Taxing Power/Direct and Indirect
What are the two lines of thinking as it relates to the Taxing Power
Direct and Indirect Tax
Only direct taxes (ex. income tax) must be apportioned in accordance with the census. Indirect taxes (ex. spending on goods and services) must be uniform throughout the united states
Articulated in Lopez, what are the three forms of activity that is regulated under the commerce clause?
1. Channels of Interstate Commerce (roadways, highways, waterways, Internet, etc.)
2. Instrumentalities (people, things going across state lines)
3. Substantial Effect of Interstate Commerce (Economic Activity v. Non Economic Activity)
What is the scope of Congress's spending power?
Congress can spend whatever they want as long as it is for the general welfare. Artcile I sec. 8 gives congress the broad ability to spend for the general welfare
Taxing Power
The majority opinion upholds the individual mandate under the taxing power. Justified because states have a lawful choice that they can make.
-Labeling it a "penalty" doesn't take away Congress' power.
-Concurring opinion: Agrees with majority reasoning.
-Dissent: Exceeds federal power. This is an unlawful "penalty"
What are the 3 elements of Standing? Are generalized grievances allowed? Third Party Standing?
Plaintiff has suffered (1) concrete injury in fact, (2) caused by the defendant (Causation); (3) that is redressible by the court
P must NOT be suing as a citizen or taxpayer interested in having the government follow the law. Additionally, P can only sue to protect his own rights, NOT those of a 3rd party. EXCEPT if P meets all requirements (injury, causation, redressible) AND a) special or close relationship -dr/patient, parent/child; or b) injured party is unlikely to be able to assert his own rights
Hylton v. United States
What was the issue: May Congress impose a tax on carriages kept for private use if the tax doesn't comply with the constitutions appointment powers
Holding: Yes, a tax on carriages kept for private use is an indirect tax that isn't subject to the apportionment requirement
Apportioned tax would create inequalities in tax burdens between states. If tax cannot be apportioned then it is not a direct tax
Compare Raich (Weed) v. Wickard (Wheat) Bonus Question: What is the general rule for both?
Both cases involved cultivating for home consumption a fungible commodity for which there established interstate market. Both statutes, the AAA (Wickard) and CSA (Raich) had the goal to control the supply and demand of fungible commodities in the market
Homegrown commodity intended for personal use is indistinguishable from other commodities and therefore may enter the market and would frustrate the purpose of the comprehensive regulation.
Finish this sentence: "The Congress shall have the power to lay and collect taxes, duties, imposts and excises to pay the debts and provide for the common defense and general welfare: but..."
How does NFIV tie into the commerce clause?
NFIB ties into category #3 - the regulation of economic activity v. non economic activity. The power to regulate local economic activities was found by a majority of the court not to extend to the regulation of inactivity even if the inactivity has a substantial economic effect on interstate commerce
In this case, regulating the behavior of people who have chosen not to buy health insurance by requiring that they either buy or make payment to the IRS
What is Mootness? What are the exceptions?
A live controversy must exist at ALL stages of litigation. If the matter has already been resolved, te case will be dismissed as moot. Example: party dies, event occur or lapse, change in law
EXCEPTION: 1) capable of repetition but evading review (roe v. wade, pregnancy); 2) Voluntary cessation; 3) class action suits (as long as one member of the class has ongoing injury)
What is the rule of apportionment?
Article I, section 2&9. Direct taxes must be apportioned among the states according to population.
Chase said if it leads to unfair results then it is not fair to be apportioned; better approach is to consider the carriage tax as an indirect tax on the owner's expense for a consumable commodity -- which the rule of apportionment did not apply
Can Congress regulate a "class of activities"? Bonus Question: What is the case & rule?
As demonstrated by Perez, yes. Congress may regulate a class of activities if the class as a whole affects interstate commerce even if not all members of the class affect interstate commerce.
Case: Perez: Loan sharks who use extortionate means to collect payments on loans are in a class largely controlled by organized crime with a substantially adverse effect on interstate commerce.
What is the four factor test for restricting the spending power?
What case is it found?
As determined in South Dakota v. Dole, the four factors test for restricting the spending power is:
(1) Must promote General Welfare
(2) String must be unambiguous
(3) Must relate to the "Federal interest"
(4) Must not be unconstitutional
Ask: Are they related?
Commerce Clause
Holding: this goes too far under the commerce clause (even further than in Wickard). Sees the individual mandate as NOT involving regulating existing commercial activity, and that they cannot regulate it just because people may engage in transactions in this market in the future.
Concurring: it can and should be justified under the commerce clause, not just the taxing power because of the substantial effect that healthcare has on interstate commerce . Uses a broad reading of the commerce clause (like previously in history- Wickard v. Filburn).
Dissent: Overreach of Congress' power under commerce clause. People cannot be forced to participate in this market.
Elaborate: Concrete Injury, Causation, and Redressbility
Concrete Injury: P must allege and prove that he has been personally injured or imminently will be injured - if seeking injunction or declaratory relief must show a likelihood of future harm
Causation: Must be a causal connection between the injury and the conduct
Redressibility: P must allege and prove that a favorable court ruling is likely to remedy the harm suffered NO ADVISORY OPINION Courts will NOT determine the constitutionality of a statute if it has never been enforced and there is no real threat it will ever be
What case addressed whether a tax is really a tax or a penalty?
Bailey v. Drexel Furniture Co. - the Court ruled the 1919 Child Labor Tax Law unconstitutional as an improper attempt by Congress to penalize employers using child labor. The Court indicated that the tax imposed by the statute was actually a penalty in disguise
What is the "aggregate" approach? What cases is it used in? Under what category?
Category #3: Regulation of local commercial activities
The aggregation approach is not whether an individual instance of the regulated activity affect commerce but whether the regulated in its entirety (adding together the impact of each individual instance of regulated activity) has a substantial economic effect on interstate commerce.
Wickard + Raich
Compare and Contrast NFIB & Dole (Strings v. Spending)
Too coercive = NFIB “Gun to head” – feds ordering the state to expand who the are covering
Not too Coerice/ Relatively mild = Dole
In NFIB v. Sebelius, the decision addressing the constitutionality of the Affordable Care Act, a majority of the Court concluded that the payment to the government required of those who failed to comply with the individual mandate was a "penalty" for one purpose but a "tax" for another purpose. For what purpose was the payment deemed a "penalty"? For what purpose was the payment deemed a "tax"?
It was a "penalty" for purposes of the Anti-Injunction Act and therefore did not preclude judicial review. But it as a "tax" for constitutional purposes and thus properly evaluated under the Court's taxing and spending cases.
Ripeness becomes a potential issue in a case when...
a claimed injury is contingent upon future events. In other words, when all the events necessary to give rise to an injury have not yet happened
Does not depend on the label Congress gives it but rather on its function.
Rule: The fact that congress labels a measure as a penalty does not prevent the measure from being upheld as a valid tax as long as the measure actually functions in a way that resembles a tax (i.e. produces at least some revenue)
What are the key commerce clause cases? SHADOWER CLAP
• Shreveport Rate (attempting to set the rate of the railroad, a section that was within the borders of Texas - instrumentalities): The fed. govt. power to regulate ICC also allows to regulate intrastate commerce where control of the former was not possible without the control of the latter - must show a connection CLOSE AND SUBSTANTIAL CONNECTION
• Hammer v. Dagenhart (congress attempting to regulate childlabor factory) congress does not have control over the production of the commerce goods. "the powers not expressly delegated to the national government are reserved to the states and to the people - REVERSED BY DARBY
• Heart of (A)tlanta Motel (Easy Case, Black people couldn't stay at the hotel): Hotel bringing people across state line = interstate commerce no matter if the hotel has private rules since it brings people from out of state/cross state lines and markets/advertises to out of state guest
• Darby (Application of wage and hour rules under Federal Fair Labor Standard Act to Lumber manufacturers): "While manufacturing of goods was not interstate commerce, the shipping of those goods across the united states made it interstate commerce (COMPARE WITH HAMMER)
• Ogden (Gibbons v. ogden) - Fairy boats w/ people going between NY and NJ. Rule = Fed. govt. CAN and has EXCLUSIVE power under Article I sec 8 to regulate interstate commerce. This case tells us what interstate commerce is (commercial intercouse between nations and states) and what is is not (completely internal commerce of states, may be considered as reserved for the state itself)
• Wickard v. Filburn (Farmer growing wheat/federal government regulating with an economic purpose) Congress can regulate purely intrastate activity that is not itself "commercial," in that it is not produced for sale, if it concludes that failure to regulate that class of activity would undercut the regulation of the interstate market in that commodity.COMPARE WITH RAICH - AGGREGATION
• E.C. Knight (federal government's attempt to enforce the Sherman Antitrust Act against a sugar manufacturer) Manufacturing is not considered an area that can be regulated by Congress under the commerce clause. The act was constitutional but did not apply to manufacturing
• Raich (weed for personal use, fungible commodity); Holding: It is within their power to regulate homegrown cannabis because it affects the national market for cannabis if enough people grew from home. COMPARE WITH WICKARD
• Champion (Chamption v. Ames - The lottery ticket case! Trafficking lottery tickets constitutes interstate commerce. Congress has the power to regulate interstate traffic is plenary (absolute). The wide discretion, allows congress to regulate traffic as it sees fit, within constitutional limits, even to the extent of prohibiting goods. SEE EC KNIGHT
• Lopez (Regulating Activity v. Non-Activity) The possession of a gun in a local school zone is not an economic activity that might, through repetition elsewhere, have a substantial effect on interstate commerce. The law is a criminal statute that has nothing to do with "commerce" or any sort of economic activity.
• Alley BBQ (Katzenbach - small local business but the cows didn't always roam in AL) It doesn't matter if it is 99.9% intrastate commerce if one thing is from out of state then it would be considered interstate commerce. COULD ARGUE UNDER AGGEREGATION METHOD
• Perez - Extortionate credit transactions do substantially affect interstate commerce due to the fact that organized crime takes over $350 million a year from America’s poor, The court held that portion of Consumer Credit Protection Act prohibiting ‘loan sharking’ activities is within Congress' power under the commerce clause to control activities affecting interstate commerce.
As it relates to the the condition not being coercive, what was O'connors point of view versus Hamilon.
Hamilton view:
Court is considered about commodering (10th amendment)
The court says it is a mild enouregment
O'connor:
agrees on the test but says its unrelated (Alcohol ≠ highways)
But congress found that young individuals combine their desire to drink with their ability to drive. The main purpose for which the highway funds are expended is the safe interstate travel
Connor says that it is overinclusive, underinclusive, and not a condition of how the money is pent
NFIB v. Sebelius (Spending Power)
• Unconstitutional exercise of spending power
- Federal government can offer additional money with conditions, but it cannot take away pre-existing money
What is an advisory opinion? Are they allowed? What is a political question? Are they allowed?
When the Court decides an issue is a political question, it determines another branch, rather than the federal courts should act in interpreting the constitutional provision, and that the federal courts should refrain from acting. See Marbury v. Madison. They are not allowed .
Advisory opinions are court rulings that do not involve a specific case presented before it; Not allowed.