Power to Tax and Spend
The U.S. Constitution provides Congress with the related powers to levy taxes and spend money for the general welfare of the nation.[1] States have concurrent powers to tax and spend. The federal government collects various types of taxes, such as those on businesses, personal income, and consumer goods. Although there is no general federal sales tax, the federal government imposes excise taxes on products with public health consequences such as tobacco, firearms, and alcohol. An excise tax is “a duty or impost levied upon the manufacture, sale, or consumption of commodities.”[2] This results in an increase in the base price of the product, unlike a sales tax, which is added on upon checkout. One of the benefits of excise taxes is that the government can earmark the funds, meaning it can dedicate the revenue stream to a particular purpose. The dual purpose of a tax on products with potential health ramifications can be to raise revenue and decrease consumption. Just after the U.S. Constitution was ratified, Congress passed the nation’s first excise tax on whisky for both of these purposes. State and local governments, by imposing sales taxes, are the primary taxing authority over food and beverages. For example, in 2014, 13 states assessed sales tax on all food at general sales tax rates, while other states only imposed sales taxes on specific foods such as soft drinks and candy.[3]
The federal government’s power to spend has meaningful ramifications for the nation. The federal government can provide money directly for public health programs. For example, through the American Recovery and Reinvestment Act of 2009, Congress allotted $650 million to the Department of Health and Human Services (HHS) to support evidence-based prevention and wellness strategies. The cornerstone of the initiative is the Communities Putting Prevention to Work Community Program, administered by the Centers for Disease Control and Prevention, under which HHS awarded grants to communities around the country to engage in evidence-based strategies to support physical activity and nutrition, and prevent obesity and tobacco use.[4]
The federal government also can condition funding to states upon states’ agreement to do something that they would not otherwise do. One hallmark case on this topic involved the federal government’s interest in having a national minimum alcohol consumption age of 21 years. Many states had enacted laws permitting people younger than 21 years to purchase alcohol, so Congress offered the states a financial incentive of federal highway funding if they agreed to raise their minimum drinking age to 21 years. South Dakota sued the federal government, but the Supreme Court upheld the conditional funding scheme, noting that Congress may attach conditions to the receipt of federal funds to accomplish federal policy objectives.[5] The conditional funding agreement must meet four criteria: Congress must be seeking to advance the general welfare of the country, it must give states a clear and legitimate choice to take or refuse the funds, the scheme must be related to the federal interest in national projects or programs, and it must not violate the U.S. Constitution.[5]
- [1] U.S. Constitution Article 1, Section 8, Clause 1.
- [2] David Becker, Ed. U.S. Master Excise Tax Guide (6th ed.). Chicago, IL: CCH; 2008.
- [3] Bridging the Gap. 2014 State-by-State Soda Tax Rates. April 2014. http://www.bridgingth-egapresearch.org/_asset/s2b5pb/BTG_soda_tax_fact_sheet_April2014.pdf
- [4] 77 Federal Register 30535 (May 23, 2012).
- [5] South Dakota v. Dole, 483 U.S. 203 (1987).
- [6] South Dakota v. Dole, 483 U.S. 203 (1987).
