Supreme Court Strikes Down Federal Child Labor Tax as Unconstitutional

The Supreme Court rules 8-1 in Bailey v. Drexel Furniture Co. (the Child Labor Tax Case) that the Revenue Act of 1919, which imposed a 10 percent excise tax on profits of companies employing children under age 14, violates the Tenth Amendment. Chief Justice William Howard Taft declares the tax unconstitutional because it constitutes a disguised criminal penalty rather than a legitimate tax, and represents an impermissible federal attempt to regulate child labor—a power reserved exclusively to the states. The case arises when Drexel Furniture Company, a North Carolina manufacturer, challenges a $6,312.79 tax assessment for employing one boy under fourteen during the 1919 tax year.

This decision follows the Court’s 1918 ruling in Hammer v. Dagenhart, which struck down the Keating-Owen Child Labor Act that banned interstate shipment of goods made with child labor. Congress had enacted the 1919 tax law as an alternative approach to accomplish the same protective purpose after the first law was invalidated. By rejecting both the commerce clause and taxing power approaches, the Supreme Court effectively blocks any federal regulation of child labor for two decades. Congress responds by proposing a constitutional amendment to explicitly grant the federal government power to regulate child labor, but the amendment fails to achieve ratification by enough states.

The Bailey decision exemplifies judicial capture in service of corporate interests during the 1920s, as the Court prioritizes states’ rights doctrine and narrow interpretations of federal power over the welfare of working children. The ruling leaves child labor regulation to individual states, many of which maintain minimal protections due to pressure from manufacturing interests seeking competitive advantage through cheap labor. Federal power to regulate child labor is not established until the Fair Labor Standards Act of 1938, which the Supreme Court finally upholds in United States v. Darby Lumber Co. (1941), nearly two decades after Bailey and after millions of children spent additional years in dangerous industrial employment.