Copy and answer questions 1-20 from page 286 to review Chapter 10.
Chapter 11: The Powers of Congress
Section 2: The Expressed Powers of Money and Commerce
1. What are the purposes of taxes?
A tax is a charge levied by government on persons or property to raise money to meet public needs.
Congress does sometimes impose taxes for other purposes as well. The protective tariff is perhaps the oldest example of this point. Although it does bring in some revenue every year, its real goal is to “protect” domestic industry against foreign competition by increasing the cost of foreign goods.
Taxes are also sometimes levied to protect the public health and safety. The Federal Government’s regulation of narcotics is a case in point. Only those who have a proper federal license can legally manufacture, sell, or deal in those drugs—and licensing is a form of taxation.
2. Summarize the limitations that the Constitution has placed on the taxation power of Congress.
(1) Congress may tax only for public purposes, not for private benefit. Article I, Section 8, Clause 1 says that taxes may be levied only “to pay the Debts and provide for the common Defense and general Welfare of the United States….”
(2) Congress may not tax exports. Article I, Section 9, Clause 5 declares “[n]o Tax or Duty shall be laid on Articles exported from any State.” Thus, customs duties (tariffs), which are taxes, can be levied only on goods brought into the country (imports), not on those sent abroad (exports).
(3) Direct taxes must be apportioned among the States, according to their populations:
(4) Article I, Section 8, Clause 1 provides that “all Duties, Imposts and Excises, shall be uniform throughout the United States.” That is, all indirect taxes levied by the Federal Government must be levied at the same rate in every part of the country. These include the federal taxes on gasoline, alcoholic beverages and tobacco products.
3. Give examples for direct tax and indirect tax.
A direct tax is one that must be paid directly to the government by the person on whom it is imposed—for example, a tax on the ownership of land or buildings, or a capitation (head or poll) tax.
An income tax is a direct tax, but it may be laid without regard to population.
As a general rule an indirect tax is one first paid by one person but then passed on to another. It is indirectly paid by that second person. Take, for example, the federal tax on cigarettes. It is paid to the Treasury by the tobacco company, but is then passed on through the wholesaler and retailer to the person who finally buys the cigarettes.
4. How is public debt related to deficit spending?
For decades, the Federal Government has practiced deficit financing. That is, it regularly spends more than it takes in each year—and borrows to make up the difference.
As a result, the public debt rose year to year—to more than $5.5 trillion at the beginning of fiscal year 1999. The public debt is all of the money borrowed by the government over the years and not yet repaid, plus the accumulated interest on that money. The federal debt now (2005) exceeds $7.5 trillion.
5. What are the three major factors that are contributing for the increasing budget deficit since 2001?
(1) a sharp downturn in the nation’s economy that began in late 2000,
(2) major tax cuts pushed by President Bush and enacted by Congress in 2001, 2002, and 2003,
(3) the onset of the global war on terrorism in 2001 and the ongoing conflicts in Afghanistan and Iraq. The shortfall topped a record $413 billion in 2004 and it will certainly exceed that stupendous sum in 2005.
6. What is the significance of the Gibbons v. Ogden case?
The Court’s ruling was widely popular at the time because it dealt a death blow to steamboat monopolies. It rejected Ogden’s argument that “commerce” should be defined narrowly, as simply “traffic” or the mere buying and selling of goods. Instead, it read the Commerce Clause in very broad terms:
“Commerce undoubtedly is traffic, but it is something more—it is intercourse. It describes the commercial intercourse between nations, and parts of nations, in all its branches, and is regulated by prescribing rules for carrying on that intercourse.”
—Chief Justice John Marshall
7. Give three examples of how Congress uses its Commerce Power.
Regulating commerce with foreign powers and between states.
Establish the federal minimum wage.
Preventing monopolies from forming.
Prohibit discrimination to public places.
8. What are the limits of congressional commerce power?
In more specific terms, the Constitution places four explicit limits on the use of the commerce power. Congress
(1) cannot tax exports, Article I, Section 9, Clause 5;
(2) cannot favor the ports of one State over those of any other in the regulation of trade, Article I, Section 9, Clause 6;
(3) cannot require that “Vessels bound to, or from, one State, be obliged to enter, clear or pay Duties in another,” Article I, Section 9, Clause 6; and, finally,
(4) could not interfere with the slave trade, at least not until the year 1808, Article I, Section 9, Clause 1. This last limitation, part of the curious slave-trade compromise at the Constitutional Convention, has been a dead letter for nearly two centuries now.
9. Why did the nation need a uniform system of “hard money” that can be used a legal tender?
So it can provide the nation with a uniform, stable monetary system that will be universally accepted by everyone in the country.
10. What is the purpose of a bankruptcy filing? Who has the power to regulate bankruptcy?
Bankruptcy is the legal proceeding in which the bankrupt’s assets—however much or little they may be—are distributed among those to whom a debt is owed. That proceeding frees the bankrupt from legal responsibility for debts acquired before bankruptcy.
The States and the National Government have concurrent power to regulate bankruptcy. Today federal bankruptcy law is so broad that it all but excludes the States from the field. Nearly all bankruptcy cases are heard now in federal district courts.