STEWARD MACHINE CO. V. DAVIS
301 U.S. 548 (1937)
NATURE OF THE CASE: This is an action challenging the constitutionality of the Social
Security Act as applied to employers of eight or more. A lower court decision upheld the
constitutionality of the federal unemployment compensation program.
FACTS: The Social Security Act taxed employers with eight or more employees based on
their salaries. The proceeds went into the General Treasury. If a taxpayer contributed to a
state fund, he received credit toward the federal tax. Employers could receive a credit up
to 90% of these taxes if they also paid into the state unemployment fund if the state fund
was certified by the Secretary of the Treasury as meeting minimum criteria with respect to
financial stability and accountability. Between 1929 and 1936, unemployment skyrocketed in
the United States, and the states couldn't give the appropriate help to those in need.
Steward Machine Co. (P) paid a tax in accordance with the statute, and then filed a claim to
recover the payment, asserting that the statute was unconstitutional. The lower courts
upheld the act. P appealed.
ISSUE:
RULE OF LAW:
HOLDING AND DECISION:
LEGAL ANALYSIS:
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