In Hammer v. Dagenhart (1918), the Supreme Court invalidated the federal Keating-Owen Child Labor Act, which had forbidden the shipment of goods made by child labor in interstate commerce, on the grounds that this ostensible regulation of commerce was really a regulation of production in violation of the Tenth Amendment. In reaction, Congress enacted the present law, which imposed a 10 percent tax on goods made by child labor. The validity of this tax was contested in Bailey v. Drexel Furniture Company in 1922.
Speaking for the Court, Chief Justice William Howard Taft found that the present law, like its predecessor invalidated in Hammer v. Dagenhart, extended federal powers too far and invaded the powers reserved to the states by the Tenth Amendment. The fact that it was called a tax rather than a regulation could not save it. “To give such magic to the word tax,” Taft wrote, would extend federal power beyond its constitutional limits and would threaten “the sovereignty of the states.”
Joseph R. Long, “Federal Police Regulation by Taxation,” Virginia Law Review, 9, No. 2 (1922-1923): 81-97; Walter I. Trattner, “The First Federal Child Labor Law (1916),” Social Science Quarterly 50, no. 3 (1969): 507–24; and Stephen B. Wood, Constitutional Politics in the Progressive Era: Child Labor and the Law (Chicago: University of Chicago Press, 1968)