Supreme Court Invalidates Agricultural Adjustment Act in United States v Butler

In United States v Butler et al., 297 U.S. 1, the U.S. Supreme Court struck down the Agricultural Adjustment Act of 1933. It held that Congress exceeded its taxing and spending power under the U.S. Constitution, characterizing the tax imposed under the statute as “but a means to an unconstitutional end.”

Facts of United States v Butler

The goal of the Agricultural Adjustment Act was to increase the prices of certain farm products for the farmer by decreasing the quantities produced. The decrease was to be attained by making payments of money to farmers who, under agreements with the Secretary of Agriculture, reduce their acreage and crops, and the money for this purpose is exacted, as a tax, from those who first process the commodities.

The United States presented a claim to the respondents as receivers of the Hoosac Mills Corporation for processing and floor taxes on cotton levied under the statute. The receivers recommended that the claim be disallowed. While the District Court found the taxes valid and ordered them paid, the Circuit Court of Appeals reversed the order.

Supreme Court’s Decision in United States v Butler

The Court held that the Agricultural Adjustment Act was unconstitutional. “The act invades the reserved rights of the states. It is a statutory plan to regulate and control agricultural production, a matter beyond the powers delegated to the federal government,” Justice Owen J. Roberts wrote on behalf of the Court. “The tax, the appropriation of the funds raised, and the direction for their disbursement, are but parts of the plan. They are but means to an unconstitutional end.”

Even though it ultimately struck down the regulation, the Court broadly interpreted the Constitution’s Spending Clause. As Justice Roberts explained:

The clause confers a power separate and distinct from those later enumerated[,] is not restricted in meaning by the grant of them, and Congress consequently has a substantive power to tax and to appropriate, limited only by the requirement that it shall be exercised to provide for the general welfare of the United States. … It results that the power of Congress to authorize the expenditure of public moneys for public purposes is not limited by the direct grants of legislative power found in the Constitution.

Nonetheless, the Court determined that the federal government’s attempt to control agricultural production violated the Tenth Amendment. Justice Roberts wrote:

Congress has no power to enforce its commands on the farmer to the ends sought by the Agricultural Adjustment Act. It must follow that it may not indirectly accomplish those ends by taxing and spending to purchase compliance. The Constitution and the entire plan of our government negative any such use of the power to tax and to spend as the act undertakes to authorize. It does not help to declare that local conditions throughout the nation have created a situation of national concern, for this is but to say that, whenever there is a widespread similarity of local conditions, Congress may ignore constitutional limitations upon its own powers and usurp those reserved to the states. If, in lieu of compulsory regulation of subjects within the states’ reserved jurisdiction, which is prohibited, the Congress could invoke the taxing and spending power as a means to accomplish the same end, clause 1 of § 8 of Article I would become the instrument for total subversion of the governmental powers reserved to the individual states.

The Court’s decision in Butler was a defeat for President Roosevelt. However, it was also the last case in which the Supreme Court struck down an Act of Congress as beyond the authority granted by the Spending Clause.