United States v. Butler

Facts

In 1933 Congress passed the Agricultural Adjustment Act. Its stated aim was to restore farm prices to a level that gave farm products the same purchasing power they had in a base period. For cotton, that period ran from August, 1909, to July, 1914. The Secretary of Agriculture could make agreements with individual farmers to cut acreage or production, and could pay them rental or benefit payments in amounts he thought fair and reasonable. The money came from a processing tax. It was levied on the first domestic processing of a commodity and paid by the processor, at a rate equal to the difference between the current average farm price and the fair exchange value. The whole revenue from the tax was appropriated to the program. On July 14, 1933, the Secretary, with the President's approval, proclaimed that rental and benefit payments would be made for cotton. He set the marketing year to begin August 1, 1933, and fixed the processing and floor taxes on cotton. The United States then presented a claim to the respondents, who were receivers of the Hoosac Mills Corporation, for those taxes. The receivers recommended that the claim be disallowed.

Issues

1. Do the receivers, who are called on to pay the processing tax, have standing to challenge its validity, or is it merely a revenue measure whose later spending they may not contest?
2. Can Congress use its power to tax and spend to pay farmers to reduce acreage, and so control agricultural production, a matter the Court treated as reserved to the states?
3. Does it save the plan that farmers may refuse the payments and so take part voluntarily?

Holding

The Court held that the Act is a plan to regulate agricultural production, with the processing tax a mere incident of it, so the receivers may challenge the tax. It held that the plan invades powers reserved to the states, so the taxes could not be collected.