The Taxing and Spending Clause (which contains provisions known as the General Welfare Clause) and the Uniformity Clause, Article I, Section 8, Clause 1 of the United States Constitution, grants the federal government of the United States its power of taxation. While authorizing Congress to levy taxes, this clause permits the levying of taxes for two purposes only:

(1) To pay the debts of the United States, and

(2) To provide for the common defense and general welfare of the United States.

Taken together, these purposes constitute the federal government’s taxing and spending power.

Article I, Clause 1 of the U.S. constitution gives the federal government of the U.S. its power of taxation. Congress’ power to tax under Article I, SS 8, Paragraph 1 is limited by the Uniformity Clause.

The uniformity clause requires taxes to be geographically uniform throughout the United States. The requirement of uniformity in the levy of indirect taxes has been interpreted to mean geographical uniformity only – identical taxation of the taxed Article in every state where it is found. However, this clause does not require revenues raised by the tax from each state to be equal.

The uniformity clause was intended to prevent the legislature and local officials from granting preferential tax treatment to influential property owners and to protect citizens against unequal and unjust taxation.

In other words, it was another check placed on the legislature in order to keep a larger group of states from “ganging up” to levy taxes benefiting them at the expense of the remaining, smaller group of states.

So long as the federal statute on its face does n/ define the taxed activity in geographic terms (by expressly naming a state or states), the statute is constitutional. It doesn’t matter if the effect of the statute is to hurt one state and benefit 49 others as long as the statute doesn’t make a geographical distinction. Only if the statute makes an express geographical distinction does it run afoul of the UC.

A tax violates the uniformity clause if:

(1) The activity to be taxed is described in geographic terms, and

a. Example: An amendment that specifically exempts certain states from the operation of the tax

(2) The gov’t cannot show that its intention was n/ to give a state (or certain states) an undue preference

A tax measure will be upheld if it bears some reasonable relationship to revenue production or if Congress has the power to regulate the taxed activity. Example: Federal income tax.

To summarize, under the Uniformity Clause, a statute that expressly and unfairly discriminates against states or expressly gives certain states an undue preference is unconstitutional.

The U.S. legal system includes uniformity clauses found in individual state Constitutions as well as the federal Constitution.

A notable exception to this limitation has been upheld by the Supreme Court of the U.S. in the seminal case of United States v. Ptasynski. In Ptasynski, the Supreme Court of the U.S. allowed a tax exemption which was quasi-geographical in nature. In the case, oil produced within a defined geographic region above the Arctic Circle was exempted from a federal excise tax on oil production.

The basis for the holding was that Congress had determined the Alaskan oil to be of its own class and exempted it on those grounds, even though the classification of the Alaskan oil was a function of where it was geographically produced.

To understand the nuance of the Court’s holding, consider this example: Congress decides to implement a uniform tax on all coal mining. The tax implemented distinguishes between different grades of coal (e.g., anthracite versus bituminous versus lignite) and exempts one of the grades from taxation. Even though the exempted grade could potentially be defined by where it is geographically produced, the tax itself is still geographically uniform.

The General Welfare Clause

Below is a quick and dirty outline of the General Welfare Clause.

a. Congress may tax and spend for the general welfare. The general welfare clause is an enabling provision.

b. One of the limitations on the general welfare clause is that Congress can only spend for the general welfare.

c. GW Clause does not give Congress the power to legislate for the general welfare because that’s left to the State’s through their police power.

d. Something is authorized by the spending power if, on its face, it’s designed to raise revenue.

e. The GWC allows the state to impose conditions related to the purpose of the expenditure.

f. GW Clause does n/ enable Congress to:

i. Compel or

ii. Prohibit

iii. Note: Every tax is in some measure regulatory. An act which purports to be an exercise of the taxing power is not any less so because the tax is burdensome or tends to restrict the thing taxed.

g. Regulation through spending rule: Although the GW Clause does n/ authorize legislation which compels or prohibits behavior, under the necessary and proper clause Congress has the power to legislate where:

i. It intends to carry out an express purpose, and

1. Congress has the power to expressly penalize unlawful actions that will result in federal money being diverted from its intended purposes. The clause safeguards the integrity of the state and local recipients of federal dollars thereby reducing the potential for embezzlement of federally ear-marked funds.

ii. The legislation is appropriate for doing so.

1. This is an appropriate way of ensuring that federal money will be devoted to its intended purposes.

h. Understanding the Mechanics: Congress has the authority under the Spending Clause to appropriate federal money to promote the general welfare, and it has corresponding authority under the Necessary and Proper Clause to see to it that taxpayer dollars appropriated under that power are in fact spent for the general welfare and n/ siphoned of.

i. Breaking it down: Congress can use its spending power to regulate areas, even where it otherwise has no power to regulate the area, by requiring entities that accept gov’t money to act in a certain manner. What I’m referring to here is attaching strings to government grants.

j. Example: Congress conditions aid to states for medical programs on state funding of AIDS research.