Taxing and Spending Power in US Constitution

Cite this article as:"Taxing and Spending Power in US Constitution," in The Business Professor, updated January 2, 2015, last accessed May 26, 2020, https://thebusinessprofessor.com/lesson/taxing-spending-power-us-constitution/.
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Taxing and Spending Clause
What is the Taxing and Spending Clause of the US Constitution? Explanation of the Taxing and Spending Power.

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The Taxing and Spending Clause

Article 1, Section 8, expressly grants to the Federal Government the “Power to lay and collect Taxes, Duties, Imports, and Excises.”

The taxing and spending power allows for the funding of Federal Government operations. The ability to tax is limited by the requirement that all taxes be uniformly applicable to all individuals.

Discussion: Can you think of a recent, landmark Supreme Court decision affecting health care that turned on the Taxing and Spending Power?

Discussion Input

  • On 28th June 2012 the Supreme Court declared its decision in the health care cases of National Federation of Independent Business vs Sebelius.  Majority of the justices voted to uphold the Affordable Care Act aka Obamacare as constitutionally right. The court upheld the law that was authorized by congress, since the congress had the power to levy taxes. The law required that Americans obtain insurance or pay a penalty. The chief Justice John G.Roberts Jr. ruled that the health care legislation passed but only under Congress’s huge power to tax. Chief justice rejected the widely held claims that the commerce clause of the federal government constitution ruling, that it doesn’t give congress power to make people buy health insurance. This means the government is not allowed to impose dietary regulations on citizens.

Article 1, Section 8 further allows the Federal Government to “Pay the debts and provide for the common Defense and general Welfare of the US.”

This authority allows the Federal Government to incur and manage domestic and foreign debt. It also allows for the formation of the military and funding of the military defense budget.

Discussion: Through what process does the United States incur foreign debt? What portion of the total revenue collected from taxes within the United States is allocated to defense spending? How does this compare to other countries in the world?

Discussion Input

  • The United States incurs foreign debts through making obligations to international organizations such as World Bank, Asian Development Bank or Inter-American Development Bank. Foreign debts can also be incurred through a combination of short-term and long-term liabilities. Some countries depend on the US for grants and donations, long-term liabilities are those countries affected by prolonged civil wars. The US government takes responsibility of the refugees. Short-term liabilities are countries which are affected by natural calamities thus they need relief. The most recent expenditure on the United States military was in the fiscal year 2018, where the president requested the Congress for $639 billion in military spending and a $54 billion increase in 2019. The United States is a superpower hence much is allocated for their military due to inventions and renovations made on their military equipment. The US also sends it’s military to war in other states when backup is requested hence the huge investments in the military.

Practice Question: The Federal Government seeks to determine automobile use parameters across the US. To begin the process, the Federal Government passes a law requiring individuals to register their vehicle as part of a national sales tax exemption program. Registering the vehicle will allow individuals to avoid a federal ad valorem tax on the value of the vehicle. Failure to register the vehicle will result in a 1% annual tax being assessed against the vehicle. The tax will be payable as part of the federal income tax return. Does the Federal Government have the authority to assess this tax penalty for failure to register a vehicle? Explain.

Proposed Answer

  • Yes, according to Article 1, Section 8, the federal government has Power to lay and collect Taxes, Duties, Imports, and Excises. Moreover, failure to register the vehicle as a requirement by the government shows lack of allegiance to one’s state. The government has the right to also determine the use of automobiles across the country for budgeting purposes. In addition, to improve the importation and manufacture of vehicles. This act by the government is also supported by the “due process” concept which can be broken down to the “procedural due process” which affirms that the government may not act in a manner that is unreasonable when subjecting an individual to laws of the state of which the act of 1% tax is reasonable to individuals who decline to tax their vehicles, since they have been instructed but they fail to do so. As a matter of fact, its negligence.

Academic Research

Mason, Ruth, Federalism and the Taxing Power (December 1, 2010). California Law Review, Vol. 99, p. 975, 2011. Available at SSRN: https://ssrn.com/abstract=1645542

Cohen, I. Glenn and Mello, Michelle M., The Taxing Power and the Public’s Health (October 20, 2014). 367 New England Journal of Medicine 1777 (2012) . Available at SSRN: https://ssrn.com/abstract=2512426

Garnett, Richard W., The New Federalism, the Spending Power, and Federal Criminal Law. Cornell Law Review, Vol. 89. Available at SSRN: https://ssrn.com/abstract=428903 or http://dx.doi.org/10.2139/ssrn.428903

Mitchell, Matthew D. and Yakovlev, Pavel A., A House Divided Against Itself Cannot Spend (as Much): The Fiscal Effect of Separate Taxing and Spending Committees in State Legislatures (05/13/2015). MERCATUS WORKING PAPER. Available at SSRN: https://ssrn.com/abstract=3211616 or http://dx.doi.org/10.2139/ssrn.3211616

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