U.S. Supreme Court
McCray v. United States, 195 U.S. 27 (1904)
McCray v. United States
Argued December 2, 1903
Decided May 31, 1904
195 U.S. 27
The judiciary is without authority to avoid an act of Congress lawfully exerting the taxing power, even in a case where, to the judicial mind, it seems that Congress had, in putting such power in motion, abused its lawful authority by levying a tax which was unwise or oppressive, or the result of the enforcement of which might be to indirectly affect subjects not within the powers delegated to Congress; nor can the judiciary inquire into the motive or purpose of Congress in adopting a statute levying an excise tax within its constitutional power.
While both the Fifth and Tenth Amendments qualify, insofar as they are applicable, all the provisions of the Constitution, nothing in either of them operates to take away the grant of power to tax conferred by the Constitution upon Congress, and that power being unrestrained except as limited by the Constitution, Congress may select the objects upon which the tax shall be levied, and, in exerting the power, no want of due process of law can possibly result, and the judiciary cannot usurp the functions of the legislature in order to control that branch of the Government in exercising its lawful functions.
The manufacture of artificially colored oleomargarine may be prohibited by a free government without a violation of fundamental rights.
There is such a distinction between natural butter artificially colored and oleomargarine artificially colored so as to cause it to look like butter that the taxing of the latter and not the former cannot be avoided as an arbitrary exertion of the taxing power of Congress without any basis of classification, taxing one article and excluding another of the same class.
The Oleomargarine Act of 1886, 24 Stat. 209, as amended by the act of 1902, 32 Stat. 93, imposing a tax of one quarter of one percent on oleomargarine not artificially colored any shade of yellow so as to look like butter and ten cents a pound if so colored, levies an excise tax, and is not unconstitutional as outside of the powers of Congress or an interference with the powers reserved to the States, nor can the judiciary declare the tax void because it is too high nor because it amounts to a destruction of the business of manufacturing oleomargarine, nor because it discriminates against oleomargarine and in favor of butter.
Where a manufacturer of oleomargarine uses as an ingredient butter artificially colored, he thereby gives to the manufactured product artificial chanrobles.com-red
coloration within the meaning of the Oleomargarine Act a amended in 1902, and the product is subject to taxation at the rate of ten cent per pound.
The United States sued McCray for a statutory penalty of $50, alleging that, being a licensed retail dealer in oleomargarine, he had, in violation of the acts of Congress, knowingly purchased for resale a fifty-pound package of oleomargarine, artificially colored to look like butter, to which there were affixed internal revenue stamps at the rate of one-fourth of a cent a pound, upon which the law required stamps at the rate of ten cents per pound. The answer of McCray, whilst admitting the purchase of the package stamped as alleged, set up two defences.
First. It was averred that the oleomargarine in question was made by a duly licensed manufacturer, the Ohio Butterine Company, from a formula used by it in making a high grade oleomargarine composed of
"the following ingredients and none other, in these proportions: oleo oil, 20 pounds; natural lard, 30 pounds; creamery butter, 50 pounds; milk and cream, 30 pounds; common salt, 7 pounds."
It was asserted that, whilst it was true that the oleomargarine made from the ingredients in question was of a yellow color, that this result was not caused by artificial coloration, but was solely occasioned by the fact that the butter which was bought in open market and used in making the oleomargarine had a deep yellow color imparted to it (the butter) by a substance known as Wells-Richardson's improved butter color. This preparation, it was averred, was not injurious to health, and.was constantly used in the United States in the manufacture of butter made from pure milk or cream, for the purpose of imparting to it a deep yellow color. Averring that a yellow color produced in oleomargarine by the employment of butter, as an ingredient which was artificially colored, did not amount to an artificial coloration of the oleomargarine within the meaning of the statute, it was asserted that the tax of one-fourth of a cent per pound was a compliance with the law. chanrobles.com-red
Second. If the act of Congress imposing the tax, when rightfully construed, required stamps at the rate of ten cents per pound upon oleomargarine, colored as described in the first defence, the act levying such tax was charged to be repugnant to the Constitution of the United States. As a foundation for this defence, the answer contained the following averments:
Whilst butter made from pure milk and cream in the spring season was of a deep yellow color, such butter when made at all other seasons was of a pale yellow; that the taste of consumers of butter in the United States required all butter to possess the deep color naturally belonging to butter made in the spring season, and hence it had come to pass that substantially all butter manufactured for sale in the United States, not made in the spring season and not naturally of a deep yellow, was colored artificially so as to cause it to have the deep yellow of spring butter. It was alleged that this deep yellow coloration of natural butter was universally produced by the use of either Wells-Richardson's compound or some other coloring ingredient, which did not change the taste of the butter, none of which were injurious to health. Oleomargarine, it was alleged, derived its chief value as an article of food as a substitute for butter, and that growing out of the taste of the consumers, unless the oleomargarine, which was naturally white, could be colored yellow to present the appearance of butter artificially colored, there was no demand for it, and its manufacture and sale would be commercially impossible. It was then averred that to impose upon the colored oleomargarine a tax of ten cents per pound would burden it with such a charge as to render it impossible to make and sell it in competition with butter, and therefore the result of imposing a tax of ten cents a pound on oleomargarine when artificially colored would destroy the oleomargarine industry. From these averments it was charged that, if the law imposed the tax of ten cents upon the oleomargarine in question the statute was repugnant chanrobles.com-red
to the Constitution because it deprived the defendant of his property without due process of law; because the levy of such a burden was beyond the constitutional power of Congress, since it was an unwarranted interference by Congress "with the police powers reserved to the several States and to the people of the United States by the Constitution of the United States;" and further, that said acts of Congress were repugnant to the Constitution, since they finally lodged in an executive officer the power to determine what constituted artificial coloration of oleomargarine, and therefore invested such officer with judicial authority; and, finally, because the attempt by Congress to levy a tax at the rate of ten cents a pound arbitrarily discriminated against oleomargarine in favor of butter, to the extent of destroying the oleomargarine industry for the benefit of the butter industry, and was, therefore, violative of "those fundamental principles of equality and justice which are inherent in the Constitution of the United States."
The Government demurred to the answer on the ground that it stated no defence. The demurrer was sustained, and, McCray electing to plead no further, the court found the facts alleged in the petition to be true, and adjudged that the Government recover "the sum of fifty dollars as a penalty and costs." Because of the questions arising under the Constitution, the case was then brought directly to this court. chanrobles.com-red