Tax Equal Protection
Armour v. City of Indianapolis, 132 S. Ct. 2073 (2012) ruled that a city did not violate the Equal Protection Clause of the Fourteenth Amendment when it chose to forgive remaining unpaid installments of a special assessment for sewage improvements but not to refund those taxpayers who had paid in full without choosing to pay in installments.
The Chief Justice and Justices Alito and Scalia dissented. Therefore, the “liberal” Justices plus Justice Thomas ruled in favor of maximum discretion for the taxing authority, and three fourths of the “conservative” Justices would have ruled in favor of less discretion for the taxing authority. The case can be viewed as the most recent in a three part set with Allegheny Pittsburgh Coal Co. v. County Com., 488 U.S. 336 (1989) and Nordlinger v. Hahn, 505 U.S. 1 (1992). Chief Justice Rehnquist wrote a unanimous opinion in Allegheny ruling for the taxpayer; John G. Roberts, Jr. was one of the attorneys for the taxpayer. Nordlinger was a split decision for the tax collector. The Howard Jarvis Taxpayers Association filed a brief on the side of the tax collector because the tax collector in Nordlinger defended California Proposition 13, which instituted the “welcome stranger” method of taxing recently purchased homes more heavily than long held homes.
The political dynamics of the opinions are somewhat conflicting but fairly clear. On one hand, the last two opinions stand for the proposition that governments have maximum flexibility in making taxing distinctions, normally a liberal position. On the other hand, Nordlinger upheld the California tax initiative that effectively started what its proponents have tried to cast as a “taxpayer revolt,” which ultimately lead to the no-tax-increase pledge promoted by Americans for Tax Reform.
As a matter of legal reasoning the cases purport to come down to what distinctions in taxation are rational for equal protection purposes. The majority opinion in the new decision stated these decisional principles, which are not really in dispute:
- The taxing distinction must have a rational relationship to a legitimate governmental purpose.
- The government need not articulate the purpose.
- Rationality means the legitimate government purpose is plausibly served by the distinction.
- When the distinction affects a fundamental right or is based on a suspect classification, stricter scrutiny will be applied.
- Subject matters that are local (in the case of state and local legislation), economic, social, commercial or taxation generally do not require such strict scrutiny.
- When strict scrutiny is not applied, deference is accorded to the legislature, and even more deference is accorded in tax cases.
- Therefore, absent strict scrutiny a distinction will be presumed to rationally advance some legitimate purpose unless the complaining party carries the burden of proving otherwise, which requires disproving every conceivable basis for the distinction. Since the government need not articulate its purpose, this process of proof entails hypothesizing purposes and disproving them.