The Wall Street Journal has a good editorial on Empress Casino v. Giannoulias, an important takings case that is currently before the Supreme Court on a petition for cert. The case involves an extremely blatant effort to tax one small group of firms (four riverboat casinos) for the sole purpose of transferring the money to rival businesses (racetracks). Unfortunately, the Illinois Supreme Court categorically ruled that no "tax" can be a taking requiring compensation under the Fifth Amendment's Takings Clause, even when the tax narrowly targets one specific group of businesses for the purpose of benefiting another. Along with several other property scholars, I helped author an amicus brief urging the Court to hear this important case.
As the Wall Street Journal article points out, the tax in question may have been enacted in part because of corruption on the part of since-impeached Illinois Governor Rod Blagojevich. The case also has important implications for takings law more generally:
Illinois politics seems to be everywhere this year — and now it may be headed to the Supreme Court in the form of a lawsuit brought against the state. The case, which has ties to impeached Illinois Governor Rod Blagojevich, could have an important impact on the definition of a "taking" under the Fifth Amendment — as well as implications for the state's power of taxation.
In Empress Casino v. Giannoulias, the question involves the passage of a state law that took money from four riverboat casinos and gave it to five horse-racing tracks to use as purse money, among other things. According to the Illinois Supreme Court, the action cannot be considered a "taking" because it involved the transfer of money from one party to another, not the confiscation of land, as takings law has traditionally been applied. (The casinos are appealing to the U.S. Supremes, who will consider the certiorari petition soon.)
Property is property, however, whether it's the contents of a bank account, a factory, or a house with a white picket fence. If the Illinois Supreme Court ruling is allowed to stand, it could establish a precedent whereby the government may take money from any successful business to prop up a failing one. That means, in theory, the government could pass a law to take money from the successful dry cleaner on Main Street to subsidize the lousy one around the corner — or from Barnes and Noble to subsidize the corner bookshop.
Broadly levied, wealth redistribution for public purpose has already been ruled Constitutional by the Supreme Court in the case of the income tax. Writ small, as it is in Empress Casino, it's a tool that might be wielded against unpopular industries and used by politicians to kiss up to favorite constituents. Think revenge of the aldermen.
This is close to the way things were working in Illinois under Mr. Blagojevich's leadership. The bill authorizing the transfer of money from the four riverboat casinos to the horse-racing industry came in the context of more than $340,000 in contributions by Balmoral and Maywood race track owner John Johnston and other associates to the Friends of Blagojevich between 2002 and 2007. Among the evidence in the Governor's impeachment trial were transcripts of Mr. Blagojevich and his brother Rob discussing some $100,000 in contributions as a quid pro quo for the legislation to benefit the racing industry.
Related Posts (on one page):
- George Will on the Empress Casino Takings Case:
- Wall Street Journal Editorial on the Empress Casino Takings Case:
- Takings Clause (with Parochial Link to Two of the Volokh Conspirators):
Isn't this the way things normally work?
Isn't this the way things normally work?
It's one thing to have a broad-based tax that is then used to support an entire industry or to help the poor. It's another thing to have an extremely narrowly targeted tax that benefits one small group of firms at the expense of another. The latter is, in practical terms, little different from a taking of of property rights, and should therefore be compensated under the Fifth Amendment.
That's true. But without the governor's participation, the legislature might well not have passed the law. The governor's lobbying was likely an essential element in the process. That's not to say that the legislators are blameless, but neither I nor the WSJ editorial claims that they were.
Actually I take my first statement back. It is the "accomplishment" of the legislative, executive AND judicial branches together, as Illinois Supreme Court has already let the law stand. The author seems to think readers would not agree with him if he says all three branches are in error, as opposed to a convenient scapegoat. Your comment lacks the same air, so my criticism is only for WSJ article.
It seems that courts in the US are easily confused by the labels legislators slap on bills. Presumably a levy of $100/day payable to the State of Illinois by anyone who declines to volunteer to house US troops in their house would also be a constitutional "tax"?
the tax in question may have been enacted in part because of corruption
This likely describes a sizable amount of the taxes in Illinois. How much of Cook County's sales taxes go toward bribing people to get out the vote for Daley, Stroger, and the rest of the machine by giving them jobs that involve standing around and not doing anything? Or giving them jobs they're not qualified for where they accidentally run over their co-workers?
In light of the horse racing matter, it seems germane to note that, IIRC, Gov-turned-prisoner Otto Kerner was found out about when a track owner claimed a bribe as a deductible business expense.
Their premise is that a narrow tax, applicable to not very many companies, can be a "takings" rather than a tax. However, the law, as written, applies to any casinos that generate over a certain amount of revenue. It does not single them out by name. Thus, in the future, the law could apply to a much larger number, or a small number, of businesses, but the law is neutral on its face about who is subject to the tax.
How narrow of a tax is "too narrow" for it to be converted into a takings? I don't see a principled way to make that distinction. For example, there are only 3 domestic automakers, and a handfull of foreign car companies that make cars in the USA. What if Congress imposed a tax on all domestically manufactured vehicles, to fund an car crash victim's compensation fund? Would that be a "takings" and not a tax? Why not?
If your objection is that the purpose of the tax --funding race tracks--is invalid, I would have more sympathy. One can argue that funding horse rack tracks is not a valid public purpose. But that is not the argument you are making.
And, I doubt the framers of the Fifth Amendment had this concept in mind when they wrote it, and I did not see any evidence of such a construction in your brief.
In short, why isn't this an instance of conservative activitists attempting to distort a constitutional right to advance their own, anti-tax, agenda?
Indeed, if I were to be a bit wistful about this, this sort of shows the lost opportunity of the Lochner era. The Lochner era court was more aggressive at striking down rent-seeking legislation than current courts. Unfortunately, the Lochner court also infamously struck down some laws that sought to protect workers, on the specious ground that protecting workers impinged on their liberty to enter into exploitative contracts. And that resulted in the Court eventually throwing the baby out with the bathwater.
But rent-seeking is the perfect target of economic due process doctrine. The point of the due process clause is to ensure fundamental fairness in government procedures. Freezing qualified people out of professions, taking from businesses with less political connections to give to those with more, etc., are all deep-seated violations of fundamental fairness.
If Lochner-style scrutiny of economic regulations is ever restored, it will be because of these sorts of cases. But there is a long way to go.
This would leave the way open for the Illinois government to slap a 3% tax on casinos with the funds being paid to the Illinois treasury. The Illinois government could then at the same time give tax funds to racetracks or whoever else is buying Illinois politicians (they're cheap). Neither of two two nominally separate acts (taxing a particular industry on a progressive basis, and giving money to another industry) is going to be struck down now or in the near future.
Is there some reason to believe that the Illinois government would have a more difficult time getting this passed as a "tax and spend" rather than the "transfer of funds" that it currently is? Or some other reason to believe that winning the case would result in a better state of affairs instead of just shifting around how the legislature does things?
This likely describes a sizable amount of the taxes in Illinois. How much of Cook County's sales taxes go toward bribing people to get out the vote for Daley, Stroger, and the rest of the machine by giving them jobs that involve standing around and not doing anything? Or giving them jobs they're not qualified for where they accidentally run over their co-workers?"
Did you leave out part of your comment, Calderon?
I see nothing pointless or sarcastic about your comment.
Christopher Cooke raises an interesting question followed up with a number of examples as to the degree of difficulty attaching as burden on any intelligently formulated (or even any intelligible)answer.
However, it seems to me that courts grapple with this kind of question much, if not all, of the time. And in the case of reference there exist certain logical principles to inform, if not guide, the analysis once the fog of existing Fifth Amendment case law (and/or precedent, and/or doctrinal exegesis incident)is purged such that a rule might be fashioned ex-nihilo/ex-cathedra.
In this connection, let us presume that the powers of government (viz.to tax, to seize with or without compensation, to do other things) are, implicitly and explicitly limited by either foundational document or by reference to some principle or set of principles sufficiently impelling (and/or stabilized/settled) to bind a general legal consensus over and across different periods and/or eras - i.e. sufficient to withstand the test(s) of time. [Should the language used here seem (or appear to be) overly vague and allusive, it may do well to remember - where it comes to the issue of the ability of courts to engage the analytic problem of what constitutes a "taking" in a context where a government undertakes to tax one specific line of business in order to directly transfer the proceeds of that in favor of another type of enterprise - that constitutional formulations concerning "penumbras formed of emanations" and "rights implicit in ordered liberty" retain some currency (and notwithstanding what cans of worms they open up) over the history of constitutional jurisprudence.]
From here, the next logical, in all probability the next ineluctable, question would not be hard to arrive at: What tax or taxing mechanism by which the government, acting as pure middleman/collection agent, solely for the purposes of directly transferring the yield of the tax (or policy) from a disfavored (but technically not proscribed) line of commerce to a "preferred" economic activity (viz. one to be directly subsidized by public policy)would be most inimical - would most affront - both notional fairness and the bounds
government fiat.
From here Empress Casino, becomes a fairly easy case to analyze. Result: the policy in question ought to fail on constitutional grounds because it interferes with the exercise of all notions of economic freedom consistent with and integral to property rights as a check on the arbitrary powers of the state to confiscate wealth authorially, or whimsically.
2. Which "narrowness" element is the critical one --
a. the narrowness of the tax
b. the narrowness of the use
c. Do both elements have to be present for the claim to apply?
3. Is the "narrow use" element any different from the argument the Supreme Court rejected in Kelo? Is the "narrow tax" element the really new one here?
4. Taxing authorities grant special tax breaks to individual companies all the time. If narrow taxes are unconstitutional, would that make narrow tax breaks unconstitutional? And vice versa: if we consider the constitutionality of individualized tax breaks established, wouldn't this tend to suggest narrow taxes are constitutional?
An earlier law gave preferential treatment to the casinos, and gave part of those proceeds to the track purses. Note, this money is not only for the tracks. It is split between the tracks and horse owners, with some money also going to horse breeders. This benefits the agricultural economy of the state.
Through no fault of the horse industry, those proceeds never happened. The casinos, however, have made millions, at least partially at the expense of the horse industry. That is why the first 3 percent law, which is now awaiting Supreme Court review, was passed.
The law signed by Gov. Blagovich and referred to on tape is a second 3 percent law that extends the first one (which was only for two years). The legislators knew the casinos were still fighting the first law, but this second law passed overwhelmingly.
The Supreme Court traditionally leaves gambling matters to the states.
Millions are raised for some important races downstate; especially when big class-action lawsuits in Madison county (why Madison county? that's where the juries are known to pay out so plaintiffs firms choose it) are pending on appeal.
We can focus on the corruption of governors, the legislature in general and this particular tax; or we can focus on WHO the IL supreme court works for.
And for that, one would have to look to the donors. Funny, the same names appear on the donor rolls for the Court as they do for Blago or anyone else. In any event, I have no comment on the merits of the tax as its way outside my expertise.
I just don't want people to get disillusioned and think the 'IL Supreme Court' was somehow removed from the rest of the cesspool which is partisan politics in IL.
If bad facts make for bad law... what do bad facts AND a thoroughly corrupt system make?
In Illinois? "Daily life"
In essence the casinos were dragooned into a gambling marketing association, and the proceeds of their dues were diverted to horse racing purses.
I've always disliked mandatory growers co-operatives, here is just another way the concept can be misused.
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