A Critical Assessment of the Originalist Case Against Administrative Regulatory Power: New Evidence from the Federal Tax on Private Real Estate in the 1790s.

• Author: Parrillo, Nicholas R.
• Position: Introduction into II. Indeterminacy in the Federal Boards' Revisions: Hamilton's "Very Bad Business of Valuations" E. Indeterminacy in Implementing the Federal Legislation of 1798 1. Secretary Wolcott's Guidance, p. 1288-1373

ARTICLE CONTENTS INTRODUCTION 1293 I. FEDERAL TAXATION OF REAL ESTATE IN 1798: FUNDAMENTALS 1318 A. The Direct Tax's Background, Political Origins, and Substance 1318 B. The Administrative Organization and Scale of the Valuation Apparatus 1327 C. The Federal Boards' Sweeping Exercises of Power 1339 II. INDETERMINACY IN THE FEDERAL BOARDS' REVISIONS: HAMILTON'S "VERY BAD BUSINESS OF VALUATIONS" 1345 A. The Continental Congress's Failure at Real-Estate Valuation, 1777-89 1348 B. The Absence of Clear Principles in State Tax Statutes, 1796-98 1350 C. Indeterminacy in Deciding Value from Land's Annual Income or Historical Sale Prices 1358 D. Indeterminacy in the Federal Legislation of 1798: "No Necessity that the Principles of Valuation Should Be Uniform in All the States" 1366 E. Indeterminacy in Implementing the Federal Legislation of 1798 1370 1. Secretary Wolcott's Guidance 1370 2. The Federal Boards' Regulations and Approaches 1372 3. The Connecticut Federal Board's Sale-Price Research 1379 4. Official Valuations and Population Density 1384 III. THE POLITICAL ASPECT OF THE FEDERAL BOARDS' REVISIONS 1391 A. State Legislative Tax Politics That Federal Boards Inherited 1392 B. Congress's Options for Handling Intrastate Politics and Its Choice to Delegate 1401 C. Politics and the Structure, Personnel, and Process of the Federal Boards 1405 D. Politics and the Substantive Decisions of Federal Boards 1408 IV. NO JUDICIAL REVIEW OF THE FEDERAL BOARDS' REVISIONS 1417 A. Equity? 1418 B. Writ of Error? 1419 C. Certiorari? 1419 D. Mandamus? 1421 E. Judicial Review Through Enforcement by Distress, or After? 1422 F. Judicial Review Through Enforcement by Sale of Land, or After? 1425 G. Conclusion: Statutes as the Sole Source of Review of Valuations 1427 V. CONSTITUTIONAL ACCEPTANCE OF THE FEDERAL BOARDS' REVISION POWER, 1798-1861 1429 A. Acceptance of the Federal Boards' Rulemaking Discretion in 1797-1800 1430 B. Repeal of the Record-Updating Provisions, 1800-1801 1437 C. The Jeffersonians' Continuing Implementation of the 1798 Direct Tax, 1801-05 1438 D. Jeffersonian Direct Taxes in the War of 1812 1440 1. The Initial Tax of 1813: Reducing Rulemaking Discretion, for Nonconstitutional Reasons 1441 2. The Permanent Tax of 1815: Increasing Rulemaking Discretion Back to the 1798 Level 1449 3. The Peacetime Pullback of 1816 1453 E. The Civil War Direct Tax, 1861 1454 CONCLUSION 1455 INTRODUCTION

Article I of the Constitution says: "All legislative Powers herein granted shall be vested in a Congress of the United States." (1) Since the nineteenth century, the Supreme Court has construed this language to mean Congress cannot give away its legislative powers: there is a constitutional limit on how much power Congress can delegate by statute to the President or to administrators in the executive branch. (2) While every statute inevitably gives some discretion to those who implement it, the Court requires the discretion delegated to be confined to that which is "executive" in nature, (3) not so broad as to be "legislative." This principle is called the nondelegation doctrine. (4) Since the 1920s, the Justices have said that a statute is constitutional under this doctrine so long as it lays down an "intelligible principle" for those administering it to follow. (5)

The doctrine has proven very loose. Only three statutes have ever been held to violate it, all in 1935-36. (6) Statutes have passed muster despite providing only vague guidance, such as telling an administrative agency to make regulations to serve the "public interest, convenience, or necessity." (7) With little judicial constraint on its freedom to delegate, Congress has vested numerous wide-ranging powers in the President and the agencies, including everything from the Environmental Protection Agency's statutory mandate to set national air-pollution standards that are "requisite to protect the public health" with "an adequate margin of safety," (8) to the President's statutory power to declare a "national emergency" (an undefined term), which President Trump invoked to obtain some of the funding to build a border wall between the United States and Mexico. (9)

But now, for the first time in nearly a century, the Supreme Court is poised to reformulate the nondelegation doctrine, opening the possibility of a revolution in separation of powers and administrative law. In Gundy v. United States, handed down in June 2019, Justice Gorsuch, joined by Chief Justice Roberts and Justice Thomas, declared that the "intelligible principle" test should be abandoned in favor of a new approach that demands greater specificity from Congress when it delegates authority to the administrative state. (10) The Court in Gundy had only eight Justices (because Justice Kavanaugh had not been confirmed at the time of the oral arguments), and Justices Ginsburg, Breyer, Sotomayor, and Kagan were unwilling to revisit the established, delegation-friendly test. (11) Justice Alito expressed sympathy with Justice Gorsuch's view and announced that he "would support" reconsidering the established test, but not with the Court short-staffed and divided 4-4. Justice Alito therefore opted to provide the fifth vote necessary to maintain the old test (and uphold the statute at issue), but only for the moment. (12) In November 2019, Justice Kavanaugh--since confirmed to the Court and carrying the potential swing vote--publicly suggested that Justice Gorsuch's "thoughtful" opinion rejecting the old test merited "further consideration." (13)

What can we expect of this apparently fast-approaching revolution? What will the new nondelegation doctrine be? One important possibility was articulated by Justice Thomas in an extensive solo concurrence in Department of Transportation v. Association of American Railroads back in 2015. (14) In his opinion, Justice Thomas argued that, "[u]nder the original understanding of the Constitution," it is unconstitutional for Congress to give the President or an agency "the discretion to formulate generally applicable rules of private conduct." (15) To this principle, Justice Thomas recognized only two exceptions. The first would be if the making of the rule turned simply on a "factual determination" by the agency, for example, if the statute states a restriction that shall go into effect if a certain event occurs, and the agency then finds that the event has in fact occurred. (16) Such an agency determination would be constitutionally permissible, said Justice Thomas, because it entails no "exercise of policy discretion." (17) The second exception would be if the delegated function "involved the external relations of the United States," (18) given that the Court has long viewed the nondelegation doctrine as weaker in this area because of the President's independent constitutional authority therein. (19) Regulating international trade might be an example of this second exception for matters related to foreign affairs. (20) Overall, Justice Thomas's theory of nondelegation is that all agency rulemaking governing private conduct is unconstitutional unless it turns solely on a factual determination or involves foreign relations.

Given that today's regulatory statutes ubiquitously authorize agencies to engage in rulemaking that governs domestic, private rights, Justice Thomas's theory in American Railroads would seem--at least if its exception for nonpolicy "factual determinations" were interpreted narrowly--to invalidate most of today's domestic regulatory state.

But will the Court follow this far-reaching theory? Two recent opinions suggest that at least five Justices would consider it. The first is Justice Gorsuch's concurrence in Kisor v. Wilkie, decided in June 2019. (21) Joined by Justices Thomas, Alito, and Kavanaugh, this opinion expressly left the door open for Justice Thomas's theory. In discussing the question at issue (whether courts should defer to an agency's interpretation of its own rules), Justice Gorsuch stated that such rules are legally binding under current doctrine, but he dropped a footnote citing Justice Thomas's American Railroads concurrence and asserted that "our precedent allowing executive agencies to issue legally binding regulations to govern private conduct may raise constitutional questions." (22)

The second opinion is Justice Gorsuch's Gundy dissent, noted earlier. Recall that it was joined by Chief Justice Roberts and Justice Thomas and then praised implicitly by Justice Alito and expressly by Justice Kavanaugh. As in Justice Thomas's American Railroads concurrence, Justice Gorsuch in Gundy contended that the current delegation-friendly approach "has no basis in the original meaning of the Constitution" (23) and declared that "the framers understood [nondelegable legislative power] to mean the power to adopt generally applicable rules of conduct governing future actions by private persons." (24) He further argued that, in order for agency rulemaking about "private conduct" to be constitutional, it must either (a) confine itself to "details" rather than "policy decisions," (25) (b) turn simply on agency "fact-finding," (26) or (c) overlap with "authority the Constitution separately vests in another branch," such as executive power over "foreign affairs." (27) Justice Gorsuch's exceptions for fact finding and foreign affairs follow the exceptions in Justice Thomas's American Railroads concurrence. Justice Gorsuch adds the exception for rulemakings that fill up "details," but this exception may be narrow, as it seems not to allow any rulemakings that make "policy decisions." (28)

Even if the Court does not categorically invalidate all agency rulemaking about domestic private conduct other than fact finding, rulemaking is so ubiquitous that mere doubt about its constitutionality could work major changes in the nondelegation doctrine and administrative law more generally. Two recent proposals illustrate the potential scope of such changes...