Spending power is the ability of a government to tax and spend. Under Article I, Section 8, Clause 1 of the Constitution, Congress is granted the power to lay and collect taxes in order “to pay the debts and provide for the common defense and general welfare of the United States.” This is also referred to as the "Taxing and Spending Clause."
In United States v. Butler, 297 U.S. 1 (1936), the Supreme Court clarified that Congress must exercise its power to tax and spend for the “general welfare” of the United States. Through its spending power, Congress can impose conditions on states that must be met in order for the states to qualify for federal funds. In South Dakota v. Dole, 483 U.S. 203 (1987), the Court established a test for such conditions:
- The spending must serve the general welfare.
- The condition placed on the state must be unambiguous.
- The condition must relate to the particular federal program.
- Unconstitutional action cannot be a contingency of receipt of the funds.
- The amount in question cannot be so great that it can be considered coercive to the state’s acceptance of the condition.
See also: congressional power, taxing power, this article on the Power to Tax and Spend, and this article on Spending for the General Welfare.
[Last updated in June of 2024 by the Wex Definitions Team]
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