Helvering v. Davis 1937

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Helvering v. Davis 1937

Petitioner: Guy T. Helvering,

U.S. Commissioner of Internal Revenue

Respondent: George P. Davis

Petitioner's Claim: That the Social Security Act of 1935 authorizing payroll taxes to fund a national old-age benefits program neither violates the Tax and Spending Clause of the Constitution nor takes away from powers reserved to the states in the Tenth Amendment.

Chief Lawyer for Petitioner: Homer S. Cummings, U.S. Attorney General

Chief Lawyer for Respondent: Edward F. McClennan

Justices for the Court: Louis D. Brandeis, Benjamin N. Cardozo, Chief Justice Charles Evans Hughes, Owen Josephus Roberts, Harlan Fiske Stone, George Sutherland, Willis Van Devanter

Justices Dissenting: Pierce Butler, James Clark McReynolds

Date of Decision: May 24, 1937

Decision: Ruled in favor of Helvering and the United States by finding that Congress has constitutional powers to establish a Social Security program for the aged.

Significance: In upholding the constitutionality of the Social Security Act, the Supreme Court signaled a major shift by supporting President Franklin D. Roosevelt's New Deal programs. The act introduced a new era in American history by establishing a responsibility of society to care for the aged, unemployed, impoverished, and disabled.

"B y 1932, the unemployed numbered upward of thirteen million. Many lived in the primitive conditions of a preindustrial society stricken by famine. In the coal fields of West Virginia and Kentucky, evicted families shivered in tents in midwinter; children went barefoot. In Los Angeles, people whose gas and electricity had been turned off were reduced to cooking over wood fires in back lots . . . At least a million, perhaps as many as two million were wandering the country in a fruitless quest for work or adventure or just a sense of movement." From Franklin Roosevelt and the New Deal:1932-1940 (1963) by William E. Leuchtenburg, New York: HarperCollins.

A New Deal

The Great Depression, beginning with the U.S. stock market crash in October of 1929, was a worldwide business slump leading to the highest unemployment in modern times. With stores, banks, and factories shut down, millions of Americans became jobless and broke. The substantial economic hardships on American citizens through the following years extended to those too old to work.

In 1932 with the economy continuing to suffer, the nation elected Franklin D. Roosevelt (1933–1945) president. To address the nation's economic plight, Roosevelt soon introduced an ambitious program for social and economic reform that became known as the New Deal. Central to reform was the substantially increased federal government role in the country's internal affairs at home.

However, progress toward carrying out the programs was slow. The Supreme Court repeatedly declared unconstitutional (did not follow the intent of the Constitution) the legislation passed to create federal relief programs. The Court ruled the measures exceeded Congress' constitutional authority. Much to Roosevelt's frustration, most of the Supreme Court justices held conservative views on federal government power and were not favorable to the proposed reforms. Reorganizing his efforts in 1935, Roosevelt unveiled a renewed long-term New Deal plan that included social security. A key to the reform was passage of the Social Security Act of 1935. Designed to bring greater economic stability to the population, Title II of the act created an old age benefits program. Title VIII established a way to fund the program by requiring companies to withhold a certain amount of money from employees' paychecks. That money, matched with an equal amount from the employer, would be paid to the U.S. Treasury and placed in a national trust fund. The fund would then provide monthly benefits to retired workers over the age of sixty-five if they had worked and paid taxes into the program. The act was primarily aimed at industry with Title VIII exempting certain types of employees, such as agricultural workers, from the program.

Bolstered by winning reelection in 1936, President Roosevelt focused attention on reorganizing the Supreme Court to get more favorable rulings on his programs. Under political pressure some justices in disfavor with the President and public chose to retire while others altered their views on Roosevelt's reform programs.

George P. Davis

George P. Davis was a shareholder for the Edison Electric Illuminating Company of Boston, an electrical power company. When Edison began to deduct money from its employees' wages to comply with the newly passed Social Security Act, Davis filed a lawsuit in the U.S. District Court for the District of Massachusetts against the company. Davis claimed "old age benefits [was] not a purpose for which the Congress has power to tax." He sought "to restrain the corporation from making the payments, and deductions from wages." Davis stated, "The deductions from the wages of the employees will produce unrest among them and will be followed . . . by demands that wages be increased . . . The corporation and its shareholders will suffer irreparable loss, and many thousands of dollars will be subtracted from the value of the shares."

The district court permitted Guy T. Helvering, commissioner of the U.S. Internal Revenue Service (IRS), to intervene (come in to represent) in the suit representing Edison Electric. The district court dismissed Davis' lawsuit. He appealed to the U.S. First Circuit Court of Appeals which ruled in his favor by holding that Title II was an invasion of state reserved powers. Helvering appealed the appeals court decision to the U.S. Supreme Court which agreed to hear the case.

Social Security Secured

Davis argued before the Supreme Court that the Social Security Act inappropriately expanded Congress' power to tax under the Taxing and Spending Clause of Article I of the U.S. Constitution. The clause states, that Congress has power to "lay and collect Taxes, Duties, Imposts [duties on imported foreign goods], and Excises [taxes on domestic goods], to pay the Debts and provide for the common Defence and general Welfare of the United States." More specifically, Davis charged the act violated the Tenth Amendment which grants powers to the states not specifically reserved to the U.S. government. Providing for social security was such a state power, he contended.

Justice Benjamin N. Cordozo wrote the opinion for the Court in a 7-2 decision. Cordozo stressed that monies spent on the general welfare of the nation's population was indeed the responsibility of the federal government, not state governments. He stated that the severe economic depression of the 1930s was "plainly national" requiring a nationwide solution. Cordozo wrote, "the ill is . . . not greatly different whether men are thrown out of work because there is no longer work to do or because the disabilities of age make them incapable of doing it." Cordozo concluded that the "laws of the separate states cannot deal with it effectively . . . States and local governments are often lacking in the resources that are necessary to finance an adequate program of security for the aged."

The old age benefits program provided by the Social Security Act was indeed constitutionally valid. Cordozo wrote, "Congress may spend money in aid of the 'general welfare.'" In addition, the tax on employers "is an excise tax and thus within the power conferred upon [given to] Congress by . . . the Constitution."

The New Deal Lives

At the time the Court delivered the Helvering decision, it also announced a decision in Steward Machine Co. v. Davis which challenged another section of the Social Security Act involving unemployment benefits. The two decisions were vital to Roosevelt's programs designed to put America back to work and protect those most affected by the depression. However, it took the demands of World War II (1939–1945) for industrial production of war materials that to ultimately bring the Depression to a close. Though always controversial, the Social Security Act became a major lasting part of U.S. domestic policy.

Days before the Helvering decision was presented, Justice Willis Van Devanter, one of the politically conservative justices opposing Roosevelt's programs announced his retirement. Roosevelt was free to select a new justice more supportive of his programs.


C ontinued expansion of the Industrial Revolution during the nineteenth century brought many basic changes to home life. No longer did the typical family work together on a farm with relatives and other closely associated families. Instead of living in small farming communities, many families moved to newly established industry centers seeking a better life. Fathers would go off to the factories for long work days leaving the wife to raise the children and take care of the home. Fewer economic "safety nets" existed for workers who grew too old to be as productive or if a sudden traumatic event occurred such as death or disability of the breadwinner. The need for social security programs grew to aid such distressed families and provide a more stable society in the industrial workforce. Germany, the first industrial country to establish such a social security program in the 1880s, required sickness and old age insurance. Similar plans were introduced through the few decades in other European and some Latin American countries.

In the United States, "beneficial associations" grew composed of workers joining together to provide sickness, old age benefit, and funeral insurance. With the crash of the stock market in 1929 and prolonged decline of the economy, President Franklin D. Roosevelt included the Social Security Act as a key element of his social and economic reforms. In the 1950s Social Security was expanded to include farmers and those self-employed. Health insurance benefits, known as Medicare, were added in 1965 as well as federally-assisted state unemployment compensation programs.

By the 1990s fears mounted over the future of the Social Security with estimates it would eventually go broke. The president and Congress both worked toward solutions to the problem. The program had become a major part of modern life in America with 90 percent of all workers covered by Social Security in 1997 and 42 million receiving benefits.

Suggestions for further reading

Freidel, Frank. Franklin D. Roosevelt: A Rendezvous with Destiny. Boston: Little, Brown and Company, 1990.

Terkel, Studs. Hard Times: An Oral History of the Great Depression. New York: Pantheon Books, 1986.

Watkins, T. H. The Great Depression: America in the 1930s. Boston: Little, Brown and Company, 1993.