The Unemployment Compensation Act of Alabama sets up a scheme
for providing unemployment benefits for workers employed within the
State by designated classes of employers. These include all who
employ eight or more persons for twenty or more weeks in the year,
except those engaged in certain specified employments. The
employers are to pay certain percentages of their total monthly
payrolls into the state Unemployment Compensation Fund, and each
employee is required to contribute to the fund a
Page 301 U. S. 496
percentage of his wages. The fund is to be deposited in the
"Unemployment Trust Fund" of the United States Government
established by the Federal Social Security Act, and is to be used
as requisitioned by the State Commission to pay unemployment
benefits prescribed by the statute, but without any liability on
the part of the State beyond amounts paid into or earned by the
Fund. Benefits are payable from the fund to the employees covered
by the Act, in the event of their unemployment, upon prescribed
conditions and at prescribed rates. The Act satisfies the criteria
which, by § 903(a) of the Social Security Act, are made
prerequisite to its approval by the Social Security Board created
by that Act, and it has been approved by the Board as that section
directs. By § 902 of the Social Security Act, contributors to the
state fund are entitled to credit their contributions in
satisfaction of the tax imposed on employers by the Social Security
Act, to the extent of 90% of the tax.
Held:
1. The Act, as an Act taxing employers, is within the state
taxing power. P.
301 U. S.
508.
Taxes are the means of distributing the burden of the cost of
government, commonly levied on property or its use, but likewise
leviable on the exercise of personal rights and privileges,
including the exercise of the right to employ or to be
employed.
2. The tax on employers is valid under the Fourteenth Amendment.
P.
301 U. S.
508.
(1) Inequalities which result from a singling out of one
particular class for taxation or exemption infringe no
constitutional limitation. P.
301 U. S.
509.
(2) A legislature is not bound to tax every member of a class or
none. It may make distinctions of degree having a rational basis,
and, when subjected to judicial scrutiny, they must be presumed to
rest on such a basis if such would exist under any conceivable
state of facts. P.
301 U. S.
509.
(3) Exclusion from the tax of employers of less than eight is a
distinction of degree such as the law is often called upon to make,
and is furthermore justified on the ground of administrative
convenience and expense. P.
301
U.S. 510.
(4) The exemption of particular classes of employers -- those
who employ agricultural laborers, domestic servants, seamen,
insurance agents, or close relatives -- and the exclusion of
charitable institutions, interstate railways, or the government of
the United States or of any State or political subdivision, whereby
the subject
Page 301 U. S. 497
of the tax is confined to those who employ labor in the
processes of industrial production and distribution, is not
arbitrary. P.
301 U. S.
512.
Where the public interest is served, one business may be left
untaxed and another taxed, in order to promote the one or to
restrict or suppress the other.
Several of the exemptions may rest upon administrative
considerations.
The burden rests upon those who complain of showing that there
are no differences between the exempt employers and the industrial
employers who are taxed sufficient to justify differences in
taxation.
(5) The provision for taxing employees is separable, and
therefore not subject to objection by employers. P.
301 U. S.
513.
(6) Distinct taxes imposed by a single statute are not to be
deemed inseparable unless that conclusion is unavoidable. P.
301 U. S.
513.
(7) Under the Fourteenth Amendment, the state taxing power can
be exerted only to effect a public purpose, and does not embrace
the raising of revenue for private purposes. P.
301 U. S.
514.
(8) The requirements of due process leave free scope for the
exercise of a wide legislative discretion in determining what
expenditures will serve the public interest. P.
301 U. S.
514.
(9) The public purposes of a State, for which it may raise funds
by taxation, embrace expenditures for its general welfare. P.
301 U. S.
514.
(10) Whether the expenditure under the Act serves a public
purpose is a practical question addressed to the lawmaking
department, and it would require a plain case of departure from
every public purpose which could reasonably be conceived to justify
the intervention of a court. P.
301 U. S.
515.
(11) Relief of unemployment is a public purpose. P.
301 U. S.
515.
(12) When public evils ensue from individual misfortunes or
needs, the legislature may strike at the evil at its source. If the
purpose is legitimate because public, it will not be defeated
because the execution of it involves payments to individuals. P.
301 U. S.
518.
(13) The scheme of the Act is not subject to any constitutional
infirmity in not being limited to the indigent, or because it is
extended to some less deserving than others, such as those
discharged for misconduct. P.
301 U. S.
518.
(14) The fact that the Act restricts its benefits to employees
of the class of employers who are subject to the tax does not
render it arbitrary or discriminatory, in violation of the
Fourteenth Amendment. P.
301 U. S.
519.
Page 301 U. S. 498
(15) It is not a valid objection to the tax on employers that
the benefits paid and the persons to whom they are paid are
unrelated to the persons taxed and the amount of the tax which they
pay -- in short, that those who pay the tax may not have
contributed to the unemployment, and may not be benefited by the
expenditure. P.
301 U. S.
521.
The tax is a means of distributing the burden of the cost of
government. This Court has repudiated the suggestion that the
Constitution requires the benefits derived from the expenditure of
public moneys to be apportioned to the burdens of the taxpayer, or
that he can resist the payment of the tax because it is not
expended for purposes which are peculiarly beneficial to him. P.
301 U. S.
522.
(16) The Act is not the invalid product of the coercive
operation of the Federal Social Security Act, and involves no
unconstitutional surrender of State power.
Steward Machine Co.
v. Davis, post, p.
301 U. S. 548. P.
301 U. S.
525.
17 F. Supp.
225 reversed.
Appeals from decrees of the District Court, of three judges,
restraining the present petitioners, officials of Alabama, from
collecting the money contributions exacted of them by the
provisions of the Alabama Unemployment Compensation Act.
Page 301 U. S. 504
MR. JUSTICE STONE delivered the opinion of the Court.
The questions for decision are whether the Unemployment
Compensation Act of Alabama infringes the due
Page 301 U. S. 505
process and equal protection clauses of the fourteenth
Amendment, and whether it is invalid because its enactment was
coerced by the action of the Federal government in adopting the
Social Security Act, and because it involves an unconstitutional
surrender to the national government of the sovereign power of the
state.
Appellee, the Southern Coal & Coke Co., is a Delaware
corporation employing more than eight persons in its business of
manufacturing paper within the state. They brought the present
suits in the District Court for the Middle District of Alabama to
restrain appellants, the Attorney General and the Unemployment
Compensation Commission of Alabama, from collecting the money
contributions exacted of them by the provisions of the Alabama
Unemployment Compensation Act. From the decrees of the district
court, three judges sitting (Jud.Code, § 266, 28 U.S.C. § 380),
granting the relief prayed, the case comes here on appeal.
Jud.Code, § 238(3), 28 U.S.C. § 345(3).
The Unemployment Compensation Act, Ala.Gen. Acts 1935, No. 447,
p. 950; Ala.Code of 1928 (1936 Cum.Supp.) § 7597(1)
et
seq., as amended by Gen.Acts 1936 (Ex.Sess.), Nos. 156 (page
176), 194 (page 225), 195 (page 228), and Acts of Feb. 10, 1937,
sets up a comprehensive scheme for providing unemployment benefits
for workers employed within the state by employers designated by
the Act. These employers include all who employ eight or more
persons for twenty or more weeks in the year, § 2(f), except those
engaged in certain specified employments. [
Footnote 1] It imposes
Page 301 U. S. 506
on the employers the obligation to pay a certain percentage of
their total monthly payrolls into the state Unemployment
Compensation Fund, administered by appellants. For 1936, the levy
is .9 of 1 percent; for 1937, it is 1.8 percent, and for 1938 and
subsequent years, it is 2.7 percent. Section 4(b). In 1941 and
thereafter, the rates of contribution by employers are to be
revised in accordance with experience, but in no case are they to
be less than 1 1/2 or more than 4 percent of the payroll. Section
4(c). After May 1, 1936, each employee is required to contribute 1
percent of his wages to the fund. Section 4(d). The fund is to be
deposited in the "Unemployment Trust Fund" of the United States
Government, § 3(d),
cf. Social Security Act, § 904(a), and
is to be used as requisitioned by the State Commission to pay
unemployment benefits prescribed by the statute, §§ 3(b), 3(d), but
without any liability on the part of the state beyond amounts paid
into or earned by the fund. Benefits are payable from the fund to
the employees covered by the Act, in the event of their
unemployment,
Page 301 U. S. 507
upon prescribed conditions and at prescribed rates.
The Act satisfies the criteria which, by § 903(a) of the Social
Security Act of August 14, 1935, c. 531, 49 Stat. 620, 640, 42
U.S.C. § 1103(a), are made prerequisite to its approval by the
Social Security Board created by that Act, and it has been approved
by the Board as that section directs. By § 902 of the Social
Security Act, contributors to the state fund are entitled to credit
their contributions in satisfaction of the tax imposed on employers
by the Social Security Act to the extent of 90 percent of the tax.
See Chas. C. Steward Machine Co. v. Davis, post, p.
301 U. S. 548.
In the court below, the statute was assailed as repugnant to
various provisions of the State Constitution. These contentions
have been put at rest by the decision of the Supreme Court of
Alabama in
Beeland Wholesale Co. v. Kaufman, 174 So. 516,
holding the state act valid under both the State and Federal
Constitutions. The statute was also attacked on the ground that the
Social Security Act is invalid under the Federal Constitution,
since the state act declares that it "shall become void" if the
Supreme Court of the United States shall hold the Social Security
Act invalid. The Alabama court interpreted the statute as having
operative effect only if the Social Security Act were
constitutional -- even in advance of a decision by this Court. We
need not decide whether the state court's ruling that the federal
statute is valid is conclusive upon us for the purpose of
determining whether the state law is presently in force,
Miller's Executors v. Swann, 150 U.
S. 132;
Louisville & Nashville R. Co. v. Western
Union Telegraph Co., 237 U. S. 300,
because its conclusion as to the validity of the federal act agrees
with our own, announced in
Chas. C. Steward Machine Co. v.
Davis, supra.
Attacks were leveled on the statute on numerous other grounds,
which are urged here -- as an infringement of
Page 301 U. S. 508
the due process and equal protection clauses of the Fourteenth
Amendment, as an unconstitutional surrender to the United States
government of the sovereign power of the state, and as a measure
owing its passage to the coercive action of Congress in the
enactment of the Social Security Act.
In
Beeland Wholesale Co. v. Kaufman, supra, the Supreme
Court of Alabama held that the contributions which the statute
exacts of employers are excise taxes laid in conformity to the
constitution and laws of the state. While the particular name which
a state court or legislature may give to a money payment commanded
by its statute is not controlling here when its constitutionality
is in question,
cf. Educational Films Corp. v. Ward,
282 U. S. 379,
282 U. S. 387;
Storaasli v. Minnesota, 283 U. S. 57,
283 U. S. 62;
Wagner v. Covington, 251 U. S. 95,
251 U. S.
102-104;
Standard Oil Co. v. Graves,
249 U. S. 389,
249 U. S. 394,
we see no reason to doubt that the present statute is an exertion
of the taxing power of the state.
Cf. Carley & Hamilton v.
Snook, 281 U. S. 66,
281 U. S.
71.
Taxes, which are but the means of distributing the burden of the
cost of government, are commonly levied on property or its use, but
they may likewise be laid on the exercise of personal rights and
privileges. As has been pointed out by the opinion in the
Chas.
C. Steward Machine Co. case, such levies, including taxes on
the exercise of the right to employ or to be employed, were known
in England and the Colonies before the adoption of the
Constitution, and must be taken to be embraced within the wide
range of choice of subjects of taxation, which was an attribute of
the sovereign power of the states at the time of the adoption of
the Constitution, and which was reserved to them by that
instrument. As the present levy has all the indicia of a tax, and
is of a type traditional in the history of Anglo-American
legislation, it is within state taxing power, and it is immaterial
whether it is
Page 301 U. S. 509
called an excise or by another name.
See Barwide v.
Sheppard, 299 U. S. 33,
299 U. S. 36.
Its validity under the Federal Constitution is to be determined in
the light of constitutional principles applicable to state
taxation.
V
alidity of the Tax Under the Fourteenth Amendment
First. Validity of the Tax Qua Tax. It is inherent in
the exercise of the power to tax that a state be free to select the
subjects of taxation and to grant exemptions. Neither due process
nor equal protection imposes upon a state any rigid rule of
equality of taxation.
See Bell's Gap R. Co. v.
Pennsylvania, 134 U. S. 232,
134 U. S. 237;
Lawrence v. State Tax Comm'n, 286 U.
S. 276,
286 U. S. 284.
This Court has repeatedly held that inequalities which result from
a singling out of one particular class for taxation or exemption
infringe no constitutional limitation.
Magoun v. Illinois Trust
& Savings Bank, 170 U. S. 283,
170 U. S. 293;
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;
Quong Wing v. Kirkendall, 223 U. S.
59,
223 U. S. 62-63;
Armour & Co. v. Virginia, 246 U. S.
1,
246 U. S. 6;
Alaska Fish Salting & By-Products Co. v. Smith,
255 U. S. 44,
255 U. S. 48;
State Board of Tax Comm'rs v. Jackson, 283 U.
S. 527,
283 U. S. 537;
Broad River Power Co. v. Query, 288 U.
S. 178,
288 U. S. 180;
Fox v. Standard Oil Co., 294 U. S. 87,
294 U. S. 97;
Cincinnati Soap Co. v. United States, ante, p.
301 U. S. 308;
Great Atlantic & Pacific Tea Co. v. Grosjean, ante, p.
301 U. S. 412.
Like considerations govern exemptions from the operation of a
tax imposed on the members of a class. A legislature is not bound
to tax every member of a class or none. It may make distinctions of
degree having a rational basis, and, when subjected to judicial
scrutiny, they must be presumed to rest on that basis if there is
any conceivable state of facts which would support it.
Rast v.
Van Deman & Lewis Co., 240 U. S. 342,
240 U. S. 357;
Heisler v. Thomas Colliery Co., 260 U.
S. 245,
260 U. S. 255;
Swiss Oil
Page 301 U. S. 510
Corp. v. Shanks, 273 U. S. 407,
273 U. S. 413;
Lawrence v. State Tax Comm'n, supra; cf. Metropolitan Casualty
Insurance Co. v. Brownell, 294 U. S. 580,
294 U. S.
584.
This restriction upon the judicial function, in passing on the
constitutionality of statutes, is not artificial or irrational. A
state legislature, in the enactment of laws, has the widest
possible latitude within the limits of the Constitution. In the
nature of the case, it cannot record a complete catalogue of the
considerations which move its members to enact laws. In the absence
of such a record, courts cannot assume that its action is
capricious, or that, with its informed acquaintance with local
conditions to which the legislation is to be applied, it was not
aware of facts which afford reasonable basis for its action. Only
by faithful adherence to this guiding principle of judicial review
of legislation is it possible to preserve to the legislative branch
its rightful independence and its ability to function.
(a) Exclusion of Employers of Less than Eight. Distinctions in
degree, stated in terms of differences in number, have often been
the target of attack,
see Booth v. Indiana, 237 U.
S. 391,
237 U. S. 397.
It is argued here, and it was ruled by the court below, that there
can be no reason for a distinction, for purposes of taxation,
between those who have only seven employees and those who have
eight. Yet this is the type of distinction which the law is often
called upon to make. [
Footnote
2] It is only a difference in numbers
Page 301 U. S. 511
which marks the moment when day ends and night begins, when the
disabilities of infancy terminate and the status of legal
competency is assumed. It separates large incomes which are taxed
from the smaller ones which are exempt, as it marks here the
difference between the proprietors of larger businesses who are
taxed and the proprietors of smaller businesses who are not.
Administrative convenience and expense in the collection or
measurement of the tax are alone a sufficient justification for the
difference between the treatment of small incomes or small
taxpayers and that meted out to others.
Citizens' Telephone Co.
v. Fuller, 229 U. S. 322,
229 U. S. 332;
Hatch v. Reardon, 204 U. S. 152,
204 U. S. 159;
New York v. Latrobe, 279 U. S. 421,
279 U. S. 428;
Aero Mayflower Transit Co. v. Georgia Public Service
Comm'n, 295 U. S. 285,
295 U. S. 289;
cf. Florida Central & Peninsular R. Co. v. Reynolds,
183 U. S. 471,
183 U. S. 480;
Packer Corp. v. Utah, 285 U. S. 105,
285 U. S. 110,
footnote 6. We cannot say that the expense and inconvenience of
collecting the tax from small employers would not be
disproportionate to the revenue obtained. For it cannot be assumed
that the legislature could not rightly have concluded that
generally the number of employees bears a relationship to the size
of the payroll, and therefore to the amount of the tax, and that
the large number of small employers and the paucity of their
records of employment would entail greater inconvenience in the
collection and verification of the tax than in the case of larger
employers.
It would hardly be contended that the state, in order to tax
payrolls, is bound to assume the administrative cost and burden of
taxing all employers having a single employee. But if, for that or
any other reason, it may exempt some, whether it should draw the
line at one, three, or seven, is peculiarly a question for
legislative decision. The decision cannot be said to be arbitrary
because it falls in the twilight zone between those members of the
class
Page 301 U. S. 512
which plainly can and those which plainly cannot expediently be
taxed.
(b) Exemption of Particular Classes of Employers. It is
arbitrary, appellees contend, to exempt those who employ
agricultural laborers, domestic servants, seamen, insurance agents,
or close relatives, or to exclude charitable institutions,
interstate railways, or the government of the United States or of
any state or political subdivision. A sufficient answer is an
appeal to the principle of taxation already stated, that the state
is free to select a particular class as a subject for taxation. The
character of the exemptions suggests simply that the state has
chosen as the subject of its tax those who employ labor in the
processes of industrial production and distribution.
Reasons for the selections, if desired, readily suggest
themselves. Where the public interest is served one business may be
left untaxed and another taxed in order to promote the one,
American Sugar Refining Co. v. Louisiana, supra; Heisler v.
Thomas Colliery Co., supra; Aero Mayflower Transit Co. v. Georgia
Public Service Comm'n, supra, or to restrict or suppress the
other,
Magnano Co. v. Hamilton, 292 U. S.
40;
Fox v. Standard Oil Co., supra; Quong Wing v.
Kirkendall, supra; Singer Sewing Machine Co. v. Brickell,
233 U. S. 304;
Alaska Fish Salting & By-Products Co. v. Smith, supra,
255 U. S. 48;
Great Atlantic & Pacific Tea Co. v. Grosjean, supra.
The legislature may withhold the burden of the tax in order to
foster what it conceives to be a beneficent enterprise. This Court
has often sustained the exemption of charitable institutions,
Bell's Gap R. Co. v. Pennsylvania, supra, 134 U. S. 237;
cf. Board of Education v. Illinois, 203 U.
S. 553,
203 U. S. 563, and
exemption for the encouragement of agriculture,
American Sugar
Refining Co. v. Louisiana, supra, 179 U. S. 95;
Aero Mayflower Transit Co. v. Georgia Public Service Comm'n,
supra, 295 U. S. 291.
Similarly, the legislature is free to aid a depressed industry such
as shipping. The exemption of business operating for less than
twenty weeks in the year
Page 301 U. S. 513
may rest upon similar reasons, or upon the desire to encourage
seasonal or unstable industries.
Administrative considerations may explain several exemptions.
Relatively great expense and inconvenience of collection may
justify the exemption from taxation of domestic employers, farmers,
and family businesses, not likely to maintain adequate employment
records, which are an important aid in the collection and
verification of the tax. The state may reasonably waive the
formality of taxing itself or its political subdivisions. Fear of
constitutional restrictions and a wholesome respect for the proper
policy of another sovereign would explain exemption of the United
States, and of the interstate railways,
compare Packer Corp. v.
Utah, supra, 285 U. S. 109.
In no case do appellees sustain the burden which rests upon them of
showing that there are no differences, between the exempt employers
and the industrial employers who are taxed sufficient to justify
differences in taxation.
(c) Tax on Employees. Appellees extend their attack on the
statute from the tax imposed on them as employers to the tax
imposed on employees. But they cannot object to a tax which they
are not asked to pay, at least if it is separable, as we think it
is, from the tax they must pay. The statute contains the usual
separability clause. Section 19. The taxation of employees is not
prerequisite to enjoyment of the benefits of the Social Security
Act. The collection and expenditure of the tax on employers do not
depend upon taxing the employees, and we find nothing in the
language of the statute or its application to suggest that the tax
on employees is so essential to the operation of the statute as to
restrict the effect of the separability clause. Distinct taxes
imposed by a single statute are not to be deemed inseparable unless
that conclusion is unavoidable.
See Field v. Clark,
143 U. S. 649,
143 U. S. 697;
Sonzinsky v. United States, 300 U.
S. 506.
Page 301 U. S. 514
From what has been said, it is plain that the tax
qua
tax conforms to constitutional requirements, and that our inquiry
as to its validity would end at this point if the proceeds of the
tax were to be covered into the state treasury, and thus made
subject to appropriation by the legislature.
Second. Validity of the Tax as Determined by Its
Purposes. The devotion of the tax to the purposes specified by
the Act requires our consideration of the objections pressed upon
us that the tax is invalid because the purposes are invalid, and
because the methods chosen for their execution transgress
constitutional limitations. It is not denied that, since the
adoption of the Fourteenth Amendment, state taxing power can be
exerted only to effect a public purpose, and does not embrace the
raising of revenue for private purposes.
See Green v.
Frazier, 253 U. S. 233,
253 U. S. 238;
Milheim v. Moffat Tunnel Dist., 262 U.
S. 710,
262 U. S. 717;
Fallbrook Irrigation Dist. v. Bradley, 164 U.
S. 112,
164 U. S. 158;
Jones v. Portland, 245 U. S. 217,
245 U. S. 221.
The states, by their constitutions and laws, may set their own
limits upon their spending power,
See
Citizens' Savings
& Loan Assn. v. Topeka, 20 Wall. 655;
cf.
Parkersburg v. Brown, 106 U. S. 487;
Cole v. La Grange, 113 U. S. 1, but the
requirements of due process leave free scope for the exercise of a
wide legislative discretion in determining what expenditures will
serve the public interest.
This Court has long and consistently recognized that the public
purposes of a state, for which it may raise funds by taxation,
embrace expenditures for its general welfare.
Fallbrook
Irrigation Dist. v. Bradley, supra, 164 U. S. 161;
Green v. Frazier, supra, 253 U. S.
240-241. The existence of local conditions which,
because of their nature and extent, are of concern to the public as
a whole, the modes of advancing the public interest by correcting
them or avoiding their consequences, are peculiarly within the
knowledge
Page 301 U. S. 515
of the legislature, and to it, and not to the courts, is
committed the duty and responsibility of making choice of the
possible methods.
See Fallbrook Irrigation Dist. v. Bradley,
supra, 164 U. S. 160;
Jones v. Portland, supra, 245 U. S. 221,
245 U. S.
224-225;
Green v. Frazier, supra, 253 U. S.
239-240. As with expenditures for the general welfare of
the United States,
United States v. Butler, 297 U. S.
1,
297 U. S. 67;
Helvering v. Davis, post, p.
301 U. S. 619,
whether the present expenditure serves a public purpose is a
practical question addressed to the lawmaking department, and it
would require a plain case of departure from every public purpose
which would reasonably be conceived to justify the intervention of
a court.
See Cincinnati Soap Co. v. United States, supra; cf.
Jones v. Portland, supra. The present case exhibits no such
departure.
(a) Relief of Unemployment as a Public Purpose. Support of the
poor has long been recognized as a public purpose,
see Kelly v.
Pittsburgh, 104 U. S. 78,
104 U. S. 81. We
need not labor the point that expenditures for the relief of the
unemployed, conditioned on unemployment alone, without proof of
indigence of recipients of the benefits, is a permissible use of
state funds. For the past six years, the nation, unhappily, has
been placed in a position to learn at first hand the nature and
extent of the problem of unemployment, and to appreciate its
profound influence upon the public welfare. Detailed accounts of
the problem and its social and economic consequences, to be found
in public reports of the expenditures of relief funds and in the
studies of many observers, afford a basis for the legislative
judgment. It suffices to say that they show that unemployment
apparently has become a permanent incident of our industrial
system; that it varies, in extent and intensity, with fluctuations
in the volume of seasonal businesses and with the business cycle.
It is dependent, with special and unpredictable manifestations,
upon technological
Page 301 U. S. 516
changes and advances in methods of manufacture, upon changing
demands for manufactured products, dictated by changes in fashion
or the creation of desirable substitutes, and upon the
establishment of new sources of competition.
The evils of the attendant social and economic wastage permeate
the entire social structure. Apart from poverty, or a less extreme
impairment of the savings which afford the chief protection to the
working class against old age and the hazards of illness, a matter
of inestimable consequence to society as a whole, and apart from
the loss of purchasing power, the legislature could have concluded
that unemployment brings in its wake increase in vagrancy and
crimes against property, [
Footnote
3] reduction in the number of marriages, [
Footnote 4] deterioration of family life, decline
in the birth rate, [
Footnote 5]
increase in illegitimate births, [
Footnote 6] impairment of
Page 301 U. S. 517
the health of the unemployed and their families [
Footnote 7] and malnutrition of their
children. [
Footnote 8]
Although employment in Alabama is predominantly in agriculture,
and the court below found that agricultural unemployment is not an
acute problem, the census reports disclose the steadily increasing
percentage of those employed in industrial pursuits in Alabama.
[
Footnote 9] The total amount
spent for emergency relief in Alabama, in the years 1933 to 1935
inclusive, exceeded $47,000,000, of which $312,000 came from state
funds, $2,243,000 from local sources and the balance from relief
funds of the federal government. [
Footnote 10] These figures bear eloquent witness to the
inability of local agencies to cope with the problem without state
action and resort to new taxing legislation. Expenditure of public
funds under the present statute, for relief of unemployment, will
afford some
Page 301 U. S. 518
protection to a substantial group of employees, [
Footnote 11] and we cannot say that it is
not for a public purpose.
The end being legitimate, the means is for the legislature to
choose. When public evils ensue from individual misfortunes or
needs, the legislature may strike at the evil at its source. If the
purpose is legitimate because public, it will not be defeated
because the execution of it involves payments to individuals.
Kelly v. Pittsburgh, supra; Knights v. Jackson,
260 U. S. 12,
260 U. S. 15;
cf. Mountain Timber Co. v. Washington, 243 U.
S. 219,
243 U. S.
239-240. "Individual interests are aided only as the
common interest is safeguarded."
See Cochran v. Board of
Education, 281 U. S. 370,
281 U. S. 375;
cf. Clark v. Nash, 198 U. S. 361,
198 U. S. 367;
Hairston v. Danville & Western Ry. Co., 208 U.
S. 598,
208 U. S. 608;
Noble State Bank v. Haskell, 219 U.
S. 104,
219 U. S.
110.
(b) Extension of Benefits. The present scheme of unemployment
relief is not subject to any constitution infirmity, as respondents
argue, because it is not limited to the indigent or because it is
extended to some less deserving than others, such as those
discharged for misconduct. While we may assume that the state could
have limited its award of unemployment benefits to the indigent and
to those who had not been rightfully discharged from their
employment, it was not bound to do so. Poverty
Page 301 U. S. 519
is one, but not the only, evil consequence of unemployment.
Among the benefits sought by relief is the avoidance of
destitution, and of the gathering cloud of evils which beset the
worker, his family, and the community after wages cease and before
destitution begins. We are not unaware that industrial workers are
not an affluent class, and we cannot say that a scheme for the
award of unemployment benefits, to be made only after a substantial
"waiting period" of unemployment, and then only to the extent of
half wages and not more than $15 a week for, at most, 16 weeks a
year, does not effect a public purpose, because it does not also
set up an elaborate machinery for excluding those from its benefits
who are not indigent. Moreover, the state could rightfully decide
not to discourage thrift.
Mountain Timber Co. v. Washington,
supra, 243 U. S. 240.
And as the injurious effects of unemployment are not limited to the
unemployed worker, there is scope for legislation to mitigate those
effects, even though unemployment results from his discharge for
cause.
(c) Restriction of Benefits. Appellees again challenge the tax
by attacking as arbitrary the classification adopted by the
legislature for the distribution of unemployment benefits. Only the
employees of those subject to the tax share in the benefits.
Appellees complain that the relief is withheld from many as
deserving as those who receive benefits. The choice of
beneficiaries, like the selection of the subjects of the tax, is
thus said to be so arbitrary and discriminatory as to infringe the
Fourteenth Amendment and deprive the statute of any public
purpose.
What we have said as to the validity of the choice of the
subjects of the tax is applicable in large measure to the choice of
beneficiaries of the relief. In establishing a system of
unemployment benefits, the legislature is not bound to occupy the
whole field. It may strike at the
Page 301 U. S. 520
evil where it is most felt,
Otis v. Parker,
187 U. S. 606,
187 U. S. 610;
Carroll v. Greenwich Insurance Co., 199 U.
S. 401,
199 U. S. 411;
Lindsley v. Natural Carbonic Gas Co., 220 U. S.
61,
220 U. S. 81;
Central Lumber Co. v. South Dakota, 226 U.
S. 157,
226 U. S. 160;
Rosenthal v. New York, 226 U. S. 260,
226 U. S. 270;
Patsone v. Pennsylvania, 232 U. S. 138,
232 U. S. 144;
Keokee Consol. Coke Co. v. Taylor, 234 U.
S. 224,
234 U. S. 227;
Silver v. Silver, 280 U. S. 117,
280 U. S. 123;
Hardware Dealers Mutual Fire Ins. Co. v. Glidden Co.,
284 U. S. 151,
284 U. S. 159,
or where it is most practicable to deal with it,
Dominion Hotel
Inc. v. Arizona, 249 U. S. 265,
249 U. S.
268-269. It may exclude others whose need is less,
New York, N.H. & H. R. Co. v. New York, 165 U.
S. 628,
165 U. S. 634;
St. Louis Consol. Coal Co. v. Illinois, 185 U.
S. 203,
185 U. S. 208;
Engel v. O'Malley, 219 U. S. 128,
219 U. S. 138;
New York Central R. Co. v. White, 243 U.
S. 188,
243 U. S. 208;
Radice v. New York, 264 U. S. 292,
264 U. S. 294;
West Coast Hotel Co. v. Parrish, 300 U.
S. 379, or whose effective aid is attended by
inconvenience which is greater,
Dominion Hotel, Inc. v.
Arizona, supra; Atlantic Coast Line R. Co. v. State, 135 Ga.
545, at 555, 556, 69 S.E. 725, as affirmed and approved,
Atlantic Coast Line R. Co. v. Georgia, 234 U.
S. 280,
234 U. S.
289.
As we cannot say that these considerations did not lead to the
selection of the classes of employees entitled to unemployment
benefits, and as a state of facts may reasonably be conceived which
would support the selection, its constitutionality must be
sustained. There is a basis, on grounds of administrative
convenience and expense, for adopting a classification which would
permit the use of records, kept by the taxpayer and open to the tax
gatherer, as an aid to the administration of benefit awards, as is
the case here, where the recipients of benefits are selected from
the employees of those who pay the tax. Special complaint is made
of the discrimination against those with only six coworkers, as
contrasted with those who have more. We have already shown that a
distinction in terms of the number of employees is not on its face
invalid. [
Footnote 12]
Page 301 U. S. 521
Here, the legislative choice finds support in the conclusion
reached by students of the problem, [
Footnote 13] that unemployment is less likely to occur in
businesses having a small number of employees.
Third. Want of Relationship Between the Subjects and
Benefits of the Tax. It is not a valid objection to the
present tax, conforming in other respects to the Fourteenth
Amendment, and devoted to a public purpose, that the benefits paid
and the persons to whom they are paid are unrelated to the persons
taxed and the amount of the tax which they pay -- in short, that
those who pay the tax may not have contributed to the unemployment
and may not be benefited by the expenditure. Appellees' contention
that the statute is arbitrary, insofar as it fails to distinguish
between the employer with a low unemployment experience and the
employer with a high unemployment experience, rests upon the
misconception that there must be such a relationship between the
subject of the tax (the exercise of the right to employ) and the
evil to be met by the appropriation of the proceeds (unemployment).
We have recently stated the applicable doctrine.
"But if the tax,
qua tax, be good, as we hold it is,
and the purpose specified be one which would sustain a subsequent
and separate appropriation made out of the general funds of the
Treasury, neither is made invalid by being bound to the other in
the same act of legislation."
Cincinnati Soap Co. v. United States, supra. Nothing is
more familiar in taxation than the imposition of a tax upon a class
or upon individuals who enjoy no direct
Page 301 U. S. 522
benefit from its expenditure, and who are not responsible for
the condition to be remedied. [
Footnote 14]
A tax is not an assessment of benefits. It is, as we have said,
a means of distributing the burden of the cost of government. The
only benefit to which the taxpayer is constitutionally entitled is
that derived from his enjoyment of the privileges of living in an
organized society, established and safeguarded by the devotion of
taxes to public purposes.
See Cincinnati Soap Co. v. United
States, supra. Any other view would preclude the levying of
taxes except as they are used to compensate for the burden
Page 301 U. S. 523
on those who pay them, and would involve the abandonment of the
most fundamental principle of government -- that it exists
primarily to provide for the common good. A corporation cannot
object to the use of the taxes which it pays for the maintenance of
schools because it has no children.
Thomas v. Gay,
169 U. S. 264,
169 U. S. 280.
This Court has repudiated the suggestion, whenever made, that the
Constitution requires the benefits derived from the expenditure of
public moneys to be apportioned to the burdens of the taxpayer, or
that he can resist the payment of the tax because it is not
expended for purposes which are peculiarly beneficial to him.
[
Footnote 15]
Cincinnati
Soap Co. v. United States, supra; Carley & Hamilton v. Snook,
supra, 281 U. S. 72;
Nashville, C. & St.L. R. Co. v. Wallace, 288 U.
S. 249,
288 U. S. 268;
see Union Refrigerator Transit Co. v. Kentucky,
199 U. S. 194,
199 U. S.
203.
Even if a legislature should undertake, what the Constitution
does not require, to place the burden of tax for unemployment
benefits upon those who cause or contribute to unemployment, it
might conclude that the burden cannot justly be apportioned among
employers
Page 301 U. S. 524
according to their unemployment experience. Unemployment in the
plant of one employer may be due to competition with another,
within or without the state, whose factory is running to capacity;
or to tariffs, inventions, changes in fashions or in market or
business conditions, for which no employer is responsible, but
which may stimulate the business of one and impair or even destroy
that of another. Many believe that the responsibility for the
business cycle, the chief cause of unemployment, cannot be
apportioned to individual employers in accordance with their
employment experience; that a business may be least responsible for
the depression from which it suffers the most.
The Alabama legislature may have proceeded upon the view, for
which there is abundant authority, that the causes of unemployment
are too complex to admit of a meticulous appraisal of employer
responsibility. [
Footnote
16] It may have concluded that unemployment is an inseparable
incident of modern industry, with its most serious manifestations
in industrial production; that employees will be best protected,
and that the cost of the remedy at least until more accurate and
complete data are available, may best be distributed, by imposing
the tax evenly upon all industrial production, [
Footnote 17] and in such form that it will
be
Page 301 U. S. 525
added to labor costs which are ultimately absorbed by the public
in the prices which it pays for consumable goods.
If the question were ours to decide, we could not say that the
legislature, in adopting the present scheme, rather than another,
had no basis for its choice, or was arbitrary or unreasonable in
its action. But, as the state is free to distribute the burden of a
tax without regard to the particular purpose for which it is to be
used, there is no warrant in the Constitution for setting the tax
aside because a court thinks that it could have drawn a better
statute or could have distributed the burden more wisely. Those are
functions reserved for the legislature.
Since the appellees may not complain if the expenditure has no
relation to the taxed class of which they are members, they
obviously may not complain because the expenditure has some
relation to that class, that those benefited are employees of those
taxed, or because the legislature has adopted the expedient of
spreading the burden of the tax to the consuming public by imposing
it upon those who make and sell commodities. It is irrelevant to
the permissible exercise of the power to tax that some pay the tax
who have not occasioned its expenditure, or that, in the course of
the use of its proceeds for a public purpose, the legislature has
benefited individuals who may or may not be related to those who
are taxed.
Relationship of the State and Federal Statutes.
There remain for consideration the contentions that the state
act is invalid because its enactment was coerced by the adoption of
the Social Security Act, and that it involves an unconstitutional
surrender of state power. Even though it be assumed that the
exercise of a sovereign power by a state, in other respects valid,
may be rendered invalid because of the coercive effect of a federal
statute enacted in the exercise of a power granted to the national
government, such coercion is lacking here.
Page 301 U. S. 526
It is unnecessary to repeat now those considerations which have
led to our decision in the
Chas. C. Steward Machine Co.
case, that the Social Security Act has no such coercive effect. As
the Social Security Act is not coercive in its operation, the
Unemployment Compensation Act cannot be set aside as an
unconstitutional product of coercion. The United States and the
State of Alabama are not alien governments. They coexist within the
same territory. Unemployment within it is their common concern.
Together, the two statutes now before us embody a cooperative
legislative effort by state and national governments for carrying
out a public purpose common to both, which neither could fully
achieve without the cooperation of the other. The Constitution does
not prohibit such cooperation.
As the state legislation is not the product of a prohibited
coercion, there is little else to which appellees can point as
indicating a surrender of state sovereignty. As the opinion in the
Chas. C. Steward Machine Co. case points out, full liberty
of action is secured to the state by both statutes. The
unemployment compensation fund is administered in accordance with
state law by the state commission. The statute may be repealed at
the will of the legislature, and, in that case, the state will be
free to withdraw at any time its unexpended share of the
Unemployment Trust Fund from the treasury of the United States, and
to use it for any public purpose. And, for the reasons stated in
the opinion in the
Chas. C. Steward Machine Co. case, we
conclude that the deposit by the state of its compensation fund in
the Unemployment Trust Fund involves no more of a surrender of
sovereignty than does the choice of any other depository for state
funds. The power to contract and the power to select appropriate
agencies and instrumentalities for the execution of state policy
are attributes of state sovereignty. They are not lost by their
exercise.
Page 301 U. S. 527
Many other arguments are pressed upon us. They require no
discussion save as their answer is implicit in what we have said.
The state compensation act, on its face, and as applied to
appellees, is subject to no constitutional infirmity, and the
decree below is
Reversed.
MR. JUSTICE McREYNOLDS thinks that the decree should be
affirmed.
* Together with No. 797,
Carmichael, Attorney General of
Alabama, et al. v. Gulf States Paper Corp., appeal from the
District Court of the United States for the Middle District of
Alabama.
[
Footnote 1]
See § 2(g). "Employment" is defined to exclude:
"(1) Agricultural labor;"
"(2) Domestic service in a private home;"
"(3) Service performed as an officer Bar Pilot or member of the
crew of a vessel on the navigable waters of the United States;"
"(4) Service performed by an individual in the employ of his
son, daughter, or spouse, and service performed by a child under
the age of twenty-one in the employ of his father or mother;"
"(5) Service performed in the employ of the United States
Government or of an instrumentality of the United States;"
"(6) Service performed in the employ of a carrier engaged in
interstate commerce and subject to the Act of Congress known as The
Railway Labor Act, as amended or as hereafter amended. Service
performed by those engaged as Solicitors or agents for Insurance
Companies;"
"(7) Service performed in the employ of a state, or political
subdivision thereof, or an instrumentality of one or more states or
political subdivisions;"
"(8) Service performed in the employ of a corporation, community
chest, fund, or foundation, organized and operated exclusively for
religious, charitable, scientific, literary, or educational
purposes, or for the prevention of cruelty to children or animals,
no part of the net earnings of which inures to the benefit of any
private shareholder or individual."
[
Footnote 2]
St. Louis Consol. Coal Co. v. Illinois, 185 U.
S. 203,
185 U. S. 207
(coal mines employing five or more subject to inspection);
McLean v. Arkansas, 211 U. S. 539,
211 U. S. 551
(mines employing ten or more required to measure coal for payment
of wages before screening);
Booth v. Indiana, 237 U.
S. 391,
237 U. S. 397
(mines required to supply wash-houses upon demand of twenty
employees);
Jeffrey Mfg. Co. v. Blagg, 235 U.
S. 571,
235 U. S. 576;
Middleton v. Texas Power & L. Co., 249 U.
S. 152,
249 U. S. 159
(employers of five or more included within workmen's compensation
act).
[
Footnote 3]
See, e.g., National Commission on Law Observance and
Enforcement (1931), Report on the Causes of Crime, No. 13,
especially p. 312.
[
Footnote 4]
From 1924 to 1932, inclusive, the marriage rate in Alabama,
determined by marriages per 1,000 population, was as follows: 11.4;
11.9; 11.9; 11.6; 11.2; 11.2; 10.4; 9.7; 9.4 (derived from
Statistical Abstract of the United States, 1926, Table 90;
id., 1928, Table 95;
id., 1930, Table 99;
id., 1932, Table 80;
id., 1936, Table 92). The
first sizeable decline came in 1930.
[
Footnote 5]
See State Board of Health, Bureau of Vital Statistics,
Report relating to the registration of births and deaths in the
Alabama for the year ending 31st December, 1935, p. XXXVII:
"Between 1910 and 1927, the trend in the birth rate was upward,
except in 1918, the year in which the outbreak of influenza
occurred and the following year. From 1927 to 1935, the trend has
been downward, the rate of decline having been practically constant
since 1928 forward, with the single exception in 1934. The rise in
1934 was due to a number of factors, including an increase in birth
registration following the registration campaign and
marriages."
[
Footnote 6]
See Annual Report of the State Board of Health of
Alabama, 1933, p. 166, Table XXV. The rate of illegitimate births
per 1,000 live births, for the years 1929 through 1933, were 70.4;
74.6; 81.6; 88.7; 95.1.
[
Footnote 7]
A survey of 4, 137 people in Birmingham, Alabama, and covering
three months in the spring of 1933, showed that the rate of illness
(disabling illness per 1,000 persons) was 165 in families with no
employed workers; 148 in families with at least one part-time
worker, but no full-time workers, and 140 in families with at least
one full-time worker.
See Perrott and Collins, Relation of
sickness to income and income change in 10 surveyed communities,
Public Health Reports (United States Public Health Service), vol.
50, p. 595 at 606, Table 6.
[
Footnote 8]
See Eliot, Martha M., Some effects of the depression on
the nutrition of children, Hospital Social Service, vol. 28, p.
585; Palmer, Carroll E., Height and weight of children of the
depression poor, Public Health Reports, vol. 50, p. 1106.
[
Footnote 9]
Of those employed in Alabama the percent employed in industry
were 19.5% in 1900; 21.4% in 1910; 30.7% in 1920; 33.6% in 1930;
24.3% in 1935. (Last figure estimated at the trial by Gist,
formerly statistician of the Department of Agriculture, and since
Feb. 1, 1936, economic adviser to the Commissioner of Agriculture
of Alabama.) The decline in 1935 may be taken to corroborate the
greater susceptibility of employment in industry to the
depression.
[
Footnote 10]
Figures obtained from Federal Emergency Relief Administration,
as stated in Appendix to the Brief of Respondent, No. 837,
Chas. C. Steward Machine Co. v. Davis, pp. 74-75, Table
17.
[
Footnote 11]
Appellees point to an estimate that, largely because of the
large agricultural population, only 26.81% of those employed in
Alabama as of October 14, 1936, were covered by the Act.
But it was estimated at the trial by Gist (formerly statistician
of the Department of Agriculture, and since Feb. 1, 1936, economic
adviser to the Commissioner of Agriculture of Alabama) that, if in
1941 there should be a recurrence of unemployment
"somewhat equivalent to the period we have just come through,
and employment in the industrial groups under consideration should
drop to, say 170,000 (approximately the number employed in 1932),
we would find Alabama with something like 64,000 unemployed persons
who would be entitled to the benefits of this Act."
[
Footnote 12]
See supra, footnote
2
[
Footnote 13]
W. I. King, Employment Hours and Earnings in Prosperity and
Depression; Hansen, Bjornaraa, and Sogge, Decline of employment in
the 1930-1931 depression in St. Paul, Minneapolis, and Duluth, U.
of Minn., Employment Stabilization Research Institute, vol. 1, No.
5, p. 20-25.
[
Footnote 14]
Cigarette and tobacco taxes are earmarked in some states for
school funds and educational purposes, Ala.Gen. Acts 1927, No. 163,
p. 139, §§ 2(j), (k); Gen. Acts 1932, Ex.Sess., No. 113, p. 125, §
15; Ark.Acts 1933, No. 135, p. 439; No. 140, p. 452, § 2; Tenn.Code
(1932), § 1242; Tex.Laws 1935, c. 241, § 3 (Vernon's Ann.Civ.St.
art. 7047c-1, § 3), and in Georgia for pensions for Confederate
soldiers, Ga.Laws 1923, pp. 39, 41.
Liquor license fees and taxes are paid into old age pension
funds, Colo.Laws 1933, Ex.Sess., c. 12, § 27; Police pension funds,
N.Y.Tax Law § 435, subds. 4, 4-a, and school funds, N.M.Laws 1933,
c. 159, § 10(b); Wis.Laws Sp.Sess.1933-34, chs. 3, 14.
Chain store taxes are sometimes earmarked for school funds,
Ala.Gen. Acts 1935, No.194, p. 441, § 348, Schedule 155.9; Fla.Laws
1935, c. 16848, § 15; Idaho Laws 1933, c. 113, § 10.
License and parimutuel taxes in states authorizing horse racing
are devoted to fairs and agricultural purposes, Cal.Stat.1933, p.
2052, c. 769, § 13; Ill.Rev.Stat.(Cahill) 1933, c. 38, § 316(6);
Mich. Acts 1933, No.199, § 10; to highway funds, Nev.Comp.Laws
(Hillyer, 1929) § 6223, and to an old age pension fund in
Washington, Laws 1933, p. 294, c. 55, § 9.
Unemployment relief, though financed in most states by special
bond issues, has in some instances been financed by Gasoline Taxes,
Ohio Laws 1933, File No. 8, p. 26, §§ 1, 2; File No. 28, p. 61;
Okla.Laws 1931, c. 66, article 10, §§ 2, 3; Sales Taxes, Ill.Laws
1933, pp. 924, 926, § 3 (Smith-Hurd Ill.Stats. c. 120, § 442 and
note); Mich. Acts 1933, No. 167, § 25(b); Utah Laws 1933, c. 63, §
21; Income Taxes, Wis.Laws 1933, c. 363, § 2; Miscellaneous Excise
Taxes, Ohio Gen.Code (Page Supp. 1935) § 6212-49 (beer); § 5543-2
(cosmetics); § 5544-2 (admissions); Utah Rev.Stat. § 46-0-47, as
added by Laws 1933, c. 35 (beer).
[
Footnote 15]
Similarly, special taxing districts for the maintenance of roads
or public improvements within the district have been sustained,
without proof of the nature or amount of special benefits.
See
St. Louis & S.W. Ry. Co. v. Nattin, 277 U.
S. 157,
277 U. S. 159;
Memphis & Chicago Ry. Co. v. Pace, 282 U.
S. 241,
282 U. S.
248-249;
cf. Missouri Pacific R. Co. v. Western
Crawford Road Imp. Dist., 266 U. S. 187. A
different question is presented when a state undertakes to levy
local assessments apportioned to local benefits. In that case, it
it fails to conform to the standard of apportionment adopted, its
action is arbitrary,
see Georgia Ry. & Elec. Co. v.
Decatur, 295 U. S. 165,
295 U. S. 170,
because there is a denial of equal protection.
Road Improvement
Dist. v. Missouri Pacific R. Co., 274 U.
S. 188,
274 U. S.
191-194;
cf. Georgia Ry. & Elec. Co. v.
Decatur, 297 U. S. 620. But
if the assessment is apportioned to benefits it is not
constitutionally defective because the assessment exceeds the
benefits.
Roberts v. Richland Irrigation Dist.,
289 U. S. 71,
289 U. S.
75.
[
Footnote 16]
Report of President Hoover's Committee on Recent Social Trends
(1933) 807 ff; J. M. Clark, Economics of Overhead Costs (1929) pp.
366, 367; Douglas, Hitchcock, and Atkins, The Worker in Modern
Economic Society (1925) p. 491
et seq.; Beveridge,
Unemployment, a Problem of Industry (1930) pp. 100-103; W. C.
Mitchell, Business Cycles; the problem and its setting (1927) pp.
87, 210, 238.
[
Footnote 17]
See E. M. Burns, Toward Social Security (1936) pp.
70-73; P. Douglas, Social Security in the United States (1936) pp.
253-355; A. Epstein, Insecurity -- A Challenge to America (3d
ed.1936) pp. 311, 312, 317; Hansen, Murray, Stevenson, and Stewart,
A Program for Unemployment Insurance and Relief in the United
States (1934) pp. 16, 65-73.
MR. JUSTICE SUTHERLAND, dissenting.
The objective sought by the Alabama statute here in question,
namely, the relief of unemployment, I do not doubt is one within
the constitutional power of the state. But it is an objective which
must be attained by legislation which does not violate the due
process or the equal protection clause of the Fourteenth Amendment.
This statute, in my opinion, does both, although it would have been
a comparatively simple matter for the legislature to avoid
both.
The statute lays a payroll tax upon employers, the proceeds of
which go into a common fund to be distributed for the relief of
such ex-employees, coming within the provisions of the statute, as
shall have lost their employment in any of a designated variety of
industries within the state. Some of these employers are engaged in
industries where work continues the year round. Others are engaged
in seasonal occupations, where the work is discontinued for a part
of the year. Some of the employers are engaged in industries where
the number of men employed remains stable, or fairly so, while
others are engaged in industries where the number of the men
employed fluctuates greatly from time to time. Plainly, a
disproportionately heavy burden will be imposed by the tax upon
those whose operations contribute
least to the evils of
unemployment, and, correspondingly,
Page 301 U. S. 528
the burden will be lessened in respect of those whose operations
contribute
most.
An example will make this clear. Let us suppose that A, an
employer of a thousand men, has retained all of his employees. B,
an employer of a thousand men, has discharged half of his
employees. The tax is upon the payroll of each. A, who has not
discharged a single workman, is taxed upon his payroll twice as
much as B, although the operation of B's establishment has
contributed enormously to the evil of unemployment, while that of A
has contributed nothing at all. It thus results that the employer
who has kept all his men at work pays twice as much toward the
relief of the employees discharged by B as B himself pays.
Moreover, when we consider the large number and the many kinds of
industries, their differing characteristics, and the varied
circumstances by which their operations are conditioned, the gross
unfairness of this unequal burden of the tax becomes plain beyond
peradventure. It is the same unfairness, in an aggravated form, as
that which we so recently condemned as fatally arbitrary in
Railroad Retirement Board v. Alton R. Co., 295 U.
S. 330. That case dealt with a federal statute which
established a pension plan requiring payments to be made by all
interstate railroad carriers into a pooled fund to be used for the
payment of annuities indiscriminately to railroad employees, of
whatever company, when they had reached the age of 65 years. This
Court, because of this pooling feature, among other things, held
the act to be bad. We said (p.
295 U. S.
357):
"This Court has repeatedly had occasion to say that the
railroads, though their property be dedicated to the public use,
remain the private property of their owners, and that their assets
may not be taken without just compensation. The carriers have not
ceased to be privately operated and privately owned, however much
subject to
Page 301 U. S. 529
regulation in the interest of interstate commerce. There is no
warrant for taking the property or money of one and transferring it
to another without compensation, whether the object of the transfer
be to build up the equipment of the transferee or to pension its
employees. . . . The argument is that, since the railroads and the
public have a common interest in the efficient performance of the
whole transportation chain, it is proper and necessary to require
all carriers to contribute to the cost of a plan designed to serve
this end. It is said that the pooling principle is desirable
because there are many small carriers whose employees are too few
to justify maintenance of a separate retirement plan for each."
In support of that view, several cases had been cited. Those
cases were reviewed and distinguished, and we concluded, p.
295 U. S.
360,
"that the provisions of the act which disregard the private and
separate ownership of the several respondents, treat them all as a
single employer, and pool all their assets, regardless of their
individual obligations and the varying conditions found in their
respective enterprises, cannot be justified as consistent with due
process."
Cases which are relied upon here to sustain the Alabama statute
were relied upon there to sustain the Retirement Act,
Mountain
Timber Co. v. Washington, 243 U. S. 219,
among others. That case dealt with the Washington Workmen's
Compensation Act, requiring designated payments to be made by
employers into a state fund for compensating injured workmen. But
we pointed out (295 U.S.
295 U. S. 330)
that, although the payments were made into a common fund, accounts
were to be kept with each industry in accordance with the
classification, and no class was to be liable for the depletion of
the fund by reason of accidents happening in another class. And we
said:
"The Railroad Retirement Act, on the contrary, makes no
classification, but, as above said, treats all the carriers as a
single employer, irrespective of their several conditions. "
Page 301 U. S. 530
If the Alabama act had followed the plan of the Washington act
in respect of classification, we should have a very different
question to consider. The vice of the Alabama act is precisely that
which was condemned in the Railroad Retirement Board case. Indeed,
the vice is more pronounced, since the federal act, relating as it
did to railroads only, dealt with a homogeneous group of employers,
while the Alabama act seeks to impose the character of "a single
employer" upon a large number of employers severally engaged in
entirely dissimilar industries.
It must be borne in mind that we are not dealing with a general
tax, the proceeds of which are to be appropriated for any public
purpose which the legislature thereafter may select, but with a tax
expressly levied for a specified purpose. The tax and the use of
the tax are inseparably united, and if the proposed use contravenes
the Constitution, it necessarily follows that the tax does the
same.
Cincinnati Soap Co. v. United States, ante, pp.
301 U. S. 308,
301 U. S.
313.
Other states have not found it impossible to adjust their
unemployment laws to meet the constitutional difficulties thus
presented by the Alabama act. The pioneer among these states is
Wisconsin. That state provides (Act of January 28, 1932, c. 20,
Laws of Wisc., Spec.Sess., 1931, p. 57, as amended) that, while the
proceeds of the tax shall be paid into a common fund, an account
shall be kept with each individual employer, to which account his
payments are to be credited and against which only the amounts paid
to his former employees are to be charged. If he maintains his roll
of employees intact, he will be charged nothing, and, in any event,
only to the extent that his employment roll is diminished. When his
tax contributions have reached a certain percentage of his payroll,
the amount of his tax is reduced, and when they reach 10%, the tax
is discontinued as long as that percentage remains. The result is
that each employer
Page 301 U. S. 531
bears his own burdens, and not those of his competitor or of
other employers. The difference between the Wisconsin and the
Alabama acts is thus succinctly stated by the Social Security Board
in its Informational Service Circular No. 5, issued November, 1936,
pp. 8, 9:
"(1) The plan for individual employer accounts provides for
employer-reserve accounts in the State fund. Each employer's
contributions are credited to his separate account, and benefits
are paid from his account only to his former employees. If he is
able to build up a specified reserve in his account, his
contribution rate is reduced."
Such is the Wisconsin plan; while under the Alabama statute:
"(2) The pooled-fund plan provides for a pooling of all
contributions in a single undivided fund from which benefits are
paid to eligible employees, irrespective of their former
employers."
Which of these plans is more advantageous from a purely economic
standpoint does not present a judicial question. But, from the
constitutional point of view, insofar as it involves the ground
upon which I think the Alabama act should be condemned, I entertain
no doubt that the Wisconsin plan is so fair, reasonable, and just
as to make plain its constitutional validity, and that the Alabama
statute, like the New York statute involved in
Chamberlin, Inc.
v. Andrews, 299 U.S. 515, affirmed by an equally divided court
during the present term, is so arbitrary as to result in a denial
both of due process and equal protection of the laws.
I am authorized to say that MR. JUSTICE VAN DEVANTER and MR.
JUSTICE BUTLER concur in this opinion.