All U.S. public debt authorized by Congressional legislation, including those incurred by the Union as a consequence of the Civil War, are unquestionably valid and must be paid.  Neither the federal government, nor any individual State, has any responsibility for debts incurred by the Confederacy.  The United States will not pay any compensation to slave owners for the loss of former slaves.

• The 14th Amendment makes it unconstitutional for the United States to default on its debt.
• The Supreme Court (Perry v. United States, 1935) ruled that voiding a United States government bond "went beyond the congressional power" on account of Section 4 of the 14th Amendment.  The Court wrote: “In the United States, sovereignty resides in the people, who act through the organs established by the Constitution.  The Congress, as the instrumentality of sovereignty, is endowed with certain powers to be exerted on behalf of the people in the manner and with the effect the Constitution ordains.  The Congress cannot invoke the sovereign power of the people to override their will as thus declared. ... The Constitution gives to the Congress the power to borrow money on the credit of the United States, an unqualified power, a power vital to the government, upon which in an extremity its very life may depend.  The binding quality of the promise of the United States is of the essence of the credit which is so pledged.  Having this power to authorize the issue of definite obligations for the payment of money borrowed, the Congress has not been vested with authority to alter or destroy those obligations.”
  

• Members of the House have always been directly elected by the people, but until the 17th Amendment was ratified in 1913, Senators were chosen by the State legislatures.  The Framers gave the House the power to originate all bills that raise revenue to ensure that the “power of the purse” was controlled by the legislative body closest to the people.  In practice, the Senate can circumvent this requirement by inserting the text of a revenue bill into any bill previously passed by the House.  The House does need to subsequently approve these changes.  
  
• The Supreme Court (Pollock v. Farmers' Loan & Trust Co., 1895) summarized the reasoning of the Framers in mandating that all revenue bills originate in the House.  “The States were about, for all national purposes embraced in the Constitution, to become one, united under the same sovereign authority and governed by the same laws. But as they still retained their jurisdiction over all persons and things within their territorial limits, except where surrendered to the general government or restrained by the Constitution, they were careful to see to it that taxation and representation should go together, so that the sovereignty reserved should not be impaired, and that, when Congress, and especially the House of Representatives, where it was specifically provided that all revenue bills must originate, voted a tax upon property, it should be with the consciousness, and under the responsibility, that, in so doing, the tax so voted would proportionately fall upon the immediate constituents of those who imposedit.”
  

The Clauses

The following are all of the clauses in the Constitution that pertain to the government’s power to incur debt and impose taxes, plus an explanation of how each clause is interpreted today in light of historic context and Supreme Court rulings.

Unless they have permission from Congress, States may not pass laws which tax imports or exports (imposts, duties, etc.) except to cover the cost of inspections required by the State.  Any such State laws may be modified by Congress.  Any revenue from such taxes, in excess of the amount required to cover inspection costs, must be turned over to the federal treasury.

• The Framers intended this clause to complement congressional power to raise revenue and to regulate commerce by restricting the ability of individual States to tax commerce entering and leaving their borders.  It was probably originally understood to cover both foreign and interstate commerce.  Chief Justice John Marshall (Brown v. Maryland,1827) assumed that the clause applied “equally to importations from a sister State” as well as to foreign imports, but subsequently the Court (Woodruff v. Parham, 1869) concluded that the clause only refers to foreign imports and exports.
  
• The Supreme Court (Michelin Tire Corp. v. Wages, 1976) ruled that a nondiscriminatory State tax would be invalidated by the Import-Export Clause only if it (1) prevented the federal government from regulating foreign commerce uniformly; (2) diverted import revenue from the federal government to the States; or (3) risked interstate disharmony like that seen under the Articles of Confederation.
  

States cannot, without permission from Congress, place a tax on imports based on the size or the cargo carrying capacity of a vessel.

• The Framers debated whether or not the Constitution should guarantee States the ability to lay duties of tonnage without Congressional interference, in order to enable States to finance the clearing of harbors and the building of lighthouses.  James Madison believed that the regulation of commerce should be completely under federal authority and that the mere existence of the Commerce Clause would bar States from imposing any duty of tonnage.  Roger Sherman disagreed, saying "The power of the United States to regulate trade being supreme can control interferences of the State regulations when such interferences happen; so that there is no danger to be apprehended from a concurrent jurisdiction."
  

The Spending Clause

All debts incurred by the United States government under the Articles of Confederation (in force from 1777 through 1788) remain the valid commitments of the United States under this Constitution.

• To finance the Revolutionary War, the States and the Continental Congress had sold millions of dollars in public bonds to Americans and to foreign investors.
• James Madison (Federalist #43) maintained that the clause was not a legal or constitutional necessity but that it was only included in the Constitution “for the satisfaction of the foreign creditors of the United States.”
  

No federal law, regulation, or tax can be structured in a way that gives the ports of one State an advantage over those of the other States.  Ships traveling to or from one State cannot be required to pay duties in another State.  

• This clause is intended to inhibit the tendency of legislatures to become the instruments through which powerful commercial interests can injure their politically weaker rivals.
  

The federal government can’t place taxes or duties on specific products exported from any state to another country.

• Congress may impose a tax on a particular good, even though there is a likelihood that a portion of those goods will be exported, as long as the tax is not imposed solely because that particular good will be exported.
• The Constitution gives the federal government absolute power over foreign commerce, therefore States whose economies relied chiefly on exports (primarily the Southern states at the time the Constitution was drafted) insisted on this protection because they realized that any tax laid on a single item of export could be used to discriminate against a State or region.
• The Supreme Court (United States v. United States Shoe Corp., 1998) ruled that a harbor maintenance tax (imposed on the value of the cargo instead of on the cost of the service provided) was a tax on exports and therefore unconstitutional.
  

The Origination Clause

(Article I; Section 7; Clause 1)

All Bills for raising Revenue shall originate in the House of Representatives; but the Senate may propose or concur with Amendments as on other Bills. 

What It Means

The quantity of direct taxes (capitation taxes and property taxes) that can be collected by the federal government from any State must be directly proportional to that State’s share of the national population (if a State has 10% of the US population, its people must pay 10% of direct taxes).  This reiterates the provision in the Apportionment Clause (Article I; Section 2; Clause 3).

• The Framers of the Constitution assumed that direct taxes would only be imposed in instances of national emergency and that indirect taxes, which were essentially taxes on consumption, would fund the federal government in ordinary circumstances.
• Prior to ratification of the 16th Amendment, the Supreme Court (Pollock v. Farmers' Loan & Trust Co., 1895) declared taxes on certain types of incomes (such as rents from land or dividends from stocks) were unapportioned direct taxes and therefore unconstitutional.  This ruling made the source of the income relevant in determining whether the tax imposed was ‘direct’ or ‘indirect’.  Taxes on wages were deemed to be indirect, therefore the only constitutional requirement was that they must be imposed uniformly throughout the country (see Article 1, Section 8, Clause 1).  Taxes on interest, dividends, and rental income were deemed to be direct taxes which constitutionally had to be apportioned based on population.   This and similar rulings led to the 16th Amendment which made the distinction between direct and indirect taxes irrelevant with respect to the power of Congress to “to lay and collect taxes on incomes”.  
  

Congress has the power to borrow money with the promise that the United States will repay the debt.

• Whenever Congress borrows money, it is obligated to repay the sum as stipulated in the original agreement.  The Supreme Court (Perry v. United States, 1935) ruled that Section 4 of the 14th Amendment makes it unconstitutional for the United States to default on its debt.  
• The Supreme Court (Knox v. Lee, 1871) ruled this clause permitted Congress to emit bills (issue paper money) and to make them legal tender in the satisfaction of debts.
  

Congress has the power to impose and collect taxes on all income, regardless of the source of that income without apportioning the tax among the States based on population.

• The Constitution originally gave Congress the power to levy a federal income tax, but a 1895 Supreme Court ruling (Pollock v. Farmers' Loan & Trust Co.) made it difficult to impose a tax that applied to all forms of income (See Direct Taxes - Article I: Section 9: Clause 4 for more details).  The 16th Amendment exempted all federal taxes on income, regardless of the source of that income, from any constitutional requirement that direct taxes be apportioned among the states according to population.  This made the current federal income tax system possible.
• The Supreme Court (Brushaber v. Union Pacific Railroad, 1916) ruled (1) that the 16th Amendment removes the requirement that certain income taxes be apportioned among the states according to population, (2) that the federal income tax statute does not violate the Constitutional prohibition (5th Amendment) against the government taking property without due process of law, and (3) that the federal income tax statute does not violate the Constitutional requirement (Article 1, Section 8) that “all .... excises shall be uniform throughout the United States” .  With regard to the 16th Amendment, the Court wrote “It is clear on the face of this text that it does not purport to confer power to levy income taxes in a generic sense -- an authority already possessed and never questioned -- or to limit and distinguish between one kind of income taxes and another, but that the whole purpose of the Amendment was to relieve all income taxes when imposed from [the requirement of] apportionment and from [the requirement of] a consideration of the source whence the income was derived.”
  
• The Supreme Court (Commissioner v. Glenshaw Glass Co., 1955) ruled that income taxes could be levied on “accessions to wealth, clearly realized, and over which the taxpayers have complete dominion”.  Under this definition, any increase in wealth (from wages, benefits, bonuses, rents, interest, dividends, capital gains, lucky finds, gambling winnings, punitive damage awards in a lawsuit,  etc.) is within the definition of income unless the Congress makes a specific exemption.  Current exemptions include income from gifts, inheritances, life insurance proceeds, scholarships, etc. (subject to certain criteria and limitations).
  

No money can be paid out of the U.S. Treasury unless it has been appropriated by an act of Congress.  A statement of revenues and expenditures must be published on a routine basis.

• This clause imposes accountability on Congressional spending and a check on the power of the executive branch.  First,  Congress must appropriate, through laws, all funds to be spent before those funds can be released by the Treasury.  Second, the executive branch cannot spend any money unless it has been appropriated by the Congress.  Third, the federal government must make its revenues and expenditures public.
  

The Constitution gives Congress the power to set and collect taxes (including indirect taxes, import duties, and fees on imports and exports) in order to pay the debts of the federal government of the United States and to provide for the country’s defense and the general welfare, but all indirect taxes (excises) and fees on imports and exports (duties and imposts) levied by Congress must be the same throughout the country.

• The Spending Clause gives Congress its taxation power.  Entitlement programs such as Social Security are authorized under this clause.  
• The Framers of the Constitution disagreed about the breadth of this power.  Alexander Hamilton supported an expansive spending power during the Constitutional Convention; but proposals, including an attempt to authorize spending by the federal government for internal improvements, were rejected by the majority.  James Madison argued that the power to tax and spend did not give Congress the right to do whatever it thought to be in the best interest of the nation.  It could only be used to further the ends specifically enumerated elsewhere in the Constitution.  For seventy years after the Constitution was ratified, most Congresses and Presidents adhered to this limited interpretation.  For example, President James Polk vetoed a bill that funded pork-barrel spending in 1847, warning that interpreting the Spending Clause to permit such appropriations would allow “combinations of individual and local interests [that would be] strong enough to control legislation, absorb the revenues of the country, and plunge the government into a hopeless indebtedness.”  By the 1930s, the interpretation of the Spending Clause had changed dramatically to give virtually unlimited discretion to Congress to determine what was in the ‘general Welfare’.  Today. congressional power to provide for the ‘general Welfare’ is interpreted as the power to spend for virtually anything that Congress itself decides is helpful.  Some Supreme Court Justices have indicated that they believe the Spending Clause has been stretched beyond constitutional limits.  Sandra Day O’Connor (dissenting in South Dakota v. Dole, 1987) held that “If the spending power is to be limited only by Congress’ notion of the general welfare, the reality...is that the Spending Clause gives ‘power to the Congress...to become a parliament of the whole people, subject to no restrictions save such as are self-imposed.’ This...was not the Framers’ plan and it is not the meaning of the Spending Clause.”
  
• The Constitution is very explicit in giving Congress the power to raise revenue because the lack of such power under the Articles of Confederation was considered to be one of the primary issues that led to the need for a new constitution.  Under the Articles, the central government had to requisition funding from the governments of the member states.  The states could decide to ignore the request or send less money than was requisitioned.  Because the central government lacked the necessary revenue to enforce laws and treaties and to pay its debts, the Confederation was effectively rendered powerless and was in danger of disintegrating.
  
• The Uniformity Clause was intended to prevent geographic discrimination that would grant one State a competitive advantage in its commercial relations with the other States.  In practice, Congress can easily circumvent the Uniformity Clause when it wants to.
  

• The Apportionment Clause is one of several compromises that were required to persuade both Northern and Southern states to ratify the Constitution.  The Southern delegates to the Constitutional Convention would have preferred to count slaves as full persons because that would have increased their power in the House of Representatives.  However making a State’s direct tax liability also proportional to the State's population disadvantaged the South and provided a disincentive for the importation of even more slaves since it would increase the relative direct tax burden on that State.  Tying representation and direct taxes together also protected the integrity of the census.  As James Madison explained (Federalist No. 54): “The States should feel as little bias as possible to swell or to reduce the amount of their numbers....By extending the rule to both [taxation and representation], the States will have opposite interests which will control and balance each other and produce the requisite impartiality.”
  
• When the Apportionment Clause was debated at the Massachusetts convention which ratified the Constitution, Rufus King (one of the Framers) said:  “It is a principle of this Constitution that representation and taxation should go hand in hand. . . . By this rule are representation and taxation to be apportioned. And it was adopted because it was the language of all America.”
  
• See Direct Taxes (Article I; Section 9; Clause 4) for an explanation of direct taxes.
  

Congress has the power to make the laws required to successfully exercise all of the powers granted to the federal government by the Constitution.

• The Framers created the Necessary and Proper Clause to serve two purposes.  The first is to empower Congress to “organize the government”, and the second is to help put into effect the other enumerated powers of Congress.  The clause authorizes Congress to enact laws that are “appropriate” to carry into execution Congress’s enumerated powers, but it doesn’t authorize Congress to enact any law that they believe is “reasonable”.
• There was considerable debate soon after the Constitution was ratified as to the extent to which the term ‘Necessary and Proper’ placed limits on the laws Congress could pass.  John Marshall, Fourth Chief Justice of the Supreme Court,  applied a broad interpretation (McCulloch v Maryland, 1819) - “Let the end be legitimate, let it be within the scope of the constitution, and all means which are appropriate, which are plainly adapted to that end, which are not prohibited, but consist with the letter and spirit of the constitution, are constitutional”  He broadened the scope of Congressional power even further to include implied powers saying - “there is no phrase in the instrument which, like the articles of confederation, excludes incidental or implied powers; and which requires that everything granted shall be expressly and minutely described.”
• The Supreme Court (Wayman v. Southard, 1825) held that Congress cannot delegate its powers in “important” matters, but it may delegate the power to one of the other branches of government “to fill up the details.”  For example, Congress can, and usually does, delegate the power to make detailed regulations to the relevant agency in the executive branch.  The Supreme Court (Mistretta v. United States, 1989) deemed it “constitutionally sufficient if Congress clearly delineates the general policy, the public agency which is to apply it, and the boundaries of this delegated authority.”
  

What the Constitution Says

The Apportionment Clause

(Article I; Section 2; Clause 3)

Representatives and direct Taxes shall be apportioned among the several States which may be included within this Union, according to their respective Numbers, which shall be determined by adding to the whole Number of free Persons, including those bound to Service for a Term of Years, and excluding Indians not taxed, three fifths of all other Persons. (modified by Amendment 14, Section 2)  The actual Enumeration shall be made within three Years after the first Meeting of the Congress of the United States, and within every subsequent Term of ten Years, in such Manner as they shall by Law direct.