Likewise in Swift & Co. v. United States (1905, 196 U. S. 375), the Supreme Court sustained a decree granting an injunction against monopolistic practices of the defendant and other packing houses, the court saying: * * * Although the combination alleged embraces restraint and monopoly of trade within a single State, its effect upon commerce among the States is not accidental, secondary, remote, or merely probable. Here the subject matter is sales, and the very point of the combination is to restrain and monopolize commerce among the States in respect of such sales. This case stated that When cattle are sent for sale from a place in one State, with the expectation that they will end their transit, after purchase, in another, and when in effect they do so, with only the interruption necessary to find a purchaser at the stockyards, and when this is a typical, constantly recurring course, the current thus existing is a current of commerce among the States, and the purchase of the cattle is a part and incident of such commerce. As stated by Mr. Chief Justice Taft in the opinion in Chicago Board of Trade v. Olsen (1923, 262 U. S. 1, 35) the Swift case was a milestone in the interpretation of the commerce clause of the Constitution. It recognized the great changes and development in the business of this vast country and drew again the dividing line between interstate and intrastate commerce where the Constitution intended it to be. It refused to permit local incidents of great interstate movements, which taken alone were intrastate, to characterize the movement as such. The Swift case merely fitted the commerce clause to the real and practical essence of modern business growth. FIRST CHILD LABOR CASE. There must be kept in mind the distinction between the regulation of manufactures and production within a State, over which Congress has no power, and the regulation of the sales of products resulting from such manufactures and production. The latter, with but minor exceptions in the case of certain milling, processing, and slaughtering transactions, is all that is contemplated in the McNaryHaugen bill. The Supreme Court has drawn this line very clearly from the beginning. In the case of United States v. E. C. Knight Co. (1895, 156 U. S. 1) the United States filed a bill against the several defendant companies alleging that the control gained by the American Sugar Refining Company over practically all of the sugar refineries in the country constituted a violation of the Sherman Antitrust Law of 1890 (c. 647, 26 Stat. 209). The argument was that the power to control the manufacture of refined sugar is a monopoly over a necessary of life, to the enjoyment of which by a large part of the population of the United States interstate commerce is indispensable, and that therefore the Federal Government in the exercise of the power to regulate commerce may repress such monopoly directly and set aside the instruments which have created it. But the court held that the contracts and acts of the defendants related exclusively to the acquisition of refineries and the business of sugar refining in Pennsylvania, and bore no direct relation to commerce between the several States or with foreign nations. Notwithstanding the fact that the Knight case has been qualified greatly by subsequent decisions, such as in Addyston Pipe & Steel Co. v. United States (1899, 175 U. S. 211), wherein it was held that Congress might prohibit the performance of any contract between individuals or corporations where the natural and direct effect of such a contract would be, when carried out, to directly, and not as a mere incident to other and innocent purposes, regulate to any extent interstate or foreign commerce, it may still be conceded that Congress is without power directly to regulate manufacture and production. The distinction was again drawn by the Supreme Court in Hammer v. Dagenhart (1918, 247 U. S. 251) when the First Child Labor Act of September 1, 1916 (c. 432, 39 Stat. 675), prohibiting the transportation in interstate commerce of goods made at a factory employing child labor, was declared an unconstitutional and not a proper exercise of the commerce power of Congress. "The making of goods and the mining of coal are not commerce, nor does the fact that these things are to be afterwards shipped or used in interstate commerce, make their production a part thereof," said the court. But this is not to say that an interstate sale of such goods, or an intrastate sale contemplating interstate shipment, or an intrastate sale which would unduly burden regulations imposed upon interstate sales, may not be regulated. The distinction between the regulation of manufacturing and production, on the one hand, and the sale of the commodity, on the other hand, is clear. The McNary-Haugen bill, with but a very few exceptions which are comparatively insignificant, regulates sale, not production, and in each case, except as noted above, the sale is either in interstate or foreign commerce, or is in intrastate commerce of such a nature that if left unregulated it will cast a burden upon and discriminate against interstate and foreign commerce. But even if the distinction as to production and manufacture, and sale, were not present, under later cases, such as United Mine Workers v. Coronado Coal Co. (1922, 259 Ú. S. 344), Mr. Chief Justice Taft has suggested that production may be regulated if unregulated practices with respect to it cast a direct, material, and substantial restraint upon it. Coal mining is not interstate commerce, and the power of Congress does not extend to its regulation as such. In Hammer v. Dagenhart, 247 U. S. 251, 272, we said: "The making of goods and the mining of coal are not commerce, nor does the fact that these things are to be afterwards shipped or used in interstate commerce make their production a part thereof.' (Delaware, Lackawanna. & Western R. R. Co. v. Yurkonis, 238 U. S. 439.) * * "Coal mining is not interstate commerce and obstruction of coal mining, though it may prevent coal from going into interstate commerce, is not a restraint of that commerce unless the obstruction to mining is intended to restrain commerce in it or has necessarily such a direct, material, and substantial effect to restrain it that the intent reasonably must be inferred. It is thus evident that not only may sale subsequent to production be regulated, but that there is the probability that production itself could be regulated under circumstances where unregulated it cast a restraint upon interstate or foreign commerce. However, as pointed out above, the doctrine of the First Child Labor case and similar cases does not apply to the McNary-Haugen bill, for that bill, almost entirely, regulates sale and not production or manufacture. REGULATORY TAX CASES INAPPLICABLE It has been argued that the equalization fee in the McNaryHaugen bill falls within the decisions of the Child Labor Tax case (1921, 259 U. S. 20) and Hill v. Wallace (1922, 259 U. S. 44). In Hammer v. Dagenhart (1918, 247 U. S. 251), above discussed, the Supreme Court held that manufacturing was not interstate commerce nor susceptible of regulation as such. In the Child Labor Tax case, the Supreme Court held, not only that the detailed regulatory features on the face of the statute showed that it was a regulatory and not a taxing measure, but also that the regulation attempted was not a regulation of interstate commerce but of a phase of manufacturing which the court had previously held in Hammer v. Dagenhart was intrastate commerce. Congress, it was held, could not regulate that phase of intrastate commerce by means of a monetary exaction when it could not regulate it by any other form of regulatory device. The regulation of intrastate commerce by Congress does not depend upon the regulatory device used but upon the relation of intrastate commerce to interstate commerce. Hammer v. Dagenhart showed no relation between interstate commerce and intrastate commerce that would lead to the conclusion that the latter, if unregulated, cast a direct burden upon interstate commerce. On the other hand, it manifestly was an attempt by Congress to regulate indirectly a field which it was without power to regulate directly. The McNary-Haugen bill, however, is readily distinguished from the Child Labor Tax case. The McNary-Haugen bill regulates sales, not manufacturing, and as previously shown (pp. 69-77) the courts have held in a great number of cases that it is proper for Congress to regulate various classes of sales of commodities even though it could not regulate the manufacture of such commodities. Therefore, if the monetary exaction in the McNary-Haugen bill is to be sustained as a regulation of commerce, it is to be borne in mind that the equalization fee is a proper regulation of interstate and foreign commerce, for the fees are applicable and limited to phases of commerce which are within the Congressional power and not to phases which are ordinarily beyond the Congressional power, such as production, manufacture, and intrastate transactions which have no effect upon interstate commerce. The McNary-Haugen bill is also distinguishable from Hill v. Wallace. In the latter case the Supreme Court held the Future Trading Act, imposing a tax upon certain future sales of grain, unconstitutional. As in the Child Labor Tax case, the Supreme Court found that the Future Trading Act on its face showed that it was intended as a regulatory and not a revenue measure. The question then presented itself (p. 68 of the opinion): Can these regulations of boards of trade by Congress be sustained under the commerce clause of the Constitution? The court found, however, that the Future Trading Act did not show any intention of the Congress to confine its operations to the exercise of the power to regulate interstate and foreign commerce. Interstate commerce was not mentioned in the Act. The Act applied indiscriminately to sales in intrastate commerce and to sales in interstate and foreign commerce. It in nowise attempted to base its regulation of intrastate sales upon their relation to interstate commerce, as did the Packers and Stockyards Act, 1921, and the subsequent Grain Futures Act, and as does the McNary-Haugen bill under the provisions of section 201. In the words of the court: Sales for future delivery on the Board of Trade are not in and of themselves interstate commerce. They can not come within the regulatory power of commerce as such, unless they are regarded by Congress, from the evidence before it, as directly interfering with interstate commerce so as to be an obstruction or a burden thereon. In other words, the monetary exaction under the Future Trading Act was unconstitutional not because it was a monetary exaction and not because such a form of regulatory device was used to regulate interstate commerce, but because the regulation applied also to intrastate commerce without any attempt to confine that application to situations in which the intrastate transactions, if unregulated, imposed a direct burden on interstate commerce. That this is a proper conclusion is also obvious from Chicago Board of Trade v. Olsen (1923, 262 U. S. 1) in which the Grain Futures Act, also regulating future sales upon exchanges, was held constitutional because the regulation was properly related to interstate commerce and the prevention of the imposition of direct burdens upon such commerce. The McNary-Haugen bill, therefore, falls within decision of Chicago Board of Trade v. Olsen and not that of Hill v. Wallace, because the McNary-Haugen bill, as pointed out above, confines its regulation to sales in interstate commerce and to sales and other transactions in intrastate commerce which, if unregulated, would cast a direct burden upon interstate com merce. CONCLUSION. It would seem from the above discussion that the vast majority of the transactions in respect of which the equalization fee is imposed are transactions in interstate commerce, and unquestionably subject to congressional regulation. As already shown, that regulation may take the form of the imposition of the fee. It would also seem that the remaining transactions in respect of which an equalization fee is imposed are in practically all cases transactions so related to interstate and foreign commerce that if allowed to remain unregulated they would cast an undue burden upon interstate or foreign commerce. They may, therefore, be regulated by the Federal Government if the facts in the particular case presented bear out the conclusion that such a burden exists. If it should be found that the Act covers any transaction in respect of which the equalization fee is imposed, and that such transaction can not be properly regulated under the interstate or foreign commerce power, and if the imposition of the fee in respect of it can not be sustained as an exercise of the taxing power, then the application of the Act to such sale will be unconstitutional. This result, however, under the doctrine of the separability of the provisions of a statute and the provisions of section 307, as discussed hereinafter in this memorandum, will serve to prevent the invalidation of the Act in its application to other transactions. IV. THE EQUALIZATION FEE CONSIDERED AS A TAX. THE PROVISIONS OF THE BILL. The provisions of the bill have been adequately set forth under III. THE PROBLEM. The problem presented is, May the monetary exaction be considered a valid tax as well as a regulation of commerce among the several States and with foreign nations? DISCUSSION. A monetary exaction may be considered a tax as well as a regulation of commerce among the several States and with foreign nations. Our tariff laws have always been considered as having both the effect of regulating commerce and of providing revenue. While the taxing feature has been stressed under the power to lay and collect duties, the regulatory feature has been the moving political consideration. In Russell v. Williams (1882, 106 U. S. 623) the court stated that the 10 per centum duty imposed upon goods produced east of the Cape of Good Hope and imported from places west of the Cape was "intended as a general regulation of commerce." Billings v. U. S. (1914, 232 U. S. 261) and cases which follow it the dual nature of a tariff duty appears clearly. In Veazie State Bank v. Fenno (1869, 8 Wall. 533) presents a case where the monetary exaction could be sustained under two sources of constitutional power, namely, the power to tax and the power to regulate the value of money. The Supreme Court has frequently recognized the burdensome and discriminatory effect upon interstate and foreign commerce of monetary exactions which purported to be valid exercises of the taxing power of the State. A large number of these have been held unconstitutional because, while admittedly exercises of the State taxing power, they were in addition regulations of interstate and foreign commerce and as such beyond the power of the State. For a discussion of the encroachment on Federal authority by the taxing powers of the States, see the articles by Thomas Reed Powell in 31 Harvard Law Review, pp. 572-618, 721-778, 932-953, and 32 Harvard Law Review, pp. 234-265, 374-416, 634-678, and 902-931. It is here urged that the equalization fee falls within the above class of monetary exactions having a twofold constitutional basis, and as such is not only a proper regulation of the interstate and foreign commerce power but is also a proper exercise of the taxing power of the Federal Government. Not all monetary exactions, however, are taxes. Some may be penalties or regulatory devices instead of taxes; some may be police power regulations reserved to the States under the Tenth Amendment; others may be taxes, but unconstitutional because violating some one of the following constitutional restrictions upon the exercise of the taxing power: (1) A direct tax and unapportioned. |