Processing taxes, as the term was used in the United States, were taxes levied upon any of certain basic agricultural commodities such as cotton or tobacco, but which were assessed exclusively against the processor of such commodities, that is, against the agents who changed the raw material into a marketable commodity.
Under the United States Agricultural Adjustment Act, a processing tax was enacted during May 1933, which in effect taxed the consumer of certain foods for the purpose of raising money with which to control the farmer's output and thus insure a permanently high price level for those commodities. By August 1935, 1,112 suits had arisen attacking the constitutionality of this tax. When the tax came before the Supreme Court, Jan. 6, 1936, in the Hoosac Mills Case, the Court held the tax unconstitutional by a majority of six votes to three, Justices Stone, Cardozo, and Brandeis dissenting. On Jan. 13, 1936, the Supreme Court ordered the return to the processors of $200,000,000 of processing taxes impounded since Jan. 5, of that year. These taxes were then paid into the hands of the courts.
The United States Government had already, however, collected $951,000,000 in processing taxes. To save at least a great part of this levy, the United States Government then enacted what was known as a 'windfall tax' based upon the theory that the processing levy had already been passed on to the consumer by the processors and that therefore the processor would enjoy 'unjust enrichment,' should he also receive back his original tax. The constitutionality of this 'windfall tax' is at the present time being debated before the courts.
On June 16, 1938, however, Congress in a $270,000,000 Deficiency Bill, appropriated $50,000,000 for the repayment of processing taxes.
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