HELVERING v. DAVIS 301 U.S. 619 (1937)

Plaintiff, a stockholder of an affected corporation, challenged Titles II and VIII of the 1935 social security act. Title II creates the old age benefits program, popularly known as "social security," and Title VIII contains the funding mechanism for that program. Under Title VIII, an employer must take a payroll deduction from each employee's wages and pay it, together with an equal amount directly from the employer, to the treasury.

Plaintiff's primary argument was that Congress lacked constitutional power to levy a tax for the purpose of providing old age benefits. Justice benjamin n. cardozo, writing an opinion in which six other Justices joined, resoundingly rejected the argument that Congress had transgressed the tenth amendment reservation to the states of powers not delegated to the federal government. Only Justices james c. mcreynolds and pierce butler dissented. The majority classified the old age benefits program as a legitimate exercise of Congress's power "to lay and collect taxes … to … provide … for the general welfare of the United States." The Court adopted a fluid definition of the general welfare. "Nor is the concept of the general welfare static. Needs that were narrow or parochial a century ago may be interwoven in our day with the well-being of a nation." The Court then examined the effects on older workers of the "purge of nation-wide calamity that began in 1929" and concluded that the problem was national in scope, acute in severity, and intractable without concerted federal effort. State governments were deficient in economic resources and reluctant to finance social programs that would place them at comparative economic disadvantage with competitor states: industry would flee the new taxes and indigents would flock to any state that provided the new social benefits. (Justice Cardozo's analysis proved prescient. In the 1960s and 1970s a number of socially progressive northeastern and western states experienced these twin problems when they far exceeded national benefit norms in the federal-state cooperative programs of Aid to Families with Dependent Children and Medicaid.) Having determined that the purpose of Title II was well within the scope of the "general welfare" clause, the Court sustained the Title VIII funding provisions.

In its broad, though imprecise, reading of the term "general welfare," Helvering v. Davis, even more than its companion case, steward machine co. v. davis (1937), rejects the view that Congress, in exercising its power to tax for the general welfare, is required by the Tenth Amendment to eschew regulation of matters historically controlled by the states. In so doing, it repudiates that vein of case law, exemplified by united states v. butler (1936), that treats the Tenth Amendment as a limitation on the federal taxing and spending power. Though Butler is factually distinguishable, the analysis used by Justice Cardozo in Steward Machine Co. and Helvering v. Davis would surely have sustained the agricultural price support provisions struck down in Butler a year earlier.

Grace Ganz Blumberg
(1986)