Bailey V. Drexel Furniture
Date: 1922
Case Background:
Congress passed the Child Labor Tax Law in February 1919. It imposed an excise tax of 10% on net profits of a company which employed children. Child labor was defined as under 16 at a mine or quarry and under 14 at a mill, workshop or factory. Drexel was a furniture company in North Carolina. In September of 1921, a tax collector from the Bureau of Internal Revenue assessed over $6,000 in excise taxes for employing children under 14 years old. Drexel paid the tax and then sued for a refund. Issue: Drexel brought up the issue that the tax was an unconstitutional attempt to regulate manufacturing. The U.S. argued that an indirect tax did not need to meet standards. They insisted that it was simply an excise tax. Decision: The tax on child labor was declared unconstitutional. It was covered as a criminal penalty, rather than a tax. Taft stated that a "tax is a source of revenue for the government and a penalty is a regulation and punishment for a certain behavior." Impact: The Child Labor Tax Law was determined to be a regulation on businesses instead of a tax. The Supreme Court has referred back to their rule on excise tax for modern drugs and weapons. |
Justice: William H. Taft
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