The Origin of the Power to Lay and Collect Taxes and Its Limits
How did the following clause of the Constitution–Article I, Section 8, clause 1— come into being? “The Congress shall have the power to lay and collect taxes, duties, imposts and excises, to pay the debts and provide for the common defense and general welfare of the United States; but all duties, imposts and excises shall be uniform throughout the Unites States.” And how did the common defense clause and the general welfare clause make their way into the Preamble of the Constitution?
The general welfare clause makes its first appearance in Article III of the Articles of Confederation of 1781. The same is true for the common defense clause. These two clauses have been linked together from the very beginning in the quest for an expression of the appropriate role of the federal government.
These two clauses of the Articles were understood to confirm the notion that the Articles of Confederation LIMITED THE REACH OF THE FEDERAL GOVERNMENT to the powers “expressly delegated to the United States.” (Article 2.) The “alliance” between the “sovereign states” was on behalf of their “common defense, the securities of their liberties, and their mutual and general welfare, binding themselves to assist each other against all force offered to, or attacks made upon them, or any of the them, on account of religion, sovereignty, trade, or other pretense whatever.” (Article 3.) So Article 3 is a sort of Preamble, where as Article 2 announces that the power of the federal government is limited to powers expressly stated. One power that was not expressly stated was the power to lay and collect taxes.
The problem under the Articles was agreeing on a formula for raising revenue to fund the limited objectives that affected the continent. Since Congress did not have the power to lay and collect taxes, requisitions to each of the states had to be filed. With, of course, mixed success and much frustration. Thus one reason for the Constitutional Convention in Philadelphia in 1787 was to secure a reliable source of revenue for the federal government consistent with the proper role for that government.
The Virginia Plan, introduced by Randolph and Madison on May 29, 1787, contains 15 Resolutions to “correct and enlarge” the Articles of Confederation. The first Resolution reminds us that the problem, as far as the Virginia delegates were concerned, lay with the means or powers provided by the Articles rather than the ends or objectives of the Articles. Thus the goals of the Articles are reaffirmed by the first Resolution of the Virginia Plan: “common defense, security of liberty and general welfare.” And to secure these three ends, the Virginia Plan recommended a radical alteration of the structure and powers of the federal government. Nothing was stated about the power of taxation, but Congress had the explicit power “to legislate in all cases to which the separate states are incompetent…[and]…to negative all laws passed by the several States….” Neither the New Jersey Plan nor the Hamilton Plan addressed the common defense, the general welfare clause, nor the taxation clause.
After two months of extensive deliberation in June and July over the structure of the federal government, the Constitutional Convention of 1787 turned to the powers of the new proposed government. The Framers then went through the first draft of the Constitution presented by the Committee on Detail on August 6. Finally, we see a specific reference to the power to lay and collect taxes. Congress was given the power in Article VII, Section I of the Draft “to lay and collect taxes, duties, imposts and excises” thus providing a constitutional source of revenue for the new government. 18 powers were listed including the power to lay and collect taxes clause, the interstate commerce clause, and the necessary and proper clause. No reference is made either in its Preamble, or in Article VII, Section I where the powers of Congress are listed, to the general welfare clause or the common defense clause. As it emerged from the Committee on Detail, the power of Congress to lay and collect taxes etc. had the potentiality to be very broad reaching indeed.
The delegates diligently worked their way through the Committee on Detail Report and finally got to Article VII, Section 1 on August 16th. The concern then was the implication that, under the proposed Draft, Congress might have been given the power to tax exports even though that power was not explicitly given. On August 18th, Madison suggested that Congress be given nine further powers and Pinckney suggested eleven further powers to the 18 Congressional powers already listed in the Report. Put differently, Madison and Pinckney were concerned that if a power was not expressly listed, then, according to the traditional mode of constitutional interpretation, the power was not granted. These proposals were referred back to the Committee of Detail. (As were further proposals by Pinckney and G. Morris to spell out the internal operating powers of the Congress and the Executive on August 20th.)
The Committee of Detail responded to the Madison and Pinckney proposals on August 22nd with suggested alterations and additions to the original list, and constitutional language, of the 18 listed powers. The response addresses the concern that if it isn’t listed then it isn’t there, but also addresses the question of it does not say we cannot do something, then does that mean that we can do it?
The first response was directed to the power to lay and collect taxes clause: “At the end of the first clause of the first section of the seventh article add ‘for payment of the debts and necessary expenses of the United States, provided that no law for raising any branch of revenue, except what may be especially appropriated for the payment of interest on debts or loans, shall continue in force for more than_____years.'” In other words, the Committee on Detail now wanted to link, and thus limit, expressly, the reach of the Congressional power to lay and collect taxes to only “the payment of the debts and necessary expenses of the United States.” The payment of debts language seems reasonably clear. But what are the “necessary expenses of the United States?”
The delegates reconsidered Article VII, Section 1 of the revised Committee of Detail Report on August 25. Roger Sherman moved that the following language be included after “the payment of interest on debts or loans” phrase: “and for defraying the expenses that shall be incurred for the common defense and general welfare.” So, according to Sherman, the “necessary expenses of the United States” are those expenses that are incurred on behalf of the common defense and general welfare. Which takes us back to the language of the Articles of Confederation. But only Connecticut voted in favor of the Sherman proposition: “the proposition, as being unnecessary was disagreed to, Connecticut alone, being in the affirmative.” Why was it unnecessary? Apparently, it was so obvious to the delegates that, of course, we all know that the taxes laid and collected will be for the general welfare and common defense, that it is being a bit too fussy to state that in a Constitution.
But Sherman was not to be denied what the delegates on August 25 deemed to be spelling out the unnecessary. He was concerned that if you do not restrain elected officials by specific limitations, then they will engage in extending the reach of federal power and, thus, their own power. On August 31, Sherman proposed the creation of what became known as the Brearly Committee, or Left Overs Committee, whose 11 members–one from each state– would be empowered to consider “such parts of the Constitution as have been postponed, and such parts of Reports that have not been acted on.” Sherman was a member if this Committee of Eleven.
On September 4, the Brearly Committee came up with nine further alterations to the Committee of Detail draft Constitution. The first alteration concerned the language of Article VII, Section 1: “The first clause of Section 1, Article VII to read as follows–‘The Legislature shall have power to lay and collect taxes, duties, imposts and excises, to pay the debts and provide for the common defense and general welfare of the United States.'” This was agreed to, nem. con. Thus, Sherman got his way in LIMITING the power to lay and collect taxes to items that fall under the common defense and general welfare clauses. So we can mark September 4 as the date securing the specific linkage between the lay and collect tax clause, the common defense clause, and the general welfare clause.
And so things stood until the September 12 Report of the five member Committee of Style that styled the draft of the Committee of Detail into what we now recognize as the contours of the Constitution. Article VII, Section 1 from the Committee of Detail is now reclassified as Article I, Section 8 in the Committee of Style and so it remains in the Constitution. And Article I, Section 8 of the Committee of Style now reads thus: “The Congress… shall have power to lay and collect taxes, duties, imposts and excises; to pay the debts and provide for the common defense and general welfare of the United States.” The Committee of Style substituted “Congress” for the “Legislature.” On September 14th, the delegates unanimously “annexed to the power of taxation,” the phrase “but all such duties, imposts and excises shall be uniform throughout the United States.” And by September 17, the semi-colon after excises was replaced by a comma.
Our related question is how did the common defense clause and the general welfare clause make their way into the Preamble of the United States Constitution? We have seen how the Articles of Confederation had a sort of Preamble in which the purposes of government were “common defense, the securities of their liberties, and their mutual and general welfare.” But the various plans at the Constitutional Convention, from the Virginia Plan through the Committee of Detail Report do not pay attention to the drafting of a Preamble. That becomes the work of the Committee on Style which, in effect, took the three purposes listed in the Articles and added three more: the union itself, domestic tranquility, and justice.
All through the ratifying debates, opponents of the Constitution, such as Brutus, wondered whether the common defense and general welfare clauses instead of being restrictions on the reach of the taxing power of the federal government were actually potential invitations for the expansion of the powers of the federal government. What activities of the federal government, said Brutus, could not be included under the taxation, common defense, and general welfare clauses? The answer was that the power to tax must be clearly associated with items that manifestly concern the common defense and the general welfare.