The United States Constitution Article I § 8 outlines Congress’s taxing power as well as spending power. In other words, Congress has the power to tax the people and the states and use that money to further their purposes.

The following case has been cited previously in discussions concerning the commerce clause. This case addressed both the commerce clause and congress’s power to tax. Although the court found that the individual mandate was unconstitutional through the commerce clause, other provisions were constitutional through the taxing power. Thus, the takeaway is that even if Congress does not have the power under one enumerated authority, it is likely that they are able to find another way through a different enumerated power.

Taxing Power

NFIB v. Sebelius

567 U.S. 519 (2012).


Does the provision violate Congress’s taxing power?


Congress is free to tax the nation if:

  1. It does not impose a penalty
  2. The tax does not contain a scienter requirement (crime).
  3. The tax is issued by an agency authorized to collect revenue (IRS).

No, there is not a violation of Congress’s authority.


Affordable Care Act has a mandate compelling individuals to pay for health insurance. The government wishes this mandate to be read as a tax because the payment for health insurance (if individuals refuse to pay for privatized insurance) appears on a tax form submitted to the IRS.


The majority says that this is a tax because it does not violate any of the rules above. This is not a penalty. There are penalties for failing to pay a tax, but otherwise the mandate benefits the population generally by only providing lower costs for health insurance. This does not contain a scienter requirement. Finally, the revenue is collected by the IRS who has the authority to do so.

Additionally, the majority addresses any concerns by addressing the nature of taxes and showing how the statute falls within that nature. Taxes can be used to encourage behavior. Also, taxes can be used to discourage behavior.

Additional Notes

So, although this fails under the commerce clause, it passes under the taxing power. The taxing and spending power is also exercised more broadly than the commerce clause.

Spending Power

United States v. Butler

297 U.S. 1 (1936).

Butler is challenging the Agricultural Adjustment Act of 1933. He won in trial court and this appeal followed.


Does the act violate Congress’s Spending Power


Congress is allowed to regulate spending for the general welfare of the nation. However, that power cannot extend beyond the State’s police authority.


The Act is unconstitutional because although the spending is fine, the act itself exceeds its boundaries.


The purpose of the act was to stabilize production and agriculture. The point was that farmers would be compensated by limiting their production.


The clause in question in § 8 of the Constitution is that spending can only be used for the general welfare.

Additional Notes

This case is interesting because there was a huge debate about the extend of the spending power. The Madison approach was that spending had to be connected to an enumerated power. Hamilton argued saying that spending could expand beyond the enumerated powers.

Interestingly, the Hamilton approach is adopted (reading directly into the clause). This appears contradictory because the Hamilton approach is broad, but the application was narrow.

Notice the date here, this was in 1936. The New Deal expansion (and court acceptance of that expansion) began in 1937. The court wanted a narrow use.

The reasoning was through the 10th amendment, which says that the powers not given to the federal government are given to the States.

Additionally, the court says that the clause was coercive (forcing people to be restrictive) and that there would be a slippery slope if the court adopted the power.

In Justice Stone’s dissent, he argues that this is not coercive because there is a subsidy (giving money to people). Additionally, because the government is giving money to people, it makes sense that there should be a request for receivers of the money to follow conditions. Further, Congress should be given authority to give money to things that govern the health of people within the nation.

Ultimately, this case is good law is some aspects. The Hamilton approach is still adopted. However, since this case, the majority of cases have followed the dissent’s reasoning.

Notice the difference between commerce and taxing powers. The commerce regulates directly. The taxing power and spending power is really an incentive to self-regulate.

NFIB v. Sebelius

567 U.S. 519 (2012).


Is the medicaid expansion within the spending power?


Congress is not to coerce states to accept a federal plan or risk losing all federal funding.


The expansion is coercive. Thus, the expansion is unconstitutional but can be severed from the remaining of the act.


There were two main parts to the ACA. First, the individual mandate (addressed earlier with commerce and the taxing power). Second, the medicaid expansion.

Originally, the federal government had created a medicaid program designed to help specific categories of the needy: blind, needy families, elderly, etc. Many states adopted the act and received federal funding to meet those needs. With the passing of the ACA, medicaid would be expanded to not only those categories, but to everyone who had an income significantly below the poverty line. The expansion also expanded benefits to the states who would receive much more funding to support this new expansion.

The catch, states had to adopt this new expansion or they risked losing all medicaid funding.


There are two issues with the expansion. First, the expansion is so broad that it acts as a new program. Instead of simply being categorized as an expansion (as titled), it acts as a completely different program. The result of this reasoning is that there are currently two spending programs: the original medicaid funding, and the new medicaid expansion.

Because this funding is separate, Congress is not allowed to condition all medicaid funding on acceptance of the new program. Otherwise, this acts as “a gun to the head.” Either accept the new plan and the conditions, or fail to receive any funding at all, old or new.

The joint dissent emphasizes the coercive nature of the expansion. The line of reasoning is if Congress gave such a large gift then no states would take issue with the expansion. However, because states do take issue with it, there is evidence that the gift is not exceedingly generous, but coercive in nature.

The Ginsberg dissent focuses on how this is a not a separate program. As a result, this is not a gun to the head. States have the choice to opt into the program or to opt out of it. Because the program is not separate, opting out should result in states receiving no funding for a program which they do not participate in.

Additional Notes

In addition to the Individual Mandate, the Affordable Care Act also expanded Medicaid. Traditionally, Medicaid covered only the severely ill. However, with the ACA, Medicaid expanded medical insurance to individuals who are in poverty.

This is a violation of the Constitution because this is going to cost a lot of money. Additionally, if a state did not adopt the plan, that state would be cut off entirely. In other words, the federal government offered a “all-or-nothing” deal. In short, this is coercive. Either take the expansion and get funding or get no funding at all. This coercion is so dramatic that the program is practically new. This is not an amendment, but a shift from one kind of Medicaid to another.

Despite the clause being a violation, the act still stands because Roberts “severed” this from the rest of the act. That is why Scalia dissents, because he believes the whole act is unconstitutional and that this should not be severed.

The Ginsberg dissent argues that this is simply an alteration of the current Medicaid plan. Ultimately, this is a taxing and spending for the general welfare because it only covers those who are making about 15,000 or less a year. They also argue that this is not a gun to the head because the states have some flexibility to determine how much of their budget goes to the program.

Today the affordable care act is in an interesting position. The individual mandate survived but President Trump chose not to enforce it. The Medicaid expansion failed. Today, the program still exists, millions of people are on the program, and insurance companies work to subsidize so that insurance costs remain lower.

Dakota v. Dole Notes

The punishment in Dole was 5% for not raising the drinking age to 21. 5% was ok, while 100% was not. First, this restriction was not coercive. There needs to be a connection between the condition and the incentive. Additionally, the program needs to be unambiguous.

With these elements, the government’s taxing and spending power is permissible.

  1. Not coercive (was the issue with Sebelius).
  2. Relationship between the condition and the incentive.
  3. Unambiguous description of the condition.


The content contained in this article may contain inaccuracies and is not intended to reflect the opinions, views, beliefs, or practices of any academic professor or publication. Instead, this content is a reflection on the author’s understanding of the law and legal practices.

Will Laursen

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