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During the Depression era, markets collapsed, food prices fell, and farmers went out of business. To combat this, Congress passed a piece of New Deal legislation called the Agricultural Adjustment Act of 1933. This law taxed processed agricultural products like cotton and wheat and then paid that money to farmers to decrease production.
In the case of United States v. Butler, 297 U.S. 1 (1936), a failing cotton mill challenged an $81,000 bill for taxes owed pursuant to the law. The United States Supreme Court ultimately took up the case to determine whether the law fell outside the scope of Congress’s powers to tax and spend for the general welfare.
Specifically, the Court considered whether Congress’s constitutional authority to tax and spend was tethered to its enumerated powers and whether the power to regulate local agricultural production was reserved to the states under the Tenth Amendment.
Ultimately, the Court concluded that the Taxing and Spending Clause was an independent grant of congressional power that gave Congress sufficient latitude to exercise the power in ways beyond those listed in its enumerated powers. Nevertheless, the Court struck down the act on the ground that Congress had exercised the power to tax and spend in a way that violated another constitutional provision: the Tenth Amendment.