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General subsequently in 2 Dec. Comp. Gen. 360, ruled that they should be deposited to the credit of a special fund merely for the "purpose of having the money go into a special fund . . . as a matter of Treasury record."

(e) Finally, it may be urged that if the fee is a tax it should be expended for strictly governmental purposes, and that the expenditures of the corporation under the bill are for non-governmental purposes. The answer to this is two-fold and complete. The purpose of the corporation and of the fee is postulated upon its strictly governmental nature, and citations of expenditures made by the Congress (which appear on page 59 of this memorandum) are adequate to refute any idea that expenditures of moneys procured under the taxing power must necessarily be restricted to so-called governmental purposes.

B. THE EQUALIZATION FEE DOES NOT VIOLATE ANY OF THE CONSTITUTIONAL RESTRICTIONS UPON THE EXERCISE OF THE TAXING POWER.

Assuming now that the equalization fee is a tax, it, nevertheless, must conform, if it is to be held a constitutional tax, to the following constitutional restrictions upon the exercise of the taxing power:

(1) If it is a direct tax, it must be apportioned among the several States.

The equalization fee is not a direct tax but is an indirect or excise tax and, therefore, need not be apportioned. (Patton v. Brady, 1902, 184 U. S. 608.) See also the discussion in Pollock v. Farmers' Loan and Trust Co. (1895, 157 U. S. 429, at page 557 ff.).

(2) If it is an excise tax, it must not lack uniformity.

The fee is subject to the rule of uniformity under Article I, section 8, clause 1, of the Constitution, which provides that the Congress has the power "to lay and collect taxes, duties, imposts, and excises * * *; but all duties, imposts, and excises shall be uniform throughout the United States."

The uniformity required in the case of such a tax is geographical only. "The tax is uniform when it operates with the same force and effect in every place where the subject of it is found." (Head Money cases, 1884, 112 U. S. 580.) See also Knowlton v. Moore (1900, 178 U. S. 41 ff.) for an extended discussion of the requirement of uniformity in respect of excise taxes. In the instant case the fee operates with the same force upon the farmer who sells wheat in North Dakota and the farmer who sells wheat in Oregon.

(3) It must not violate the "due process" clause because of unreasonable classification.

Section 37 of the Tariff Act of August 5, 1909 (c. 6, 36 Stat. 11, 112), imposed an annual tonnage tax on the use of foreign-built yachts owned or chartered for more than six months by citizens of the United States. In Billings v. U. S. (1914, 232 U.S. 261) this act, which operated to discourage commerce in yachts built in other countries, was held to be constitutional and that the difference between things domestic and things foreign constitutes a reasonable basis of classification for taxation purposes. Rainey v. U. S. (1914, 232 U.S.310) and intervening cases follow the Billings case, sustaining the tax on foreign-built yachts and denying a lack of due process with respect to such tax.

It was said in the Billings case (supra):

The Constitution is not self-destructive

the powers which it confers on the one hand it does not immediately take away on the other; that is to say, that the authority to tax which is given in express terms is not limited or restricted by the subsequent provisions of the Constitution or the amendments thereto, especially by the due-process clause of the fifth amendment.

It might be urged that there are discriminatory features and arbitrary classifications in the bill which violate the due-process clause of the Fifth Amendment. It is true, of course, that only the purchasers and the producers of certain commodities are affected by the McNaryHaugen bill, and in subdivision (d) of section 302 certain exemptions are permitted. The general power of Congress to make classifications and to prescribe exemptions in taxing statutes has been finally settled in the Brushaber case (1916,240 U.S. I, at p. 24 ff.), where discrimination and want of due process were urged because of exemptions, deductions, and the unfair application of the income tax to certain individuals, etc. The court, in answer to these contentions, on pages 24, 25, and 26, stated:

So far as the due process clause of the fifth amendment is relied upon, it suffices to say that there is no basis for such reliance since it is equally well settled that such clause is not a limitation upon the taxing power conferred upon Congress by the Constitution; In fact, comprehensively surveying all the contentions relied upon, we can not escape the conclusion that they all rest upon the mistaken theory that although there be differences between the subjects taxed, to differently tax them transcends the limit of taxation and amounts to a want of due process, and that where a tax levied is believed by one who resists its enforcement to be wanting in wisdom and to operate injustice, from that fact in the nature of things there arises a want of due process of law and a resulting authority in the judiciary to exceed its powers and correct what is assumed to be mistaken or unwise exertions by the legislative authority of its lawful powers, even although there be no semblance of warrant in the Constitution for so doing.

(4) If it taxes exports, it is unconstitutional to that extent.

The fee can not be considered to be a tax on exports and as such subject to the prohibition of Art. I, sec. 9, clause 5, of the Constitution, which provides that “no tax or duty shall be laid upon articles exported from any State."

This question has been discussed recently by Mr. Justice Holmes in Spalding & Bros. v. Edwards (1923,262 U. S. 66). This was a suit brought by Spalding & Bros. to recover taxes paid by it under the revenue act of 1917 as a "manufacturer" upon "baseball bats, *** balls of all kinds * * * sold by the manufacturer." The baseball bats, etc., were sold direct to Delgado & Cia., in La Guaira, Venezuela, by Spalding & Bros. through Scholtz & Co., commission agents. In that case the "very act that passed the title and that would have incurred the tax had the transaction been domestic, committed the goods to the carrier that was to take them across the sea, for the purpose of export and with the direction to the foreign port upon the goods" (p. 69). Recovery of the tax paid was allowed.

Mr. Justice Holmes says that to determine whether an article when taxed is taxed as an export "we have to fix a point at which, in view of the purpose of the Constitution, the export must be said to begin. As elsewhere in the law there will be other points very near to it on the other side, so that if the necessity of fixing one definitely is not remembered, any determination may seem arbitrary." In Cornell v. Coyne (1904, 192 U. S. 418) a tax of 1 cent per pound was levied on all

91358-26-PT 1-11

filled cheese "which shall be manufactured," and although one and one-half million pounds were manufactured for export, so marked and sold, the court held the cheese so marked and sold subject to the tax.

In the Spalding case the tax was paid by the exporter and manufacturer, Spalding & Bros., upon the sale for export. The farmer who sells to the miller, or who sells to the corporation (which may subsequently sell for export) is being taxed on a sale which is a domestic transaction. It may happen, in the case of hogs, for example, that the producer of the hogs may be a packer who may sell the hogs after slaughter for export, and doubtless under the Spalding case would not be required to pay the fee here imposed. It would seem reasonable that the court, as in the Spalding case, would grant relief to any producer who makes a sale for export in the same manner as relief was granted in the Spalding case, without raising the question of the validity of the fee in the ordinary transaction.

(5.) It must not be a tax for a purpose other than to pay the debts of the United States or to provide for the general welfare.

The fee can not be considered as violative of this constitutional restriction if the conclusions in respect of the existence of a public purpose in appropriations by the Congress for the use of the corporation are sound. This discussion appears on page 57 of this report.

CONCLUSION.

Your Committee is of the opinion that because of the presence of the characteristics which are essential for a proper tax, and because of the absence of violations of the constitutional restrictions imposed upon such a tax, the monetary exaction here discussed may properly be considered a valid exercise of the taxing power as well as a proper regulation of commerce.

V.

THE DELEGATION OF POWER TO THE COMMISSION TO DETERMINE THE AMOUNT OF THE EQUALIZATION FEE.

THE PROVISIONS OF THE BILL.

Title II of the bill provides for the apportionment of the expenses and losses of the corporation by means of an equalization fee to be paid upon every sale or other disposition (as defined in section 206) of a basic agricultural commodity by or on account of the producer, during the special emergency.

Section 202 imposes upon the corporation the power and duty of determining the amount of the fee, in accordance with the rule laid down in the section. The corporation must estimate the probable price it will receive upon the sale of the commodity it has purchased, the probable losses of the corporation resulting therefrom, and the expenses of the corporation. Upon such estimates, the corporation must determine "the total amount of such expenses and losses which will be incurred or sustained as a result of, and fairly and properly attributable to, the operation of the corporation in respect of each agricultural commodity during each operation period" (subdivision (b) of section 202). The corporation then determines the

standard unit of weight or measure and the amount of the fee to be collected upon the sale or other disposition of that unit by the producer. This amount is defined as the "equalization fee. Subdivision (c) of section 204 imposes upon the corporation the duty of distributing ratably any excess amounts collected.

THE PROBLEM.

The problem presented is, May Congress delegate to the corporation the power to determine the amount of the equalization fee?

DISCUSSION.

The problems of the delegation of power arise in various, different situations. A statute may delegate power to an executive or administrative agency (1) to ascertain a fact, upon the determination of which the prescribed rule of law takes effect—the familiar form of "contingent legislation;" (2) to apply a prescribed rule of law to a specific case the "order making" power; (3) to make "interpretative regulations" of general future application; (4) to make “procedural regulations" of general future application; and (5) to make general and enforceable regulations of future application—the “rule making" power.

The power to make general and enforceable regulations of future application is, in effect, "legislative power". It is power of this nature that is involved in the problem under discussion. The present discussion will be confined to the court decisions and legislative precedents applicable to this situation.

A. THE POWER OF CONGRESS TO DELEGATE LEGISLATIVE POWER.

At the outset we are confronted with the familiar quotation from the decision of the United States Supreme Court in Field v. Clark (1892, 143 U. S. 649, 692):

That Congress can not delegate legislative power to the President is a principle universally recognized as vital to the integrity and maintenance of the system of government ordained by the Constitution.

In order to evade this inhibition against the delegation of legislative power, the courts, until very recently, have declared that the statute in question merely delegated the power "to fill in the details" (see, Buttfield v. Stranahan, 1904, 192 U. S. 470; U. S. v. Grimaud, 1920, 220 U. S. 506; Mutual Film Corporation v. Industrial Commission of Ohio, 1915, 236 U. S. 230). However, it is now recognized that statutes delegating power of this nature actually delegate legislative power. Chief Justice Taft recognized the actual situation, responding during the proceedings on the death of Chief Justice White (257 U. S. xxv-xxvi, January 16, 1922). And shortly thereafter he gave the first judicial recognition that the powers which were delegated were legislative. (Wichita R. R. & Light Co. v. Public Utilities Commission, 1922, 260 U. S. 48, 58-59). Less than three months ago, in a case involving the delegation of power to the Secretary of Labor, the Chief Justice again recognized that Congress may delegate legislative power (Mahler v. Eby, February 18, 1924, 44 Sup. Ct. 283).

The question becomes, consequently, What are the limitations upon the power of Congress to delegate legislative power?

B. THE CONSTITUTIONAL LIMITATIONS UPON THE DELEGATION OF LEGISLATIVE POWER.

In delegating legislative power to an executive or administrative agency, Congress must prescribe a "standard" or "rules of decision" in order to prevent the delegation from being unconstitutional as a pure "delegation of legislative power". This requirement has been frequently repeated from the decision in Buttfield v. Stranahan (1904, 192 U. S. 470, 473) to the decision by Chief Justice Taft in Mahler v. Eby (February 18, 1924, 44 Sup. Ct. 283, 288). In addition to this requirement, the Supreme Court has also laid emphasis upon the necessity for the delegation (see, Buttfield v. Stranahan, supra; U. S. v. Grimaud, 1911, 220 U. S. 506).

Before discussing the application of the principles to the various statutory delegations involved, it should be pointed out that the Supreme Court of the United States has never held unconstitutional any delegation of power of this nature.

C. THE APPLICATION BY THE SUPREME COURT OF THE LIMITATIONS.

In Buttfield v. Stranahan (1904, 192 U. S. 470) the Supreme Court held the Tea Inspection Act constitutional. Section 1 of this Act prohibited the importation of teas inferior to the grades established by the Secretary of the Treasury. Section 2 created a board, and section 3 authorized the Secretary, upon recommendation of the board, to establish standards "of purity, quality, and fitness for consumption". Eight packages of imported tea were rejected by the customs officials because inferior to the standard of quality prescribed by regulation of the Secretary. Upon the failure of the importer to export the tea within the time limit, the tea was destroyed. This action was commenced against the collector to recover damages for the alleged wrongful seizure, removal, and destruction of the tea. The lower court instructed that the only question was that of the constitutionality of the Act, for if the Act was valid it would be a complete defense to the action. The United States Supreme Court, through Mr. Justice White, held the Act constitutional. The decision, however, rests in part upon the theory of the plenary power of Congress over foreign commerce (see the discussion under Part VI, infra, page 95).

U. S. v. Grimaud (1911, 220 U. S. 506):

Forest reserves had been created. The Secretary of Agriculture was authorized to "make such rules and regulations and establish such service as will insure the objects of such reserves; namely, to regulate their occupancy and use, and to preserve the forests thereon from destruction; and any violation of the provisions of this Act or such rules and regulations shall be punished" by a fine and imprisonment. The Secretary issued a regulation requiring a permit to graze sheep. The defendants were indicted for a violation of this regulation. They demurred on the ground that the statute was unconstitutional insofar as it delegated to the Secretary of Agriculture power to make rules and regulations, and made a violation thereof a penal offense. The lower court sustained the demurrer. Other lower courts had been divided. The United States Supreme Court first affirmed by a divided court the decision of the

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