Category Archives: The Power to Tax and Spend

Powers ch 8, Short Course ch 8

The Power to Tax….

With all the attention being paid to the federal budget and the sequester, tax policy has come under scrutiny.  One issue that briefly received attention was the possibility that Congress would end the federal income tax deduction for the state income tax.  The New York Times and NPR commented on the impact of such a change in policy.[1]  In brief, the repeal of the deduction would not only reverse a tax policy that has existed as long as the federal income tax, but would impose greater burdens on residents in states with high income tax rates.  It could be argued that this policy change would threaten state policies that support the needy; it could also weaken state autonomy to determine state policy.

As was noted by both NPR and the Times, the basis of the state income tax deduction is to exempt the portion of individual income that was paid in taxes from being taxed as income—in effect, to avoid double taxation.  States that impose an income tax on its residents find it easier to get acceptance of the taxes since they are exempt.  But the exemption also amounts to a subsidy from the federal government to the states.  What’s more, this subsidy is larger for those states that impose higher taxes to fund programs that provide more support to the needy.  In other words, the subsidy is greatest for those states that believe in the effectiveness of a strong government. [2]

The problem is that the state income tax deduction is estimated to cost the federal government about $70 billion a year.  In the search for more sources of revenue, both Congress and the President have suggested that the state income tax exemption could use another look, either by capping federal tax deductions, which would impact more people in high tax states, or by repealing the exemption.

However, repealing or limiting the exemption could increase pressure to reduce state tax rates, limiting the ability of states to fund many state programs.  As the Times argues,

The deduction is Washington’s way of supporting states that support their most vulnerable citizens and neediest cities. The seven states that account for 90 percent of state and local tax deductions (including sales and property taxes) — New York, New Jersey, California, Pennsylvania, Maryland, Illinois and Massachusetts — generally do a better job of providing for the health and welfare of their citizens, and are more willing to pay for institutions that are good for society as a whole.[3]

 

As such, it could be argued that repealing the exemption would have a deleterious effect on the states’ abilities to adopt and shape their policies.  The policy also reflects a “balance between the federal government and the states.”[4]  After all, as the Chief Justice Marshall so famously noted, “the power to tax is the power to destroy.”   So could repeal of the state income tax deduction be challenged as an unconstitutional infringement on the state’s powers and the federal system?


[1] For the stories, see NPR, “Day 8 of 12 Days of Tax Deductions,” http://www.npr.org/2012/12/19/167600157/day-8-of-12-days-of-tax-deductions and New York Times,  “Keep the State Tax Deduction, “ http://www.nytimes.com/2012/12/07/opinion/keep-the-state-tax-deduction.html

[2] To see a nice map of the relative value of the state income tax deduction, see http://taxfoundation.org/blog/monday-map-state-income-and-sales-tax-deductions  accessed 2/28/13

[3] NPR, “Day 8”

[4] New York Times, “Keep the State Tax Deduction”

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The heat is on? A hypothetical

A recent NPR story on efforts to reduce the incidence of heat stroke deaths of young athletes raises interesting issues about federalism and regulation.

As anyone who lives in the South knows, football practices begin in earnest during the summer.  The hot, humid Southern weather and the conditions of practice and workouts (lots of physical exertion, lack of shade, a “macho” environment where it’s expected that the players will endure demands that push them to the edge of physical limits) have led to the deaths of young players from heatstroke.  According to the NPR story, five high school players died of heat stroke last year; more deaths have occurred in previous years.

The deaths have led to research about conditions that will mitigate the threat of heatstroke (for example, practice in a t-shirt and shorts keeps players significantly cooler than practice in uniforms and padding).  It has also led to the formation and adoption of guidelines by the National Athletic Trainers Association (NATA) to help coaches create practices that enable players to adapt to practicing and playing in the heat.  According to the NPR story, “The guidelines require a certain number of days at the beginning of the practice season without full uniforms. They limit the number of two-a-day practices that teams can have. They also recommend having an athletic trainer on site — something fewer than half of high schools do.”  Craig Lemoult, the reporter for the story, further notes that only “nine states have fully adopted the task force guidelines.”[1]  He ends the piece by noting that because the policies guiding high school athletic training policies are governed by state policies, concerned parents who want football practices conducted according to the NATA recommendations must advocate for their adoption in each state.

Given that few states have adopted the guidelines, a committed set of parents could launch a lobbying effort to Congress to get the passage of legislation that would require any state that received federal education funds to adopt the NATA guidelines.  That congressional legislation could require, rather than recommend, an athletic trainer on site.  One could imagine that cash-strapped state schools who don’t have athletic trainers (according to the NPR story, this is less than half of all high schools) might protest the imposition of another cost to their budgets.  If they decided to challenge this legislation, the following questions would be raised:

1)      How could this legislation be justified under the Constitution?  Is it an exercise of the commerce power?  If so, how?

2)      If passed, would the legislation be an imposition of legitimate federal regulation or a coercion on the states?  What factors would affect the answer to this question?


[1] Craig Lemoult, “Heat Guidelines Help Keep Young Athletes Cool,” http://www.npr.org/2012/08/28/160114705/heat-guidelines-help-keep-young-athletes-cool, accessed 8/28/2012.

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Can the justices overturn Pacifica and keep a safe harbor?

On January 10th, the Supreme Court heard oral argument in FCC v. Fox Television Stations (No. 10-1293).[1]  In this case, Fox among others is challenging the agencies fleeting expletives rule; the FCC began enforcing this rule more strictly in 2004.  The rule applies indecency standards and fines for spontaneous use of words normally banned from broadcast.  The FCC began to enforce this standard more stringently after complaints to the agency multiplied in the early 2000’s.  Fox, however, wants more than the fleeting expletives rule struck as arbitrary or infringing on First Amendment rights.  Fox wants the Court to overturn its decision in FCC v. Pacifica Foundation 438 US 726 (1978).[2]  At 28:55 in the oral argument, Justice Alito asked Carter Phillips, representing Fox, “Well, you want us to overrule a decision of this Court, Pacifica?”  Phillips responded with a simple, “Yes, Justice”.

Fox’s contention is that the rationale supporting Pacifica is no longer valid.  The scarcity argument no longer holds since there are a plethora of channels available to all via cable and satellite.[3]  Phillips argued that cable and satellite TV are “equally pervasive” in answer to Justice Alito’s question.  As to the “safe haven or safe harbor” argument, Phillips noted the many channels specifically directed toward children, tweens, and teens, as well as the existence of technological means to block offensive television; so the safe harbor exists with or without Pacifica.  Therefore, there should not be differing standards for broadcast TV and other media.

After listening to the oral argument, the Court seemed dubious of Fox’s argument or at least dubious of voting in favor of Fox.[4]   The justices seemed to lean towards upholding the authority of the FCC here; after all, Justice Scalia stated, “Sign me up as supporting Justice Kennedy’s notion…these are public airwaves, the government is entitled to insist upon a certain modicum of decency”  (23:41). Nonetheless, Fox’s argument that the changes in technology, access, and pervasiveness place the Pacifica holding in jeopardy of becoming anachronistic rings true.  If this is the case, how can the justices maintain the ‘safe harbor’ of broadcast television without using a technologically outdated precedent?

The answer may lie in the fact that the spectrum licenses granted by the government are “worth billions and billions of dollars.”[5]  If the licenses that are freely provided are equivalent to a government grant or expenditure, the Court’s decision in South Dakota v. Dole 483 US 203 (1987) could be the precedent the justices need.  The government does not need an elaborate scheme differentiating between radio, TV, cable, and satellite. This methodology is trapped in one point in technological time, with standards becoming outdated almost overnight.  However, the government is well within its rights and powers to place conditions on the receipt of monies.  If the justices want to maintain a few channels where they are assured that there will be no “f” bombs or nudity, then they may need to move away from the First Amendment jurisprudence and look elsewhere for their justification.  By conceptualizing the issue as a condition of the receipt of federal funds, they can effectively overturn Pacifica without losing the “modicum of decency” they wish to protect.


[3] Although Chief Justice Roberts suggests that this argument “…cuts both ways.”  29:41.

[4] This notion is supported by an analysis of the oral argument by Professor Lyrissa Lidsky (University of Florida Law School); She presented this analysis at the BYU Law Review Symposium on January 27, 2012.

[5] Solicitor General Verrilli at 23:03.

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Filed under Freedom of Speech, Assembly, and Association, The Power to Tax and Spend

Drug testing and welfare payments

The progressive website Think Progress claims that a law enacted in Florida last June is unconstitutional.  The law requires that Floridians receiving public assistance must take a drug test.  If they test positive for illicit drug use, then the recipient of government assistance will not receive payments for a year (or until they sought and received treatment).  After a second positive test, the individual will be barred from receiving benefits under TANF (Temporary Assistance for Needy Families) for three years.  The costs of the tests will be reimbursed to those welfare recipients that are found to be drug-free.[1]

Think Progress and the ACLU claim that the law violates the 4th Amendment.  –They argue that the drug tests amount to  suspicionless searches and thus cannot stand under the precedents of Chandler v. Miller 520 US 305 (1997)[2], Vernonia School District 47 v. Acton 515 US 646 (1995)[3], and Skinner v. Railway Labor Executives Association 489 US 602 (1989).  This string of cases all deal with drug testing in various situations (candidates for state office; students involved in extra-curricular activities; and railway employees involved in accidents, respectively) and set the standard for such searches.  As stated in Skinner:

In limited circumstances, where the privacy interests implicated by the search are minimal, and where an important governmental interest furthered by the intrusion would be placed in jeopardy by a requirement of individualized suspicion, a search may be reasonable despite the absence of such suspicion. 489 US 664

Think Progress links to two lower court cases dealing with ‘similar’ laws.  One is a case very similar to Chandler that struck a law requiring individuals standing for public office to undergo drug testing[4]; this case, and Chandler are readily distinguishable.  The drug testing in these two cases was imposed without any showing of ‘special needs’.  Rather in both instances, the interests were more a general notion of fighting the drug problem.

The other is a case out of the Court of Appeals for the Sixth Circuit.[5] The District Court found that Michigan’s interest did not create a special need under Supreme Court doctrine.[6]  In an en banc decision, the court split evenly on the question of whether Michigan’s law requiring drug testing for welfare eligibility is constitutional; therefore, the district court opinion was upheld.  No opinion was published in this case.

As in the Michigan case, Florida’s interest in adopting their law is to prevent taxpayer monies from supporting illegal drug use; in Michigan, the legislature made a specific connection between drug abuse and the ability to move off welfare.  Based upon this analysis, the claims of Think Progress about the blatant unconstitutionality of the law are hyperbolic, and the question remains open whether such suspicionless searches violate the 4th Amendment.

Florida and Michigan’s laws did remind me of this line of 4th Amendment cases, but it also raises a question of government powers.  TANF is a federal spending program and the monies are distributed at the state level.  Additionally, states have some authority to regulate the receipt of these monies by individuals.  As recipients of the state’s generosity, those applying for assistance must meet several requirements including age, residency, creation of and adherence to a household budget, and transparency regarding all sources of income.  Why is it unreasonable or unconstitutional for Florida to add an additional requirement of a fairly nonintrusive (according to the Court) drug test?  The Court has previously ruled that the power to spend at the national level contains the power to place restrictions on the monies.  In South Dakota v. Dole 483 US 203 (1987), Chief Justice Rehnquist notes that:

[T]he “independent constitutional bar” limitation on the spending power [of the federal government] is not, as petitioner suggests, a prohibition on the indirect achievement of objectives, which Congress is not empowered to achieve directly.  Instead, we think that the language in our earlier opinions stands for the unexceptional proposition that the power may not be used to induce the States to engage in activities that would themselves be unconstitutional.[7]

Equally germane is National Endowment for the Arts v. Finley 524 US 569 (1998).[8]  Here the NEA did not fund several performance artists based upon its reading of the establishing legislation; that legislation has a clause that requires the NEA to consider standards of decency when allocating grants.  Justice O’Connor writing for the Court:

Finally, although the First Amendment certainly has application in the subsidy context, we note that the Government may allocate competitive funding according to criteria that would be impermissible were direct regulation of speech or a criminal penalty at stake.

Is the Florida legislature less empowered to set spending priorities and dictate requirements for funding than the Congress?

Of course, the next line in O’Connor’s opinion is “So long as legislation does not infringe on other constitutionally protected rights, Congress has wide latitude to set spending priorities….”  If these suspicionless searches are indeed within the test set by the Court in Skinner and broadened in Vernonia, and it seems there is at least a reasonable argument that they are given my analysis and the even split in the Sixth Circuit, then states should have the power to impose requirements on the receipt of state assistance of any kind.

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