Home › Case briefs › Constitutional Law

Hill v. Wallace

Supreme Court of the United States · 1922 · Constitutional Law

Constitutional LawTaxing PowerCommerce ClauseSeverabilityEquitytax vs regulationpenalty disguised as taxTenth Amendment

Facts

The Future Trading Act imposed a 20-cent-per-bushel tax on grain futures contracts unless the contracts fit specified exceptions, including being made through a board of trade designated by the Secretary of Agriculture as a contract market. To obtain and retain that designation, a board of trade had to comply with detailed conditions concerning recordkeeping, market reports, price manipulation, corners, cooperative-association membership, and enforcement of administrative orders. The bill alleged that enforcement of the Act would seriously injure the Chicago Board of Trade and the value of members' memberships, and that the Board's directors refused to challenge the Act because they feared antagonizing public officials. The Act also imposed criminal penalties and administrative sanctions for noncompliance.

Issue

Whether the Future Trading Act could be sustained as a valid exercise of Congress's taxing power or commerce power, and whether the complainants could seek equitable relief against its enforcement. Also, whether the Act's invalid provisions could be salvaged through its saving clause.

Rule

Congress may not use the taxing power to enact, on the face of the statute, a complete regulatory scheme over a subject within the state's police power and enforce compliance by a heavy exaction labeled a tax. A federal regulatory statute also cannot be sustained under the Commerce Clause where the Act is not confined to interstate commerce and the Court would need to insert limiting language to make it constitutional. A saving clause permits preservation of truly separable provisions, but does not empower courts to rewrite the statute.

🔒

See the holding & full analysis

Create a free KwikCourt account to unlock the rest of this brief — and practice the case.

The court's holding and reasoning
Doctrine tests, pitfalls & exam hypotheticals
10 practice questions + 4 AI-graded essays on this case

Free sample · practice this case

Test yourself

One of 10 multiple-choice questions for this case. Pick an answer to see why.

Congress enacts the Livestock Futures Assessment Act. It imposes a $5,000 charge on each cattle-futures contract unless the transaction occurs through an exchange in Omaha that the Secretary of Agriculture has certified after the exchange adopts federal rules on membership, publication of market data, anti-manipulation practices, and enforcement of agency orders.

If ranchers and exchange members challenge the charge, what is the strongest argument that the Act is unconstitutional?

Explanation. The controlling rule is substance over label. When the statute, read as a whole, reveals a detailed regulatory scheme over matters otherwise reserved to the states, and a heavy exaction is used to compel compliance rather than raise revenue, the exaction is not saved by the word 'tax.' The majority emphasized that facial features such as administrative supervision, membership rules, anti-manipulation commands, and sanctions unrelated to tax collection show regulation, not a true tax.