Judicial Taxation


Mr. Chairman, distinguished members of the subcommittee:

My name is Roger Pilon. I am a senior fellow at the CatoInstitute and the director of Cato's Center for ConstitutionalStudies.

I want to thank Chairman Grassley for inviting me to testify onS. 1817, the "Fairness in Judicial Taxation Act of 1996.11Unfortunately, because the subcommittee's invitation was tenderedonly yesterday, I have not had time to prepare the kind ofstatement I would like to have prepared. Nevertheless, I am pleasedto share such thoughts as I have on the problem that is before thesubcommittee in the hope that I may thereby aid the members inaddressing that problem.

There can be no question that "judicial taxation," asCongressman Manzullo called it in his earlier testimony, is a veryreal and a very troubling problem, both from a practical and from aconstitutional perspective. Under our Constitution, judges do nothave the power to tax. When they are seen to be taxing, citizenscome to feel--owing to the non-responsible, lifetime tenure of thefederal judiciary--that they have lost control of theirgovernment.

In his own testimony, Mr. Neblock of the Rockford, Illinois,School Board has given the subcommittee some sense of that feeling.His is a compelling account of the devastation that takes hold in acommunity when its public school system is effectively taken overby the federal judiciary in the course of imposing a far-reachingdesegregation scheme. Perhaps the most famous--or infamous--exampleof this process is the effort to desegregate the Kansas City,Missouri, School District, which has been before the federal courtsfor nearly 20 years now, and before the United States Supreme Courtthree times.

At the same time, even those who are deeply troubled by judicialtaxation seem reluctant to ban it. Thus, Congressman Manzullo,pointing to the need for judicial enforcement of municipalcontracts and public bond issues, concludes that "an outright bansimply would not work."

Thus, the alternative he and others are proposing is in the formof the bill that is before this subcommittee, "which would requirethat six criteria be met before a federal judge can issue an order,or agree to a settlement, that would have the effect of raisingtaxes." Those six criteria, in a nutshell, would restrain theremedial power of federal judges and might, depending on the factsin a given case, preclude its exercise.

With all due respect, and in complete sympathy concerning theproblem before the subcommittee, I believe this approach to befundamentally mistaken--not least because it gives credence to theidea that "judicial taxation" is in any way legitimate. That pointshould not be surrendered to those who for years have promoted thevast remedial powers of the judiciary that have brought this issueto a head. Yet by conceding the power, then seeking to limit it,this bill compounds one error with another. Bad enough that thejudiciary wants to micromanage the original problem; now Congresswants to micromanage the judiciary. It won't work--for the samereasons that judicial micromanagement does not work. And it islikely as well to be found to be an unconstitutional intrusion onthe power of the judiciary.

Just as hard cases make bad law--as the case of desegregationhas done--so too such cases can make bad legislation--as seems tobe the case here. Let me try to illuminate my conclusion by workingmy way up from easy cases, then turn to the problem before thesubcommittee.

There is no question, of course, that courts, including federalcourts, have remedial powers. And in some cases, those powers may"lead to" or "have the effect of" increasing taxation. But that isnot tantamount to having a power to tax. Nor is the distinctionmerely semantic.

The remedial power of a court, in its barest essence, amounts tothe power to right wrongs, insofar as possible, by orderingwrongdoers to do what is necessary to make their victims whole.Thus, while courts have no power to tax, they have the power toorder both private and public individuals and institutions to rightthe wrongs they cause, even if additional taxation may result in agiven case. In such a case, the court has no authority, strictlyspeaking, to order the means. It may order only the end, which apublic entity may satisfy--in the case of money damages--throughmeans as various as incurring debt, shifting resources, reducingcosts, or increasing taxes. It is no proper business of the courtto make that call regarding means. If it were, the court would soonbe in the business of running the public entity.

Unfortunately, courts too often today are in just such abusiness. Before considering that situation, however, let us take asimple, straightforward application of the basic principles, anapplication not often thought to fall under them involving a FifthAmendment takings case. If a public entity, in pursuit of somepublic end, commits the "wrong" of taking someone'sproperty-albeit, permitted under the Fifth Amendment--it may benecessary for a court to order just compensation --pursuant to theamendment's Just Compensation Clause--by way of remedy for thatwrong. That is not tantamount to ordering taxation, however, evenif additional taxation results from the order. Nor is the TakingsClause authority for the court to tell the public entity just howit must satisfy the court's order. That is the business of theentity. What the court can say--and does say by implication--isthat if the compensation is not paid, the taking, and hence the endit serves, cannot go forward.

But those principles apply in the more common remedial case aswell, where the public entity cannot simply walk away from itspublic project--as with the takings example--but must instead bemade to remedy some tortious or contractual wrong the entity hascommitted. In such a case, additional taxation may be required tosatisfy a particularly large judgment.. Yet no one would say that acourt that had ordered such a judgment had ordered a tax increase;for again, the means are matters for the public entity todetermine.

There are other contexts, however, in which the issues ofjudicial taxation and judicial micromanagement do seem to arise,yet on closer examination, they need not. Consider the managementof public prisons, which is paradigmatically a state or executivebranch function, yet today is sometimes done by over-zealouscourts. Here too the principles articulated above apply, even ifthe application is sometimes more difficult, and oftenconfusing.

What contributes to the confusion is this: the wrong to beremedied in the prison context is not ordinarily remedied by moneydamages; rather, the wrong arises from ongoing prison conditions,which need to be changed--which in turn leads to the charges ofjudicial taxation and micromanagement. Notwithstanding suchcharges, the analysis begins with a simple but important premise,namely, that prisoners do not loose all their rights upon enteringprison. While it is in large part up to the legislative branch todetermine just what rights are and are not retained, thatdetermination is not entirely up to the legislature; for implicitin the Fifth and Eighth Amendments is a requirement that punishmentfit the crime--that the remedy imposed on the criminal remedy thewrong by being proportional to that wrong. When the punishment,under certain prison conditions, exceeds the wrong to be remedied,a new wrong arises--this time to the prisoner--which needs to beremedied.

When prison conditions mean that a one-year sentence may beequivalent to a death sentence, courts have authority to remedysuch wrongs. Properly, of course, that should be the business ofthe political branches to do, but when they fail to do it, thecourt has authority to hear complaints and, if appropriate, orderremedies. Adjudicating those complaints will involve the court inassessing prison conditions, of course, and so will tempt the courtto try, by way of remedy, to micromanage those conditions. Thattemptation should be resisted, for it is no business of the courtto run a prison, even if the court may properly pass judgment onthe conditions before it. And the temptation will be present aswell to pass judgment not only on egregious complaints but ontrivial complaints too, which too often happens. Still, howevermuch courts may abuse their authority--and I expect the abuse israther overstated--the authority is there, failing which thepremise would have no force at al--, and prisoners would haverecourse only to political remedies, which in the nature of thecase would be all but non-existent.

Once again, however, in ordering prison conditions to bechanged, the court cannot order the public entity to raise taxes.The means for righting the wrong are properly left to the publicentity to determine, which may range from raising taxes to shiftingresources to reducing prison overcrowding (if that is the wrong)through early or selective releases. Does that mean that the publicmight be endangered in the name of protecting the rights ofprisoners? Yes it does. But one of the basic principles of a freesociety is that government may not secure rights by violatingrights--otherwise a police state could be justified. That principleapplies in general--as in the case of the Fourth Amendmentprotection against unreasonable searches and seizures-and itapplies in more narrow cases such as this.

When we apply the principles before us to the case before thesubcommittee, however, we start to see the problem. In each of theexamples just discussed, there were individually identifiablevictims of some wrong, some public entity that caused the wrong,and a remedy aimed at righting the wrong. Typical court-orderedpublic school desegregation plans, however, are entirely different.They proceed from the wrong of de jure segregation, which is a formof discrimination or exclusion from public benefits that others arereceiving or are receiving to a greater extent than are the victimsof the segregation. To be sure, that wrong has individuallyidentifiable victims--all those who were so excluded--andindividually identifiable wrongdoers- the members of the public whoultimately authorized the exclusion. But the typical public schooldesegregation remedy--unlike ordinary remedies--looks hardly at allto those parties. Instead, it looks to what might be called "futureparties"--parties that are neither victims nor wrongdoers. In fact,the remedy has little to do with past victims or past wrongdoers,for it is a "remedy" only Ln the sense that it seeks to end, notrectify, the wrong.

That raises profound problems, however, for ending the wrong, inthis context, is driven by the idea of equalizing the receipt ofthe public service at issue--education. That "goal" thus takes overthe remedial scheme. No longer is the remedy driven by righting thewrong through making the victim whole but by the goal of equality,which is a much more amorphous idea. Indeed, it is a remedytailor-made for judicial overreaching at its worst. For inequalitycan manifest itself in an Infinite variety of ways, and each ofthose ways is in principle subject to judicial recognition andredress. The court is thus drawn into the infinitely complexbusiness of micromanaging the school.. system toward the goal ofequality--which is never satisfied because it never can besatisfied. It is no accident that the Kansas City system is stillunder court management some 20 years after the court first steppedin. Rockford's system will be under court management for that longand longer too unless something is done about it. But what is to bedone?

A ban or restraints on "judicial taxation" will not solve theproblem, not least because whether a given court order "requires" atax increase--the language of the present bill--is itself apolitical question that no court could determine before issuing anorder. Where the problem lies, rather, is in the remedial approachthe court has taken. Rather than simply end public discriminationand compensate its victims, to the extent possible, courts, drivenby modern egalitarian theories, have taken it upon themselves tobring about "equality." The Equal Protection Clause of theConstitution requires no such result even if we did know what itmeant, which we don't. If the Congress were to fashion a systematicremedial scheme for remedying past discrimination, much as itfashions such schemes in the criminal law area, it would go fartoward giving guidance to the courts in this area. In the end, wedo not need congressional micromanagement to check judicialmicromanagement. We need rather to get back to basics.

Roger Pilon

Subcommittee on Administrative Oversight and the Courts
Committee on the Judiciary
United States Senate