The Article III fiscal power.

Author:Rosenzweig, Adam H.
 
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Imagine that the United States faces an unprecedented Constitutional crisis. Earlier in the year, Congress authorized the President to spend $3 trillion, comprised of $1 trillion in defense spending to fund a war duly authorized by Congress, another $1 trillion of interest on debt incurred by the United States also duly authorized by Congress, and another $1 trillion of Medicare expenses (which are mandatory under existing law duly enacted by a previous Congress). As the end of the year approaches, the President realizes that the United States will not have enough money to pay all these bills, leading to a choice: should the President (1) decline to prosecute a duly authorized military conflict, (2) fail to pay interest on duly authorized and issued national debt, (3) fail to make duly authorized and mandatory Medicare payments, or (4) borrow an additional $1 trillion to cover the shortfall? The President chooses option (4), and thus requests the authority from Congress to issue $1 trillion of debt. But this time Congress refuses, denying the President the power to issue the debt. What options remain?

This hypothetical represents a simplified version of the so-called "debt ceiling" standoff between Congress and President Obama in 2011. The resolution at the time was a compromise (of sorts) to raise the statutory debt limit in exchange for certain promises to cut spending in the future. But what if Congress had stood its ground? Either the President could violate the Constitutional obligation to faithfully execute the laws by failing to spend duly authorized funds or violate the separation of powers by issuing debt without Congressional authorization. A real Constitutional crisis seems to emerge, (1) with no way out. Or is there?

As most American schoolchildren learn in civics class, the United States government is comprised of three branches: the legislative, the executive, and the judicial. So if the legislative and executive cannot--or will not--comply with their Constitutional obligations, what about the judiciary? Could a federal court itself, under its own authority, satisfy the Constitution if the other branches won't? Typically, when the Executive violates the Constitution the solution is for the Supreme Court to order the Executive to fulfill its Constitutional obligations. But in the hypothetical above this would not be sufficient; even if it wanted to, the Supreme Court couldn't order the President to spend money the country didn't have, nor could it order Congress to pass a new statute to authorize debt or withdraw appropriations. (2)

The thesis of this Essay is that, under certain limited circumstances, the Supreme Court can, under its own, independent, power under Article III of the Constitution, impose taxes and borrow money, wholly separate from the powers of Congress to do so under Article I or any potential powers of the President to do so under Article II. (3)

While at first glance this may seem like an odd, or even outrageous, contention, in fact the Supreme Court has recognized the inherent power of federal courts to do something strikingly similar over twenty years ago in the case of Missouri v. Jenkins. (4) In that case, the school district of Kansas City, Missouri, was ordered to undertake certain spending to comply with Brown v. Board of Education ("Brown I"). (5) The school district passed a new property tax to do so, but the state of Missouri passed a law withdrawing the taxing power from the school district, making the tax increase null and void. The district court found the state's actions unconstitutional, and ordered the school district to collect the tax and spend the money. In other words, the court itself ordered the imposition and collection of a tax that was not authorized by state law. On appeal, the Supreme Court effectively held that this was within the inherent power of the district court to remedy Constitutional violations. (6)

Jenkins understandably caused quite an uproar at the time, although much of the commentary focused on the aspect of the case related to the power of federal courts over states and localities, (7) while others on the more limited issue of enforcement of school desegregation. (8) But on the face of the opinion, neither is necessarily correct. Rather, in Jenkins the Supreme Court held that when a law-making body authorizes spending, then refuses to allocate the resources to meet this spending, and, crucially, the failure to do so violates the Constitution, the courts have the independent power to raise the money directly to remedy the Constitutional violation, irrespective of legislative authority to do so. (9)

This fact pattern seems almost identical to the hypothetical at the beginning of this Essay. Congress authorizes spending by statute, the President--Constitutionally obligated to execute that law--tries to undertake the spending, but then Congress effectively withdraws the ability from the President to do so. If failure to spend the money would violate the Constitution, (10) Jenkins would seem to stand for the proposition that the Court could order the President to raise and spend the money. Taken to an even further extreme, the Court could itself raise the money and provide it to the President to spend, either through taxing or borrowing, to avoid the Constitutional violation.

Not only would recognition of such a power fundamentally alter any future debates over taxing and spending, it could potentially offer a way out of the policy and political stalemate facing the country. After all, if both Congress and the President knew that doing nothing would lead to five justices of the Supreme Court choosing how to fund the government, the odds of a stalemate would be reduced dramatically. Perhaps the recognition of the existence of such a power could itself force the government out of its rut and return a real balance of power to the coordinate branches of government.

To this end, Part I of this Essay will summarize and describe the facts and holding of Missouri v. Jenkins, demonstrating the already recognized Article III power to tax. Part II will then describe why and how the logic and reasoning of Jenkins can and should apply with equal, if not stronger, force to the federal government as opposed to state legislatures.

  1. MISSOURI V. JENKINS: RECOGNIZING THE JUDICIAL POWER TO TAX

    Prior to the landmark decision of Brown /, the schools of the State of Missouri ("Missouri") were legally segregated by race. (11) The decision in Brown effectively struck down the de jure segregation of schools, but as with many school districts across the country this did not mean the end to de facto school segregation. In response, the Supreme Court ordered, in Brown II, (12) that the district courts enforce the mandate of Brown I by using their broad equitable powers to undo the vestiges of de jure segregation in schools.

    In 1977, certain parents and students sued Missouri and the Kansas City Missouri School District ("KCMSD") for failing to comply with the mandates of Brown and undertake the efforts necessary to ameliorate the effects of the previous de jure segregation. (13) (1) Pursuant to Brown II, in 1984 the district court agreed and ordered KCMSD to undertake a number of efforts to remediate the existing de facto segregation in the district, including remedial education programs in underserved schools and capital improvements in facilities. (14)

    The problem faced by KCMSD was that it did not have enough money to comply with the district court's order. Of course, this is a problem that is conceptually easy to remedy--KCMSD could simply raise taxes. The problem with this remedy is that Missouri, in the interim, had adopted rules effectively prohibiting KCMSD from doing so. (15) The intention of this was clear. Missouri, having already lost one school desegregation case in Saint Louis and clearly sensing that it would lose in Kansas City, took away the taxing power from KCMSD so that, even if it lost, it would not be able to comply with any district court orders requiring new funding. (16)

    This put the district court in a difficult position. The Supreme Court had clearly mandated that the court use its broad equitable powers to enforce Brown, and the court had found that KCMSD was not in compliance with Brown, but it could not order KCMSD to impose new taxes because KCMSD was prohibited by state law from doing so. The solution adopted by the district court, relying in part on the Saint Louis case, was to strike down the state law limiting the KCMSD taxing power as a violation of Brown. (17) In the Saint Louis case, this alone was sufficient because the Saint Louis school district had already increased its taxes, which therefore became effective as soon as the state law had been found unconstitutional. Thus, striking down the state cap effectively raised sufficient taxes to comply with the court's order. The difficulty in the KCMSD situation was that the state cap had been put in place before the KCMSD tax increase had been approved. Thus, merely striking down the cap was not sufficient.

    The district court once again found itself in a bind. This time, however, the court had no precedent upon which to draw. Instead, the court fashioned its own remedy, taking up the call in Brown II to use its equitable powers as necessary. The district court ordered KCMSD to adopt a new property tax and, in the interim, ordered that a new income and property tax be imposed under its own inherent power, and in addition, that $150 million of new bonds be issued, all in direct contravention to the Missouri Constitution. (18)

    As has been widely noted, states and localities are particularly sensitive to federal courts telling them how to tax their own citizens. (19) But the order in the KCMSD case went even beyond that. Missouri was concerned that if the order in KCMSD was upheld, federal courts would be able to impose their own taxes directly on the citizens of states...

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