Judicial Taxation

September 19, 1996 • Testimony

Mr. Chairman, distinguished members of the subcommittee:

My name is Roger Pilon. I am a senior fellow at the Cato Institute and the director of Cato’s Center for Constitutional Studies.

I want to thank Chairman Grassley for inviting me to testify on S. 1817, the “Fairness in Judicial Taxation Act of 1996.11 Unfortunately, because the subcommittee’s invitation was tendered only yesterday, I have not had time to prepare the kind of statement I would like to have prepared. Nevertheless, I am pleased to share such thoughts as I have on the problem that is before the subcommittee in the hope that I may thereby aid the members in addressing that problem.

There can be no question that “judicial taxation,” as Congressman Manzullo called it in his earlier testimony, is a very real and a very troubling problem, both from a practical and from a constitutional perspective. Under our Constitution, judges do not have the power to tax. When they are seen to be taxing, citizens come to feel–owing to the non‐​responsible, lifetime tenure of the federal judiciary–that they have lost control of their government.

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 a community when its public school system is effectively taken over by the federal judiciary in the course of imposing a far‐​reaching desegregation scheme. Perhaps the most famous–or infamous–example of this process is the effort to desegregate the Kansas City, Missouri, School District, which has been before the federal courts for nearly 20 years now, and before the United States Supreme Court three times.

At the same time, even those who are deeply troubled by judicial taxation seem reluctant to ban it. Thus, Congressman Manzullo, pointing to the need for judicial enforcement of municipal contracts and public bond issues, concludes that “an outright ban simply would not work.”

Thus, the alternative he and others are proposing is in the form of the bill that is before this subcommittee, “which would require that six criteria be met before a federal judge can issue an order, or agree to a settlement, that would have the effect of raising taxes.” Those six criteria, in a nutshell, would restrain the remedial power of federal judges and might, depending on the facts in a given case, preclude its exercise.

With all due respect, and in complete sympathy concerning the problem before the subcommittee, I believe this approach to be fundamentally mistaken–not least because it gives credence to the idea that “judicial taxation” is in any way legitimate. That point should not be surrendered to those who for years have promoted the vast remedial powers of the judiciary that have brought this issue to a head. Yet by conceding the power, then seeking to limit it, this bill compounds one error with another. Bad enough that the judiciary wants to micromanage the original problem; now Congress wants to micromanage the judiciary. It won’t work–for the same reasons that judicial micromanagement does not work. And it is likely as well to be found to be an unconstitutional intrusion on the power of the judiciary.

Just as hard cases make bad law–as the case of desegregation has done–so too such cases can make bad legislation–as seems to be the case here. Let me try to illuminate my conclusion by working my way up from easy cases, then turn to the problem before the subcommittee.

There is no question, of course, that courts, including federal courts, have remedial powers. And in some cases, those powers may “lead to” or “have the effect of” increasing taxation. But that is not tantamount to having a power to tax. Nor is the distinction merely semantic.

The remedial power of a court, in its barest essence, amounts to the power to right wrongs, insofar as possible, by ordering wrongdoers to do what is necessary to make their victims whole. Thus, while courts have no power to tax, they have the power to order both private and public individuals and institutions to right the wrongs they cause, even if additional taxation may result in a given case. In such a case, the court has no authority, strictly speaking, to order the means. It may order only the end, which a public entity may satisfy–in the case of money damages–through means as various as incurring debt, shifting resources, reducing costs, or increasing taxes. It is no proper business of the court to make that call regarding means. If it were, the court would soon be in the business of running the public entity.

Unfortunately, courts too often today are in just such a business. Before considering that situation, however, let us take a simple, straightforward application of the basic principles, an application not often thought to fall under them involving a Fifth Amendment takings case. If a public entity, in pursuit of some public end, commits the “wrong” of taking someone’s property‐​albeit, permitted under the Fifth Amendment–it may be necessary for a court to order just compensation –pursuant to the amendment’s Just Compensation Clause–by way of remedy for that wrong. That is not tantamount to ordering taxation, however, even if additional taxation results from the order. Nor is the Takings Clause authority for the court to tell the public entity just how it must satisfy the court’s order. That is the business of the entity. What the court can say–and does say by implication–is that if the compensation is not paid, the taking, and hence the end it serves, cannot go forward.

But those principles apply in the more common remedial case as well, where the public entity cannot simply walk away from its public project–as with the takings example–but must instead be made to remedy some tortious or contractual wrong the entity has committed. In such a case, additional taxation may be required to satisfy a particularly large judgment.. Yet no one would say that a court that had ordered such a judgment had ordered a tax increase; for again, the means are matters for the public entity to determine.

There are other contexts, however, in which the issues of judicial taxation and judicial micromanagement do seem to arise, yet on closer examination, they need not. Consider the management of public prisons, which is paradigmatically a state or executive branch function, yet today is sometimes done by over‐​zealous courts. Here too the principles articulated above apply, even if the application is sometimes more difficult, and often confusing.

What contributes to the confusion is this: the wrong to be remedied in the prison context is not ordinarily remedied by money damages; rather, the wrong arises from ongoing prison conditions, which need to be changed–which in turn leads to the charges of judicial taxation and micromanagement. Notwithstanding such charges, the analysis begins with a simple but important premise, namely, that prisoners do not loose all their rights upon entering prison. While it is in large part up to the legislative branch to determine just what rights are and are not retained, that determination is not entirely up to the legislature; for implicit in the Fifth and Eighth Amendments is a requirement that punishment fit the crime–that the remedy imposed on the criminal remedy the wrong 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 be remedied.

When prison conditions mean that a one‐​year sentence may be equivalent to a death sentence, courts have authority to remedy such wrongs. Properly, of course, that should be the business of the political branches to do, but when they fail to do it, the court has authority to hear complaints and, if appropriate, order remedies. Adjudicating those complaints will involve the court in assessing prison conditions, of course, and so will tempt the court to try, by way of remedy, to micromanage those conditions. That temptation should be resisted, for it is no business of the court to run a prison, even if the court may properly pass judgment on the conditions before it. And the temptation will be present as well to pass judgment not only on egregious complaints but on trivial complaints too, which too often happens. Still, however much courts may abuse their authority–and I expect the abuse is rather overstated–the authority is there, failing which the premise would have no force at al–, and prisoners would have recourse only to political remedies, which in the nature of the case would be all but non‐​existent.

Once again, however, in ordering prison conditions to be changed, the court cannot order the public entity to raise taxes. The means for righting the wrong are properly left to the public entity to determine, which may range from raising taxes to shifting resources to reducing prison overcrowding (if that is the wrong) through early or selective releases. Does that mean that the public might be endangered in the name of protecting the rights of prisoners? Yes it does. But one of the basic principles of a free society is that government may not secure rights by violating rights–otherwise a police state could be justified. That principle applies in general–as in the case of the Fourth Amendment protection against unreasonable searches and seizures‐​and it applies in more narrow cases such as this.

When we apply the principles before us to the case before the subcommittee, however, we start to see the problem. In each of the examples just discussed, there were individually identifiable victims of some wrong, some public entity that caused the wrong, and a remedy aimed at righting the wrong. Typical court‐​ordered public school desegregation plans, however, are entirely different. They proceed from the wrong of de jure segregation, which is a form of discrimination or exclusion from public benefits that others are receiving or are receiving to a greater extent than are the victims of the segregation. To be sure, that wrong has individually identifiable victims–all those who were so excluded–and individually identifiable wrongdoers‐ the members of the public who ultimately authorized the exclusion. But the typical public school desegregation remedy–unlike ordinary remedies–looks hardly at all to those parties. Instead, it looks to what might be called “future parties”–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, not rectify, the wrong.

That raises profound problems, however, for ending the wrong, in this context, is driven by the idea of equalizing the receipt of the public service at issue–education. That “goal” thus takes over the remedial scheme. No longer is the remedy driven by righting the wrong through making the victim whole but by the goal of equality, which is a much more amorphous idea. Indeed, it is a remedy tailor‐​made for judicial overreaching at its worst. For inequality can manifest itself in an Infinite variety of ways, and each of those ways is in principle subject to judicial recognition and redress. The court is thus drawn into the infinitely complex business of micromanaging the school.. system toward the goal of equality–which is never satisfied because it never can be satisfied. It is no accident that the Kansas City system is still under court management some 20 years after the court first stepped in. Rockford’s system will be under court management for that long and longer too unless something is done about it. But what is to be done?

A ban or restraints on “judicial taxation” will not solve the problem, not least because whether a given court order “requires” a tax increase–the language of the present bill–is itself a political question that no court could determine before issuing an order. Where the problem lies, rather, is in the remedial approach the court has taken. Rather than simply end public discrimination and compensate its victims, to the extent possible, courts, driven by modern egalitarian theories, have taken it upon themselves to bring about “equality.” The Equal Protection Clause of the Constitution requires no such result even if we did know what it meant, which we don’t. If the Congress were to fashion a systematic remedial scheme for remedying past discrimination, much as it fashions such schemes in the criminal law area, it would go far toward giving guidance to the courts in this area. In the end, we do not need congressional micromanagement to check judicial micromanagement. We need rather to get back to basics.

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