 Pet. 657, 37 U. S. 725 .
We find no room for doubt that they may do the like with Congress
if the essence of their statehood is maintained without impairment.
[ Footnote 14 ] Alabama Page 301 U. S. 598 is seeking and obtaining a credit of many millions in favor of
her citizens out of the Treasury of the nation. Nowhere in our
scheme of government -- in the limitations express or implied of
our federal constitution -- do we find that she is prohibited from
assenting to conditions that will assure a fair and just requital
for benefits received. But we will not labor the point further. An
unreal prohibition directed to an unreal agreement will not vitiate
an act of Congress, and cause it to collapse in ruin. Fifth. Title III of the act is separable from Title IX,
and its validity is not at issue.

															The essential provisions of that title have been stated in the
opinion. As already pointed out, the title does not appropriate a
dollar of the public moneys. It does no more than authorize
appropriations to be made in the future for the purpose of
assisting states in the administration of their laws, if Congress
shall decide that appropriations are desirable. The title might be
expunged, and Title IX would stand intact. Without a severability
clause, we should still be led to that conclusion. The presence of
such a clause (§ 1103) makes the conclusion even clearer. Williams v. Standard Oil Co., 278 U.
S. 235 , 278 U. S. 242 ; Utah Power & Light Co. v. Pfost, 286 U.
S. 165 , 286 U. S. 184 ; Carter v. Carter Coal Co., 298 U.
S. 238 , 298 U. S.
312 .

															The judgment is Affirmed. [ Footnote 1 ]

															"Sec. 903. (a) The Social Security Board shall approve any State
law submitted to it, within thirty days of such submission, which
it finds provides that --"

															"(1) All compensation is to be paid through public employment
offices in the State or such other agencies as the Board may
approve:"

															"(2) No compensation shall be payable with respect to any day of
unemployment occurring within two years after the first day of the
first period with respect to which contributions are required;"

															"(3) All money received in the unemployment fund shall
immediately upon such receipt be paid over to the Secretary of the
Treasury to the credit of the Unemployment Trust Fund established
by Section 904;"

															"(4) All money withdrawn from the Unemployment Trust Fund by the
State agency shall be used solely in the payment of compensation,
exclusive of expenses of administration;"

															"(5) Compensation shall not be denied in such State to any
otherwise eligible individual for refusing to accept new work under
any of the following conditions: (A) If the position offered is
vacant due directly to a strike, lockout, or other labor dispute;
(B) if the wages, hours, or other conditions of the work offered
are substantially less favorable to the individual than those
prevailing for similar work in the locality; (C) if as a condition
of being employed the individual would be required to join a
company union or to resign from or refrain from joining any bona fide labor organization;"

															"(6) All the rights, privileges, or immunities conferred by such
law or by acts done pursuant thereto shall exist subject to the
power of the legislature to amend or repeal such law at any
time."

															"The Board shall, upon approving such law, notify the Governor
of the State of its approval."

															"(b) On December 31 in each taxable year the Board shall certify
to the Secretary of the Treasury each State whose law it has
previously approved, except that it shall not certify any State
which, after reasonable notice and opportunity for hearing to the
State agency, the Board finds has changed its law so that it no
longer contains the provisions specified in subsection (a) or has
with respect to such taxable year failed to comply substantially
with any such provision."

															"(c) If, at any time during the taxable year, the Board has
reason to believe that a State whose law it has previously
approved, may not be certified under subsection (b), it shall
promptly so notify the Governor of such State."

															[ Footnote 2 ]

															"Sec. 904. (a) There is hereby established in the Treasury of
the United States a trust fund to be known as the 'Unemployment
Trust Fund,' hereinafter in this title called the 'Fund.' The
Secretary of the Treasury is authorized and directed to receive and
hold in the Fund all moneys deposited therein by a State agency
from a State unemployment fund. Such deposit may be made directly
with the Secretary of the Treasury or with any Federal reserve bank
or member bank of the Federal Reserve System designated by him for
such purpose."

															"(b) It shall be the duty of the Secretary of the Treasury to
invest such portion of the Fund as is not, in his judgment,
required to meet current withdrawals. Such investment may be made
only in interest-bearing obligations of the United.States or in
obligations guaranteed as to both principal and interest by the
United States. For such purpose such obligations may be acquired
(1) on original issue at par, or (2) by purchase of outstanding
obligations at the market price. The purposes for which obligations
of the United States may be issued under the Second Liberty Bond
Act, as amended, are hereby extended to authorize the issuance at
par of special obligations exclusively to the Fund. Such special
obligations shall bear interest at a rate equal to the average rate
of interest, computed as of the end of the calendar month next
preceding the date of such issue, borne by all interest-bearing
obligations of the United States then forming part of the public
debt; except that, where such average rate is not a multiple of
one-eighth of 1 percentum, the rate of interest of such special
obligations shall be the multiple of one-eighth of 1 percentum next
lower than such average rate. Obligations other than such special
obligations may be acquired for the Fund only on such terms as to
provide an investment yield not less than the yield which would be
required in the case of special obligations if issued to the Fund
upon the date of such acquisition."

															"(c) Any obligations acquired by the Fund (except special
obligations issued exclusively to the Fund) may be sold at the
market price, and such special obligations may be redeemed at par
plus accrued interest."

															"(d) The interest on, and the proceeds from the sale or
redemption of, any obligations held in the Fund shall be credited
to and form a part of the Fund."

															"(e) The Fund shall be invested as a single fund, but the
Secretary of the Treasury shall maintain a separate book account
for each State agency and shall credit quarterly on March 31, June
30, September 30, and December 31, of each year, to each account,
on the basis of the average daily balance of such account, a
proportionate part of the earnings of the Fund for the quarter
ending on such date."

															"(f) The Secretary of the Treasury is authorized and directed to
pay out of the Fund to any State agency such amount as it may duly
requisition, not exceeding the amount standing to the account of
such State agency at the time of such payment."

															[ Footnote 3 ]

															The list of services is comprehensive. It included:

															"Maitre d'Hotel, House-steward, Master of the Horse, Groom of
the Chamber, Valet de Chambre, Butler, Under-butler, Clerk of the
Kitchen, Confectioner, Cook, House-porter, Footman,
Running-footman, Coachman, Groom, Postillion, Stable-boy, and the
respective Helpers in the Stables of such Coachman, Groom, or
Postillion, or in the Capacity of Gardener (not being a
Day-labourer), Park-keeper, Gamekeeper, Huntsman, Whipper-in. . .
."

															[ Footnote 4 ]

															The statute, amended from time to time, but with its basic
structure unaffected, is on the statute books today. Act of 1803,
43 George III, c. 161; Act of 1812, 52 George III, c. 93; Act of
1853, 16 & 17 Vict., c. 90; Act of 1869, 32 & 33 Vict., c.
14. 24 Halsbury's Laws of England, 1st ed., pp. 692 et
seq. [ Footnote 5 ] See also the following laws imposing occupation taxes:
12 Hening's Statutes of Virginia, p. 285, Act of 1786; Chandler,
The Colonial Records of Georgia, vol.19, Part 2, p. 88, Act of
1778; 1 Potter, Taylor and Yancey, North Carolina Revised Laws, p.
501, Act of 1784.

															[ Footnote 6 ]

															The cases are brought together by Professor John MacArthur
Maguire in an essay, "Taxing the Exercise of Natural Rights"
(Harvard Legal Essays, 1934, pp. 273, 322).

															The Massachusetts decisions must be read in the light of the
particular definitions and restrictions of the Massachusetts
Constitution. Opinion of the Justices, 282 Mass. 619, 622,
186 N.E. 490, 266 Mass. 590, 593, 165 N.E. 904. And see Howes
Brothers Co. v. Massachusetts Unemployment Compensation Comm'n,
supra, pp. 730, 731.

															[ Footnote 7 ]

															Alabama General Acts, 1935, c.194, Art. XIII (flat license tax
on occupations); Arizona Revised Code, Supplement (1936) § 3138a et seq. (general gross receipts tax); Connecticut General
Statutes, Supplement (1935) §§ 457c, 458c (gross receipts tax on
unincorporated businesses); Revised Code of Delaware (1935) §§
192-197 (flat license tax on occupations); Compiled Laws of
Florida, Permanent Supplement (1936) Vol. I, § 1279 (flat license
tax on occupations); Georgia Laws, 1935, p. 11 (flat license tax on
occupations); Indiana Statutes Ann. (1933) § 64 2601 et
seq. (general gross receipts tax); Louisiana Laws, 3rd Extra
Session, 1934, Act No. 15, 1st Extra Session, 1935, Acts Nos. 5, 6
(general gross receipts tax); Mississippi Laws, 1934, c. 119
(general gross receipts tax); New Mexico Laws, 1935, c. 73 (general
gross receipts tax); South Dakota Laws, 1933, c. 184 (general gross
receipts tax, expired June 30, 1935); Washington Laws, 1935, c.
180, Title II (general gross receipts tax); West Virginia Code,
Supplement (1935) § 960 (general gross receipts tax).

															[ Footnote 8 ]

															The total estimated receipts without taking into account the 90
percent deduction, range from $225,000,000 in the first year to
over $900,000,000 seven years later. Even if the maximum credits
are available to taxpayers in all states, the maximum estimated
receipts from Title IX will range between $22,000,000, at one
extreme, to $90,000,000 at the other. If some of the states hold
out in their unwillingness to pass statutes of their own, the
receipts will be still larger.

															[ Footnote 9 ]

															The attitude of Massachusetts is significant. Her act became a
law August 12, 1935, two days before the federal act. Even so, she
prescribed that its provisions should not become operative unless
the federal bill became a law, or unless eleven of the following
states (Alabama, Connecticut, Delaware, Georgia, Illinois, Indiana,
Iowa, Maine, Maryland, Michigan, Minnesota, Missouri, New
Hampshire, New Jersey, New York, North Carolina, Ohio, Rhode
Island, South Carolina, Tennessee, Vermont) should impose on their
employers burdens substantially equivalent. Acts of 1935, c. 479,
p. 655. Her fear of competition is thus forcefully attested. See also California Laws, 1935, c. 352, Art. I, § 2; Idaho
Laws, 1936 (Third Extra Session) c. 12, § 26; Mississippi Laws,
1936, c. 176, § 2-a.

															[ Footnote 10 ]

															Perkins, State action under the Federal Estate Tax Credit
Clause, 13 North Carolina L.Rev. 271, 280.

															[ Footnote 11 ] See note 1 supra. [ Footnote 12 ] See note 2 supra. [ Footnote 13 ]

															"This last provision will not only afford maximum safety for
these funds, but is very essential to insure that they will operate
to promote the stability of business, rather than the reverse.
Unemployment reserve funds have the peculiarity that the demands
upon them fluctuate considerably, being heaviest when business
slackens. If, in such times, the securities in which these funds
are invested are thrown upon the market for liquidation, the net
effect is likely to be increased deflation. Such a result is
avoided in this bill through the provision that all reserve funds
are to be held by the United States Treasury, to be invested and
liquidated by the Secretary of the Treasury in a manner calculated
to promote business stability. When business conditions are such
that investment in securities purchased on the open market is
unwise, the Secretary of the Treasury may issue special
nonnegotiable obligations exclusively to the unemployment trust
fund. When a reverse situation exists and heavy drains are made
upon the fund for payment of unemployment benefits, the Treasury
does not have to dispose of the securities belonging to the fund in
open market, but may assume them itself. With such a method of
handling the reserve funds, it is believed that this bill will
solve the problem often raised in discussions of unemployment
compensation, regarding the possibility of transferring purchasing
power from boom periods to depression periods. It will, in fact,
operate to sustain purchasing power at the onset of a depression
without having any counteracting deflationary tendencies."

															House Report No. 615, 74th Congress, 1st session, p. 9.

															[ Footnote 14 ] Cf. 12 Stat. 503; 26 Stat. 417.

															Separate opinion of MR. JUSTICE McREYNOLDS.

															That portion of the Social Security legislation here under
consideration, I think, exceeds the power granted to Congress. It
unduly interferes with the orderly government of the State by her
own people and otherwise offends the Federal Constitution.

															In Texas v.
White , 7 Wall. 700, 74 U. S. 725 (1869), a cause of momentous importance, this Court, through Chief
Justice Chase, declared -- Page 301 U. S. 599 "But the perpetuity and indissolubility of the Union by no means
implies the loss of distinct and individual existence, or of the
right of self-government, by the States. Under the Articles of
Confederation, each State retained its sovereignty, freedom, and
independence and every power, jurisdiction, and right not expressly
delegated to the United States. Under the Constitution, though the
powers of the States were much restricted, still all powers not
delegated to the United States, nor prohibited to the States, are
reserved to the States respectively, or to the people. And we have
already had occasion to remark at this term that"

															"the people of each State compose a State, having its own
government and endowed with all the functions essential to separate
and independent existence,"

															"and that, 'without the States in union, there could be no such
political body as the United States.' [ Lane County v.
Oregon , 7 Wall. 71, 74 U. S.
76 .] Not only, therefore, can there be no loss of
separate and independent autonomy to the States through their union
under the Constitution, but it may be not unreasonably said that
the preservation of the States, and the maintenance of their
governments, are as much within the design and care of the
Constitution as the preservation of the Union and the maintenance
of the National government. The Constitution, in all its
provisions, looks to an indestructible Union, composed of
indestructible States."

															The doctrine thus announced and often repeated, I had supposed
was firmly established. Apparently the States remained really free
to exercise governmental powers, not delegated or prohibited,
without interference by the Federal Government through threats of
punitive measures or offers of seductive favors. Unfortunately, the
decision just announced opens the way for practical annihilation of
this theory, and no cloud of words or ostentatious parade of
irrelevant statistics should be permitted to obscure that fact. Page 301 U. S. 600 The invalidity, also the destructive tendency, of legislation
like the Act before us were forcefully pointed out by President
Franklin Pierce in a veto message sent to the Senate May 3, 1854. * He was a
scholarly lawyer of distinction, and enjoyed the advice and counsel
of a rarely able Attorney General -- Caleb Cushing of
Massachusetts. This message considers with unusual lucidity points
here specially important. I venture to set out pertinent portions
of it which must appeal to all who continue to respect both the
letter and spirit of our great charter.

															" To the Senate of the United States: "

															"The bill entitled 'An Act making a grant of public lands to the
several States for the benefit of indigent insane persons,' which
was presented to me on the 27th ultimo, has been maturely
considered, and is returned to the Senate, the House in which it
originated, with a statement of the objections which have required
me to withhold from it my approval."

															" * * * *" "If, in presenting my objections to this bill, I should say more
than strictly belongs to the measure or is required for the
discharge of my official obligation, let it be attributed to a
sincere desire to justify my act before those whose good opinion I
so highly value and to that earnestness which springs from my
deliberate conviction that a strict adherence to the terms and
purposes of the federal compact offers the best, if not the only,
security for the preservation of our blessed inheritance of
representative liberty."

															"The bill provides in substance:"

															"First. That 10,000,000 acres of land be granted to the several
States, to be apportioned among them in the compound ratio of the
geographical area and representation of said States in the House of
Representatives. " Page 301 U. S. 601 "Second. That wherever there are public lands in a State subject
to sale at the regular price of private entry, the proportion of
said 10,000,000 acres falling to such State shall be selected from
such lands within it, and that, to the States in which there are no
such public lands land scrip shall be issued to the amount of their
distributive shares, respectively, said scrip not to be entered by
said States, but to be sold by them and subject to entry by their
assignees: Provided, That none of it shall be sold at less than $1
per acre, under penalty of forfeiture of the same to the United
States."

															"Third. That the expenses of the management and superintendence
of said lands and of the moneys received therefrom shall be paid by
the States to which they may belong out of the treasury of said
States."

															"Fourth. That the gross proceeds of the sales of such lands or
land scrip so granted shall be invested by the several States in
safe stocks, to constitute a perpetual fund, the principal of which
shall remain forever undiminished, and the interest to be
appropriated to the maintenance of the indigent insane within the
several States."

															"Fifth. That annual returns of lands or scrip sold shall be made
by the States to the Secretary of the Interior, and the whole grant
be subject to certain conditions and limitations prescribed in the
bill, to be assented to by legislative acts of said States."

															"This bill therefore proposes that the Federal Government shall
make provision to the amount of the value of 10,000,000 acres of
land for an eleemosynary object within the several States, to be
administered by the political authority of the same, and it
presents at the threshold the question whether any such act on the
part of the Federal Government is warranted and sanctioned by the
Constitution, the provisions and principles of which are to be
protected and sustained as a first and paramount duty. " Page 301 U. S. 602 "It cannot be questioned that, if Congress has power to make
provision for the indigent insane without the limits of this
District, it has the same power to provide for the indigent who are
not insane, and thus to transfer to the Federal Government the
charge of all the poor in all the States. It has the same power to
provide hospitals and other local establishments for the care and
cure of every species of human infirmity, and thus to assume all
that duty of either public philanthropy or public necessity to the
dependent, the orphan, the sick, or the needy which is now
discharged by the States themselves or by corporate institutions or
private endowments existing under the legislation of the States.
The whole field of public beneficence is thrown open to the care
and culture of the Federal Government. Generous impulses no longer
encounter the limitations and control of our imperious fundamental
law; for however worthy may be the present object in itself, it is
only one of a class. It is not exclusively worthy of benevolent
regard. Whatever considerations dictate sympathy for this
particular object apply in like manner, if not in the same degree,
to idiocy, to physical disease, to extreme destitution. If Congress
may and ought to provide for any one of these objects, it may and
ought to provide for them all. And if it be done in this case, what
answer shall be given when Congress shall be called upon, as it
doubtless will be, to pursue a similar course of legislation in the
others? It will obviously be vain to reply that the object is
worthy, but that the application has taken a wrong direction. The
power will have been deliberately assumed, the general obligation
will by this act have been acknowledged, and the question of means
and expediency will alone be left for consideration. The decision
upon the principle in any one case determines it for the whole
class. The question presented, therefore, clearly is upon the
constitutionality and propriety of the Federal Government's Page 301 U. S. 603 assuming to enter into a novel and vast field of legislation,
namely that of providing for the care and support of all those
among the people of the United States who, by any form of calamity,
become fit objects of public philanthropy."

															"I readily and, I trust, feelingly acknowledge the duty
incumbent on us all as men and citizens, and as among the highest
and holiest of our duties, to provide for those who, in the
mysterious order of Providence, are subject to want and to disease
of body or mind; but I cannot find any authority in the
Constitution for making the Federal Government the great almoner of
public charity throughout the United States. To do so would, in my
judgment, be contrary to the letter and spirit of the Constitution,
and subversive of the whole theory upon which the Union of these
States is founded. And if it were admissible to contemplate the
exercise of this power for any object whatever, I cannot avoid the
belief that it would, in the end, be prejudicial, rather than
beneficial, in the noble offices of charity to have the charge of
them transferred from the States to the Federal Government. Are we
not too prone to forget that the Federal Union is the creature of
the States, not they of the Federal Union? We were the inhabitants
of colonies distinct in local government one from the other before
the revolution. By that Revolution, the colonies each became an
independent State. They achieved that independence and secured its
recognition by the agency of a consulting body which, from being an
assembly of the ministers of distinct sovereignties instructed to
agree to no form of government which did not leave the domestic
concerns of each State to itself, was appropriately denominated a
Congress. When, having tried the experiment of the Confederation,
they resolved to change that, for the present Federal Union, and
thus to confer on the Federal Government more ample authority, they
scrupulously measured such of the Page 301 U. S. 604 functions of their cherished sovereignty as they chose to
delegate to the General Government. With this aim and to this end,
the fathers of the Republic framed the Constitution, in and by
which the independent and sovereign States united themselves for
certain specified objects and purposes, and for those only, leaving
all powers not therein set forth as conferred on one or another of
the three great departments -- the legislative, the executive, and
the judicial -- indubitably with the States. And when the people of
the several States had in their State conventions, and thus alone,
given effect and force to the Constitution, not content that any
doubt should in future arise as to the scope and character of this
act, they ingrafted thereon the explicit declaration that"

															"the powers not delegated to the United States by the
Constitution nor prohibited by it to the States are reserved to the
States respectively or to the people."

															"Can it be controverted that the great mass of the business of
Government -- that involved in the social relations, the internal
arrangements of the body politic, the mental and moral culture of
men, the development of local resources of wealth, the punishment
of crimes in general, the preservation of order, the relief of the
needy or otherwise unfortunate members of society -- did in
practice remain with the States; that none of these objects of
local concern are by the Constitution expressly or impliedly
prohibited to the States, and that none of them are by any express
language of the Constitution transferred to the United States? Can
it be claimed that any of these functions of local administration
and legislation are vested in the Federal Government by any
implication? I have never found anything in the Constitution which
is susceptible of such a construction. No one of the enumerated
powers touches the subject, or has even a remote analogy to it. The
powers conferred upon the United States have reference to federal
relations, or to the means of accomplishing Page 301 U. S. 605 or executing things of federal relation. So also of the same
character are the powers taken away from the States by enumeration.
In either case, the powers granted and the powers restricted were
so granted or so restricted only where it was requisite for the
maintenance of peace and harmony between the States or for the
purpose of protecting their common interests and defending their
common sovereignty against aggression from abroad or insurrection
at home."

															"I shall not discuss at length the question of power sometimes
claimed for the General Government under the clause of the eighth
section of the Constitution, which gives Congress the power"

															"to lay and collect taxes, duties, imposts, and excises, to pay
debts and provide for the common defense and general welfare of the
United States,"

															"because if it has not already been settled upon sound reason
and authority, it never will be. I take the received and just
construction of that article, as if written to lay and collect
taxes, duties, imposts, and excises in order to pay the
debts and in order to provide for the common defense and
general welfare. It is not a substantive general power to provide
for the welfare of the United States, but is a limitation on the
grant of power to raise money by taxes, duties, and imposts. If it
were otherwise, all the rest of the Constitution, consisting of
carefully enumerated and cautiously guarded grants of specific
powers, would have been useless, if not delusive. It would be
impossible in that view to escape from the conclusion that these
were inserted only to mislead for the present, and, instead of
enlightening and defining the pathway of the future, to involve its
action in the mazes of doubtful construction. Such a conclusion the
character of the men who framed that sacred instrument will never
permit us to form. Indeed, to suppose it susceptible of any other
construction would be to consign all the rights of the States and
of the people of the States to the mere discretion Page 301 U. S. 606 of Congress, and thus to clothe the federal Government with
authority to control the sovereign States, by which they would have
been dwarfed into provinces or departments and all sovereignty
vested in an absolute consolidated central power, against which the
spirit of liberty has so often and in so many countries struggled
in vain."

															"In my judgment, you cannot by tributes to humanity make any
adequate compensation for the wrong you would inflict by removing
the sources of power and political action from those who are to be
thereby affected. If the time shall ever arrive when, for an object
appealing, however strongly, to our sympathies, the dignity of the
States shall bow to the dictation of Congress by conforming their
legislation thereto, when the power and majesty and honor of those
who created shall become subordinate to the thing of their
creation, I but feebly utter my apprehensions when I express my
firm conviction that we shall see 'the beginning of the end.'"

															"Fortunately, we are not left in doubt as to the purpose of the
Constitution any more than as to its express language, for although
the history of its formation, as recorded in the Madison Papers,
shows that the Federal Government in its present form emerged from
the conflict of opposing influences which have continued to divide
statesmen from that day to this, yet the rule of clearly defined
powers and of strict construction presided over the actual
conclusion and subsequent adoption of the Constitution. President
Madison, in the Federalist, says:"

															" The powers delegated by the proposed Constitution are few and
defined. Those which are to remain in the State governments are
numerous and indefinite. . . . Its [the General Government's]
jurisdiction extends to certain enumerated objects only, and leaves
to the several States a residuary and inviolable sovereignty over
all other objects. " Page 301 U. S. 607 "In the same spirit, President Jefferson invokes"

															"the support of the State governments in all their rights as the
most competent administrations for our domestic concerns and the
surest bulwarks against anti-republican tendencies,"

															"and President Jackson said that our true strength and wisdom
are not promoted by invasions of the rights and powers of the
several States, but that, on the contrary, they consist 'not in
binding the States more closely to the center, but in leaving each
more unobstructed in its proper orbit.'"

															"The framers of the Constitution, in refusing to confer on the
Federal Government any jurisdiction over these purely local
objects, in my judgment, manifested a wise forecast and broad
comprehension of the true interests of these objects themselves. It
is clear that public charities within the States can be efficiently
administered only by their authority. The bill before me concedes
this, for it does not commit the funds it provides to the
administration of any other authority."

															"I cannot but repeat what I have before expressed, that, if the
several States, many of which have already laid the foundation of
munificent establishments of local beneficence, and nearly all of
which are proceeding to establish them, shall be led to suppose,
as, should this bill become a law, they will be, that Congress is
to make provision for such objects, the fountains of charity will
be dried up at home, and the several States, instead of bestowing
their own means on the social wants of their own people, may
themselves, through the strong temptation which appeals to states
as to individuals, become humble suppliants for the bounty of the
Federal Government, reversing their true relations to this
Union."

															" * * * *" "I have been unable to discover any distinction on
constitutional grounds or grounds of expediency between an
appropriation of $10,000,000 directly from the money in Page 301 U. S. 608 the Treasury for the object contemplated and the appropriation
of lands presented for my sanction, and yet I cannot doubt that, if
the bill proposed $10,000,000 from the Treasury of the United
States for the support of the indigent insane in the several
States, that the constitutional question involved in the act would
have attracted forcibly the attention of Congress."

															"I respectfully submit that, in a constitutional point of view,
it is wholly immaterial whether the appropriation be in money or in
land."

															" * * * *" "To assume that the public lands are applicable to ordinary
State objects, whether of public structures, police, charity, or
expenses of State administration, would be to disregard to the
amount of the value of the public lands all the limitations of the
Constitution and confound to that extent all distinctions between
the rights and powers of the States and those of the United States;
for if the public lands may be applied to the support of the poor,
whether sane or insane, if the disposal of them and their proceeds
be not subject to the ordinary limitations of the Constitution,
then Congress possesses unqualified power to provide for
expenditures in the States by means of the public lands, even to
the degree of defraying the salaries of governors, judges, and all
other expenses of the government and internal administration within
the several States."

															"The conclusion from the general survey of the whole subject is
to my mind irresistible, and closes the question both of right and
of expediency so far as regards the principle of the appropriation
proposed in this bill. Would not the admission of such power in
Congress to dispose of the public domain work the practical
abrogation of some of the most important provisions of the
Constitution?"

															" * * * * Page 301 U. S.
609 " "The general result at which I have arrived is the necessary
consequence of those views of the relative rights, powers, and
duties of the States and of the Federal Government which I have
long entertained and often expressed and in reference to which my
convictions do but increase in force with time and experience."

															No defense is offered for the legislation under review upon the
basis of emergency. The hypothesis is that hereafter it will
continuously benefit unemployed members of a class. Forever, so far
as we can see, the States are expected to function under federal
direction concerning an internal matter. By the sanction of this
adventure, the door is open for progressive inauguration of others
of like kind under which it can hardly be expected that the States
will retain genuine independence of action. And without independent
States a Federal Union as contemplated by the Constitution becomes
impossible.

															At the bar, counsel asserted that, under the present Act, the
tax upon residents of Alabama during the first year will total
$9,000,000. All would remain in the Federal Treasury but for the
adoption by the State of measures agreeable to the National Board.
If continued, these will bring relief from the payment of
$8,000,000 to the United States.

															Ordinarily, I must think, a denial that the challenged action of
Congress and what has been done under it amount to coercion and
impair freedom of government by the people of the State would be
regarded as contrary to practical experience. Unquestionably our
federate plan of government confronts an enlarged peril.

															* "Messages and Papers of the President" by James D. Richardson,
Vol. V, pp. 247-256.

															Separate opinion of MR. JUSTICE SUTHERLAND.

															With most of what is said in the opinion just handed down, I
concur. I agree that the payroll tax levied is an excise within the
power of Congress; that the devotion of Page 301 U. S. 610 not more than 90% of it to the credit of employers in states
which require the payment of a similar tax under so-called
unemployment tax laws is not an unconstitutional use of the
proceeds of the federal tax; that the provision making the adoption
by the state of an unemployment law of a specified character a
condition precedent to the credit of the tax does not render the
law invalid. I agree that the states are not coerced by the federal
legislation into adopting unemployment legislation. The provisions
of the federal law may operate to induce the state to pass an
employment law if it regards such action to be in its interest. But
that is not coercion. If the act stopped here, I should accept the
conclusion of the court that the legislation is not
unconstitutional.

															But the question with which I have difficulty is whether the
administrative provisions of the act invade the governmental
administrative powers of the several states reserved by the Tenth
Amendment. A state may enter into contracts; but a state cannot, by
contract or statute, surrender the execution, or a share in the
execution, of any of its governmental powers either to a sister
state or to the federal government, any more than the federal
government can surrender the control of any of its governmental
powers to a foreign nation. The power to tax is vital and
fundamental, and, in the highest degree, governmental in character.
Without it, the state could not exist. Fundamental also, and no
less important, is the governmental power to expend the moneys
realized from taxation, and exclusively to administer the laws in
respect of the character of the tax and the methods of laying and
collecting it and expending the proceeds.

															The people of the United States, by their Constitution, have
affirmed a division of internal governmental powers between the
federal government and the governments of the several states --
committing to the first its powers by express grant and necessary
implication; to the latter, or Page 301 U. S. 611 to the people, by reservation, "the powers not delegated to the
United States by the Constitution, nor prohibited by it to the
States." The Constitution thus affirms the complete supremacy and
independence of the state within the field of its powers. Carter v. Carter Coal Co., 298 U.
S. 238 , 298 U. S. 295 .
The federal government has no more authority to invade that field
than the state has to invade the exclusive field of national
governmental powers; for, in the oft-repeated words of this court
in Texas v.
White , 7 Wall. 700, 74 U. S.
725 ,

															"the preservation of the States, and the maintenance of their
governments, are as much within the design and care of the
Constitution as the preservation of the Union and the maintenance
of the National Government."

															The necessity of preserving each from every form of illegitimate
intrusion or interference on the part of the other is so imperative
as to require this court, when its judicial power is properly
invoked, to view with a careful and discriminating eye any
legislation challenged as constituting such an intrusion or
interference. See South Carolina v. United States, 199 U. S. 437 , 199 U. S.
448 .

															The precise question, therefore, which we are required to answer
by an application of these principles is whether the congressional
act contemplates a surrender by the state to the federal
government, in whole or in part, of any state governmental power to
administer its own unemployment law or the state payroll tax funds
which it has collected for the purposes of that law. An affirmative
answer to this question, I think, must be made.

															I do not, of course, doubt the power of the state to select and
utilize a depository for the safekeeping of its funds; but it is
quite another thing to agree with the selected depository that the
funds shall be withdrawn for certain stipulated purposes, and for
no other. Nor do I doubt the authority of the federal government
and a state government to cooperate to a common end, provided Page 301 U. S. 612 each of them is authorized to reach it. But such cooperation
must be effectuated by an exercise of the powers which they
severally possess, and not by an exercise, through invasion or
surrender, by one of them of the governmental power of the
other.

															An illustration of what I regard as permissible cooperation is
to be found in Title I of the act now under consideration. By that
title, federal appropriations for old-age assistance are authorized
to be made to any state which shall have adopted a plan for old-age
assistance conforming to designated requirements. But the state is
not obliged, as a condition of having the federal bounty, to
deposit in the federal treasury funds raised by the state. The
state keeps its own funds and administers its own law in respect of
them, without let or hindrance of any kind on the part of the
federal government; so that we have simply the familiar case of
federal aid upon conditions which the state, without surrendering
any of its powers, may accept or not as it chooses. Massachusetts v. Mellon, 262 U. S. 447 , 262 U. S. 480 , 262 U. S.
482 -483.

															But this is not the situation with which we are called upon to
deal in the present case. For here, the state must deposit the
proceeds of its taxation in the federal treasury, upon terms which
make the deposit suspiciously like a forced loan to be repaid only
in accordance with restrictions imposed by federal law. Title IX,
§§ 903(a)(3), 904(a), (b), (e). All moneys withdrawn from this fund
must be used exclusively for the payment of compensation. §
903(a)(4). And this compensation is to be paid through public
employment offices in the state or such other agencies as a federal board may approve. § 903(a)(1). The act, it is
true, recognizes [§ 903(a)(6)] the power of the legislature to
amend or repeal its compensation law at any time. But there is
nothing in the act, as I read it, which justifies the conclusion
that the state may, in that event, unconditionally withdraw its Page 301 U. S. 613 funds from the federal treasury. Section 903(b) provides that
the board shall certify in each taxable year to the Secretary of
the Treasury each state whose law has been approved. But the board
is forbidden to certify any state which the board finds has so
changed its law that it no longer contains the provisions specified
in subsection (a), "or has with respect to such taxable year failed
to comply substantially with any such provision." The federal
government, therefore, in the person of its agent, the board, sits
not only as a perpetual overseer, interpreter and censor of state
legislation on the subject, but, as lord paramount, to determine
whether the state is faithfully executing its own law -- as though
the state were a dependency under pupilage * and not to be trusted.
The foregoing, taken in connection with the provisions that money
withdrawn can be used only in payment of compensation and that it
must be paid through an agency approved by the federal board,
leaves it, to say the least, highly uncertain whether the right of
the state to withdraw any part of its own funds exists, under the
act otherwise than upon these various statutory conditions. It is
true also that subsection (f) of § 904 authorizes the Secretary of
the Treasury to pay to any state agency "such amount as it may duly
requisition, not exceeding the amount standing to the account of
such State agency at the time of such payment." But it is to be
observed that the payment is to be made to the state agency, and
only such amount as that agency may duly requisition. It is hard to
find in this provision any extension of the right of the state to
withdraw its funds except in the manner and for the specific
purpose prescribed by the act.

															By these various provisions of the act, the federal agencies are
authorized to supervise and hamper the administrative powers of the
state to a degree which not only does not comport with the dignity
of a quasi -sovereign Page 301 U. S. 614 state a matter with which we are not judicially concerned -- but
which denies to it that supremacy and freedom from external
interference in respect of its affairs which the Constitution
contemplates -- a matter of very definite judicial concern. I refer
to some, though by no means all, of the cases in point.

															In the License Cases , 5 How. 504, 46 U. S. 588 ,
Mr. Justice McLean said that the federal government was supreme
within the scope of its delegated powers, and the state governments
equally supreme in the exercise of the powers not delegated by nor
inhibited to them; that the states exercise their powers over
everything connected with their social and internal condition, and
that, over these subjects, the federal government had no power.
"They appertain to the State sovereignty as exclusively as powers
exclusively delegated appertain to the general government."

															In Tarble's Case , 13 Wall. 397, Mr. Justice Field, after pointing out that the
general government and the state are separate and distinct
sovereignties, acting separately and independently of each other
within their respective spheres, said that, except in one
particular, they stood in the same independent relation to each
other as they would if their authority embraced distinct
territories. The one particular referred to is that of the
supremacy of the authority of the United States in case of conflict
between the two.

															In Farrington v. Tennessee, 95 U. S.
679 , 95 U. S. 685 ,
this court said,

															"Yet every State has a sphere of action where the authority of
the national government may not intrude. Within that domain, the
State is as if the union were not. Such are the checks and balances
in our complicated but wise system of State and national
polity."

															"The powers exclusively given to the federal government," it was
said in Worcester v.
Georgia , 6 Pet. 515, 31 U. S.
570 ,

															"are limitations upon the state authorities. But, Page 301 U. S. 615 with the exception of these limitations, the states are supreme,
and their sovereignty can be no more invaded by the action of the
general government than the action of the state governments can
arrest or obstruct the course of the national power."

															The force of what has been said is not broken by an acceptance
of the view that the state is not coerced by the federal law. The
effect of the dual distribution of powers is completely to deny to
the states whatever is granted exclusively to the nation, and,
conversely, to deny to the nation whatever is reserved exclusively
to the states.

															"The determination of the Framers Convention and the ratifying
conventions to preserve complete and unimpaired state
self-government in all matters not committed to the general
government is one of the plainest facts which emerge from the
history of their deliberations. And adherence to that determination
is incumbent equally upon the federal government and the states.
State powers can neither be appropriated, on the one hand, nor
abdicated, on the other." Carter v. Carter Coal Co., supra, p. 298 U. S. 295 .
The purpose of the Constitution in that regard does not admit of
doubt or qualification, and it can be thwarted no more by voluntary
surrender from within than by invasion from without.

															Nor may the constitutional objection suggested be overcome by
the expectation of public benefit resulting from the federal
participation authorized by the act. Such expectation, if voiced in
support of a proposed constitutional enactment, would be quite
proper for the consideration of the legislative body. But, as we
said in the Carter case, supra, p. 298 U. S. 291 -- "nothing is more certain than that beneficent aims, however
great or well directed, can never serve in lieu of constitutional
power." Moreover, everything which the act seeks to do for the
relief of unemployment might have been accomplished, as is done by
this same act for the relief of the misfortunes of old age,
without Page 301 U. S. 616 obliging the state to surrender, or share with another
government, any of its powers.

															If we are to survive as the United States, the balance between
the powers of the nation and those of the states must be
maintained. There is grave danger in permitting it to dip in either
direction, danger -- if there were no other -- in the precedent
thereby set for further departures from the equipoise. The threat
implicit in the present encroachment upon the administrative
functions of the states is that greater encroachments, and
encroachments upon other functions, will follow.

															For the foregoing reasons, I think the judgment below should be
reversed.

															MR. JUSTICE VAN DEVANTER joins in this opinion.

															* Compare 85 U. S. United
States, 18 Wall. 317, 85 U. S. 319 -320.

															MR. JUSTICE BUTLER, dissenting.

															I think that the objections to the challenged enactment
expressed in the separate opinions of MR. JUSTICE McREYNOLDS and
MR. JUSTICE SUTHERLAND are well taken. I am also of opinion that,
in principle and as applied to bring about and to gain control over
state unemployment compensation, the statutory scheme is repugnant
to the Tenth Amendment:

															"The powers not delegated to the United States by the
Constitution, nor prohibited by it to the States, are reserved to
the States respectively, or to the people."

															The Constitution grants to the United States no power to pay
unemployed persons or to require the States to enact laws or to
raise or disburse money for that purpose. The provisions in
question, if not amounting to coercion in a legal sense, are
manifestly designed and intended directly to affect state action in
the respects specified. And, if valid as so employed, this "tax and
credit" device may be made effective to enable federal authorities
to induce, if not indeed to compel, state enactments for any
purpose within the realm of Page 301 U. S. 617 state power, and generally to control state administration of
state laws.

															The Act creates a Social Security Board and imposes upon it the
duty of studying and making recommendations as to legislation and
as to administrative policies concerning unemployment compensation
and related subjects. § 702. It authorizes grants of money by the
United States to States for old age assistance, for administration
of unemployment compensation, for aid to dependent children, for
maternal and child welfare and for public health. Each grant
depends upon state compliance with conditions prescribed by federal
authority. The amounts given being within the discretion of the
Congress, it may at any time make available federal money
sufficient effectively to influence state policy, standards and
details of administration.

															The excise laid by § 901 is limited to specified employers. It
is not imposed to raise money to pay unemployment compensation. But
it is imposed having regard to that subject; for, upon enactment of
state laws for that purpose in conformity with federal requirements
specified in the Act, each of the employers subject to the federal
tax becomes entitled to credit for the amount he pays into an
unemployment fund under a state law up to 90 percent. of the
federal tax. The amounts yielded by the remaining 10 percent., not
assigned to any specific purpose, may be applied to pay the federal
contributions and expenses in respect of state unemployment
compensation. It is not yet possible to determine more closely the
sums that will be needed for these purposes.

															When the federal Act was passed, Wisconsin was the only State
paying unemployment compensation. Though her plan then in force is
by students of the subject generally deemed the best yet devised,
she found it necessary to change her law in order to secure federal
approval. In the absence of that, Wisconsin employers subject to
the Page 301 U. S. 618 federal tax would not have been allowed any deduction on account
of their contribution to the state fund. Any State would be moved
to conform to federal requirements, not utterly objectionable, in
order to save its taxpayers from the federal tax imposed in
addition to the contributions under state laws.

															Federal agencies prepared and took draft bills to state
legislatures to enable and induce them to pass laws providing for
unemployment compensation in accordance with federal requirements,
and thus to obtain relief for the employers from the impending
federal exaction. Obviously the Act creates the peril of federal
tax not to raise revenue, but to persuade. Of course, each State
was free to reject any measure so proposed. But, if it failed to
adopt a plan acceptable to federal authority, the full burden of
the federal tax would be exacted. And, as federal demands similarly
conditioned may be increased from time to time as Congress shall
determine, possible federal pressure in that field is without
limit. Already at least 43 States, yielding to the inducement
resulting immediately from the application of the federal tax and
credit device, have provided for unemployment compensation in form
to merit approval of the Social Security Board. Presumably the
remaining States will comply whenever convenient for their
legislatures to pass the necessary laws.

															The terms of the measure make it clear that the tax and credit
device was intended to enable federal officers virtually to control
the exertion of powers of the States in a field in which they alone
have jurisdiction and from which the United States is by the
Constitution excluded.

															I am of opinion that the judgment of the Circuit Court of
Appeals should be reversed.

Summary: In *Steward Machine Co. v. Collector of Internal Revenue* (1937), the Supreme Court upheld the federal government's power to impose an "excise tax" on employers with respect to having individuals in their employ, with the tax amount based on a percentage of total wages. This tax was part of the Social Security Act and was uniform across the United States. The Court also ruled that exemptions and credits provided to employers who contributed to state unemployment compensation funds did not violate the Constitution, as they were based on valid policy considerations and practical convenience. The tax was deemed a valid exercise of Congress's taxing power, and the Court rejected arguments that it infringed on state powers or violated the Fifth Amendment.