Taxation and Orwell's Animal Farm

 Indianapolis constructed sanitary sewers for a neighborhood and financed the project by a tax assessment of some $9,300 on each benefited parcel.  Owners could pay in one lump sum, or make monthly payments over 10, 20, or 30 years.  Several years later the city decided to use a different financing method -- issuance of bonds -- to pay for the improvements.  As part of this shift, the city forgave the unpaid installments, but refused to refund any part of the upfront payments made by some 38 owners.  In Armour v, City of Indianapolis the Supreme Court ruled that equal protection was not violated by the city's decision to treat these taxpayers unequally.  Why?  Because it was rationally related to the city's legitimate objective of avoiding administrative inconvenience.  What was the inconvenience?  The city would have had to continue to collect installment payments over the next 20 years or so.  Or, if the city chose not to do so, it would have to compute how much of a refund was due to upfront payers in this project as well as similar such projects.  But the city had already made that computation and it was a part of the record, so all it would have had to do was write and mail the checks.   The final "inconvenience" would have been to refund a total of about $300,000 out of a total annual budget of $900 million. 

But that's not all.  Indiana law requires that assessments of the type initially imposed be imposed equally, and Allegheny Pittsburgh Coal Co. v. County Commission, 488 U.S. 336 (1989), held that equal protection was violated by a locality's failure to comply with state law that required similar equality of treatment of property taxpayers.  Why the difference here?  The original assessments were equal -- everybody got charged $9,300 -- and Indiana law was silent on the question of refunds.  When the salami is sliced so thin that you can see through it, there's no salami. 

This travesty was authored by Justice Breyer, joined by Justices Kennedy, Ginsburg, Thomas, Sotomayor, and Kagan.  The dissent was written by Chief Justice Roberts, joined by Justices Scalia and Alito.  One might wonder why Justices Kennedy and Thomas joined.  Perhaps they thought that any decision invalidating government action under minimal scrutiny -- a/k/a "rational basis" -- would have a destabilizing effect on equal protection doctrine.  But that's a curious explanation for Justice Kennedy, who had little difficulty doing so in Romer v. Evans.  Justice Thomas's concurrence is more of a head-scratcher; perhaps he thought that striking down government actions as irrational would create precedent that might be used to strike down other government actions under minimal scrutiny.  We won't know; we can only guess.  But what we do know is that under Indiana law all taxpayers are equal, but under the equal protection clause some taxpayers are more equal than others.  Orwell would relish the result. 

Comments

[Jon__Wood]

Thomas' concurrence can likely be explained by his concurrence in Nordlinger v. Hahn, 505 U.S. 1 (1992), rejecting Allegheny-Pittsburgh.

[Calvin Massey]

The Thomas concurrence in Nordlinger explains why he would reject Allegheny Pittsburgh, but it doesn't fully explain why he would accept as rational the avoidance of the minuscule administrative burden of writing checks to identified taxpayers in specific amounts. That amounts to an incredibly deferential standard of rationality, but it's one that the Court hardly applies consistently.

[James Grimmelmann]

Possession is nine points in the law.

(I'm not defending the Court's decision, or attacking it, just noting how strong an intuitive pull possession exerts in shaping legal entitlements.)

[Larry Catá Backer]

Point well made. But not surprising given the development of legal cultures about the legal effect of the promises of large institutions in this country. A state can seek payment today from people who then accept the risk that tomorrow others may not have to pay to receive the same benefit; an employee may agree to provide labor today for a promise of future benefit knowing that tomorrow that benefit may disappear after labor has been provided. So, after reading the opinion the first thing I thought of was not government but collective bargaining contracts for benefits and wages. It is clear that the courts have come to understand that a company can induce action today on the promise of payment today (wages) and a benefit (pensions or health care, for example) tomorrow. But the company is obligated only to pay what is due and may avoid future payment (for example through bankruptcy and future bargaining). This is not to suggest a direct analogy, only a pattern of thinking from the private sector that may have some resonance here. Like a company (but in reverse perhaps) the government may keep what it collects but may bargain away its right to collect what is not yet due, even if the service has been rendered and the result is uneven. There is a lesson here for both homeowners and labor--for homeowners it is avoid paying now if there is an opportunity to pay later and for labor it is avoid acceptance of payment in the future for services performed in the present. In other cases, what is clear is clear is that there is a lower moral value on promises. As a consequence, the case promises a nice point for future empirical work--will landowners now act rationally in the face of this new set of financial risks in relations with the state.