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U.S. Supreme Court

Carmichael v. Southern Coal & Coke Co., 301 U.S. 495 (1937)

Carmichael v. Southern Coal & Coke Co.

No. 724

Argued April 7, 8, 1937

Decided May 24, 1937*

301 U.S. 495


The Unemployment Compensation Act of Alabama sets up a scheme for providing unemployment benefits for workers employed within the State by designated classes of employers. These include all who employ eight or more persons for twenty or more weeks in the year, except those engaged in certain specified employments. The employers are to pay certain percentages of their total monthly payrolls into the state Unemployment Compensation Fund, and each employee is required to contribute to the fund a chanrobles.com-red

Page 301 U. S. 496

percentage of his wages. The fund is to be deposited in the "Unemployment Trust Fund" of the United States Government established by the Federal Social Security Act, and is to be used as requisitioned by the State Commission to pay unemployment benefits prescribed by the statute, but without any liability on the part of the State beyond amounts paid into or earned by the Fund. Benefits are payable from the fund to the employees covered by the Act, in the event of their unemployment, upon prescribed conditions and at prescribed rates. The Act satisfies the criteria which, by § 903(a) of the Social Security Act, are made prerequisite to its approval by the Social Security Board created by that Act, and it has been approved by the Board as that section directs. By § 902 of the Social Security Act, contributors to the state fund are entitled to credit their contributions in satisfaction of the tax imposed on employers by the Social Security Act, to the extent of 90% of the tax.


1. The Act, as an Act taxing employers, is within the state taxing power. P. 301 U. S. 508.

Taxes are the means of distributing the burden of the cost of government, commonly levied on property or its use, but likewise leviable on the exercise of personal rights and privileges, including the exercise of the right to employ or to be employed.

2. The tax on employers is valid under the Fourteenth Amendment. P. 301 U. S. 508.

(1) Inequalities which result from a singling out of one particular class for taxation or exemption infringe no constitutional limitation. P. 301 U. S. 509.

(2) A legislature is not bound to tax every member of a class or none. It may make distinctions of degree having a rational basis, and, when subjected to judicial scrutiny, they must be presumed to rest on such a basis if such would exist under any conceivable state of facts. P. 301 U. S. 509.

(3) Exclusion from the tax of employers of less than eight is a distinction of degree such as the law is often called upon to make, and is furthermore justified on the ground of administrative convenience and expense. P. 301 U. S. 510.

(4) The exemption of particular classes of employers -- those who employ agricultural laborers, domestic servants, seamen, insurance agents, or close relatives -- and the exclusion of charitable institutions, interstate railways, or the government of the United States or of any State or political subdivision, whereby the subject chanrobles.com-red

Page 301 U. S. 497

of the tax is confined to those who employ labor in the processes of industrial production and distribution, is not arbitrary. P. 301 U. S. 512.

Where the public interest is served, one business may be left untaxed and another taxed, in order to promote the one or to restrict or suppress the other.

Several of the exemptions may rest upon administrative considerations.

The burden rests upon those who complain of showing that there are no differences between the exempt employers and the industrial employers who are taxed sufficient to justify differences in taxation.

(5) The provision for taxing employees is separable, and therefore not subject to objection by employers. P. 301 U. S. 513.

(6) Distinct taxes imposed by a single statute are not to be deemed inseparable unless that conclusion is unavoidable. P. 301 U. S. 513.

(7) Under the Fourteenth Amendment, the state taxing power can be exerted only to effect a public purpose, and does not embrace the raising of revenue for private purposes. P. 301 U. S. 514.

(8) The requirements of due process leave free scope for the exercise of a wide legislative discretion in determining what expenditures will serve the public interest. P. 301 U. S. 514.

(9) The public purposes of a State, for which it may raise funds by taxation, embrace expenditures for its general welfare. P. 301 U. S. 514.

(10) Whether the expenditure under the Act serves a public purpose is a practical question addressed to the lawmaking department, and it would require a plain case of departure from every public purpose which could reasonably be conceived to justify the intervention of a court. P. 301 U. S. 515.

(11) Relief of unemployment is a public purpose. P. 301 U. S. 515.

(12) When public evils ensue from individual misfortunes or needs, the legislature may strike at the evil at its source. If the purpose is legitimate because public, it will not be defeated because the execution of it involves payments to individuals. P. 301 U. S. 518.

(13) The scheme of the Act is not subject to any constitutional infirmity in not being limited to the indigent, or because it is extended to some less deserving than others, such as those discharged for misconduct. P. 301 U. S. 518.

(14) The fact that the Act restricts its benefits to employees of the class of employers who are subject to the tax does not render it arbitrary or discriminatory, in violation of the Fourteenth Amendment. P. 301 U. S. 519. chanrobles.com-red

Page 301 U. S. 498

(15) It is not a valid objection to the tax on employers that the benefits paid and the persons to whom they are paid are unrelated to the persons taxed and the amount of the tax which they pay -- in short, that those who pay the tax may not have contributed to the unemployment, and may not be benefited by the expenditure. P. 301 U. S. 521.

The tax is a means of distributing the burden of the cost of government. This Court has repudiated the suggestion that the Constitution requires the benefits derived from the expenditure of public moneys to be apportioned to the burdens of the taxpayer, or that he can resist the payment of the tax because it is not expended for purposes which are peculiarly beneficial to him. P. 301 U. S. 522.

(16) The Act is not the invalid product of the coercive operation of the Federal Social Security Act, and involves no unconstitutional surrender of State power. Steward Machine Co. v. Davis, post, p. 301 U. S. 548. P. 301 U. S. 525.

17 F.Supp. 225 reversed.

Appeals from decrees of the District Court, of three judges, restraining the present petitioners, officials of Alabama, from collecting the money contributions exacted of them by the provisions of the Alabama Unemployment Compensation Act. chanrobles.com-red

Page 301 U. S. 504


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