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5 J. S. Legal Hist. 1 (1997)
Federal Police Power by Taxation: McCray v. United States and the Oleomargarine Tax of 1902

handle is hein.journals/jslh5 and id is 11 raw text is: ARTICLES Federal Police Power by Taxation: McCray v. United States and the Oleomargarine Tax of 1902 BY HERBERT F. MARGULIES * A cting at the behest of dairymen, in 1902 Congress amend- ed an 1886 law and raised the tax on colored oleomarga- rine from two cents to ten cents per pound. Uncolored oleomar- garine was taxed at one-quarter of a cent per pound. Without the tax, colored oleomargarine, which resembled butter in appearance, texture and taste, was cheaper than butter. With the new tax, butter was normally cheaper. If the law succeeded in its obvious purpose, federal revenue would increase little or not at all, as consumers would drastically curtail their buying of colored oleomargarine. Thus, Congress exercised its tax power not for the ordinary purpose of raising revenue, but for an ulterior, regulatory purpose. Similar efforts in the late nineteenth century had twice been struck down by the Supreme Court.' To be sure, the protective tariff, including prohibitively high duties calculated to raise little or no revenue, had gone unchallenged in the post-Civil War era. The Supreme Court had also sustained a law placing a ten percent tax on state bank notes, levied in 1866 to prevent further issuance of such notes. In its 1869 opinion, however, the Court upheld the law on the basis that Congress, in using a tax to effect its purpose, had done indirectly what it might have done directly, under its currency power.' That reasoning did not apply with respect to the prohibitive tax on colored oleomargarine. Thus, Congress was breaking new ground in 1902; it was using the tax power as a means to implement a federal police power, which to that point had belonged almost exclusively to the states. The regulatory * Emeritus Professor of History, University of Hawaii-Manoa. University of Wisconsin at Madison (Ph. D., 1955).

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