## Facts

- A shareholder of a corporation filed a derivative suit seeking to enjoin the corporation from complying with the Social Security Act of 1935.
- The suit challenged the corporation’s obligation to pay the employer tax imposed by Title VIII and to withhold and remit the employee wage tax.
- Title II established a federal old-age benefits framework through an Old-Age Reserve Account and contemplated future appropriations for benefits.
- Title VIII imposed (1) an excise tax on employers measured by wages paid and (2) an employee wage tax collected through payroll withholding.
- Revenues from the Title VIII taxes were paid into the general Treasury and were not legally earmarked to fund old-age benefit payments.
- The district court dismissed the bill, upholding the employer tax and treating Title II and the employee tax as not properly presented.
- The court of appeals reversed and held Titles II and VIII unconstitutional.
- On review, the Commissioner and Collector (who intervened below) waived objections based on equity jurisdiction and the existence of an adequate remedy at law and sought a decision on the validity of the taxes.

## Issues

1. Whether the Court should dismiss the shareholder’s suit on equity or jurisdictional grounds despite the parties’ waivers.
2. Whether the federal old-age benefits program under Title II, in connection with the Title VIII taxes, exceeded Congress’s power and violated the Tenth Amendment.
3. Whether funding old-age benefits is a permissible exercise of Congress’s Article I, § 8 power to tax and spend for the general welfare.

## Decision

- The Court declined to dismiss the case on its own motion and reached the merits, given the parties’ posture and express waivers of procedural defenses.
- The Court reversed the court of appeals and upheld the constitutionality of the Social Security Act’s old-age benefits program as within Congress’s taxing-and-spending power.
- The Court held that the Title II old-age benefits scheme did not contravene the Tenth Amendment.
- The Court treated the Title VIII exactions as ordinary internal-revenue measures deposited in the general Treasury, supporting the program’s validity under the taxing-and-spending framework.

## Legal Principles

- Congress may tax and spend in aid of the “general welfare” under Article I, § 8, and the spending power is not confined to subjects otherwise reachable only through other enumerated regulatory powers.
- Courts generally defer to Congress’s judgment about what constitutes the “general” welfare, intervening only when the choice is plainly arbitrary.
- Federal spending aimed at a problem reasonably characterized as national in scope may be sustained even if states also address related matters.
- Deposit of tax proceeds into the general Treasury without statutory earmarking supports characterization of the exaction as a general revenue measure rather than a constitutionally suspect funding device.
- The Tenth Amendment does not bar Congress from using its tax-and-spend authority to support a nationwide old-age benefits system.

## Conclusion

The Court upheld the Social Security Act’s old-age benefits program and related taxes as a valid exercise of Congress’s power to tax and spend for the general welfare, rejecting the claim that the program violated the Tenth Amendment and emphasizing substantial judicial deference to Congress’s welfare determination.


Helvering v. Davis, 301 U.S. 619 (1937)