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Cuomo’s Claim that capping SALT deductions is unconstitutional is wrong

Cuomo’s Claim that capping SALT deductions is unconstitutional is wrong

This post first appeared in The Hill on January 30, 2018.

Some leading proponents of centralized federal power have caught that ole-time states’-rights religion.

New York Governor Andrew Cuomo, for example, has been a fervid defender of ObamaCare and other congressional programs invading traditional areas of state control. But, he says, Congress violated the rules of federalism when its new tax law capped income tax deductions for state and local taxes paid (SALT deductions).

Are Cuomo and his allies correct? Does the Constitution require Congress to include SALT deductions in its income tax laws?

The Constitution’s actual language does not say so.

Some cite a 1985 speech by the late Senator Daniel Patrick Moynihan (D.-N.Y). arguing for the SALT deduction. But that particular speech is cast in generalities, and does little to address specific constitutional questions.

They also point to Controller v. Wynn, a 2015 case in which the Supreme Court struck down a Maryland law taxing out-of-state income. But that case centered on interstate commerce issues not present in the new tax law.

Still others contend that the original Constitution banned income taxes until the Sixteenth Amendment approved them, and that amendment would not have been approved unless it implicitly required SALT deductions. For several different reasons, however, this argument is extraordinarily weak.

First, its initial premise is wrong: The original Constitution did not ban income taxes. On the contrary, it granted Congress broad authority to impose “direct taxes,” including income taxes. The only restriction was that if Congress imposed a direct tax it had to divide the expected revenues among the states by population. The Sixteenth Amendment eliminated that restriction, but Congress always had enjoyed power to impose an income tax.

Second, cited evidence for the founders’ supposed anti-income tax view actually cuts in the opposite direction. According to one Cuomo ally, “It was feared that the new federal income tax would ‘monopolize’ all of the country’s resources, leaving little money left in state coffers … Alexander Hamilton outlined this precise fear as early as the 1780s, in Federalist Paper No. 31.”

What the writer fails to mention is this fear arose chiefly among the Constitution’s opponents, and that Hamilton “outlined” it only to rebut it. Specifically, Hamilton pointed out that the Constitution tasked the federal government with national defense and internal order—and that because it was impossible to predict how much revenue would be needed for such functions, additional limits would be unworkable.

For better or worse, most of the founders agreed with Hamilton. They repelled efforts to further curtail Congress’s taxing authority.

Finally, there is little basis to the claim that, “the 16th Amendment likely would not have been ratified without SALT deductions in mind.”

When constitutional language is unclear or exact definitions uncertain, courts may clarify the terms by examining common practices and representations considered part of the “ratification bargain.” But the presence of SALT deductions in short-lived tax bills in 1862 or 1894 tells us little about how the ratifiers understood the Sixteenth Amendment decades later. Moreover, on those rare occasions when legislatures or conventions ratify an unclear measure on the basis of particular meanings, they can say so — which, in the case of the Sixteenth Amendment, they apparently did not.

More importantly, the Sixteenth Amendment is not ambiguous or uncertain. It is straightforward and clear: “The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several States, and without regard to any census or enumeration.”

Where in this amendment, pray tell, lurks any mandatory SALT deduction?

Opponents of the new tax law are right to be concerned about federal overreaching, but they are barking up the wrong tree. They are inventing a fictional limit on federal authority while ignoring real ones.

For example, when drafting the Affordable Care Act Congress permitted the Senate to insert economic regulations in a tax bill, thereby violating an explicit constitutional rule called the Origination Clause. That violation has not induced Cuomo and his allies to withhold their support. They also have failed to object when Congress ignores other constitutional limits on its powers.

Governor Cuomo and his allies should honor the Constitution’s real restrictions on federal power. When arguing constitutional questions, however, they should not invent non-existent ones.

Restoration of the Rule of Law: The Link Between Your Increased Wealth and Obama’s Departure

Restoration of the Rule of Law: The Link Between Your Increased Wealth and Obama’s Departure

This article originally appeared in The Hill.

If you are like me, your retirement account rose substantially in value during 2017.

The end of the stubborn economic lag of the Obama years is a signal event affecting the life every American. It’s not just the stock market that’s up, but GDP and job growth as well.

Presumably because it would make the Trump administration look good, the mainstream media have given this development relatively little attention—as illustrated by the New York Times’ non-treatment in its 2017 Year in Review. (The Denver Post’s December 31 print edition review provides another example.) When the mainstream media have discussed the economy outside their business pages, they sometimes have done so only to belittle the progress made.

On the other side of the political divide, President Trump is (of course) claiming credit. No doubt he is entitled to some.

But let’s face it: The election of almost any of the major presidential candidates other than avowed socialist Bernie Sanders probably would have triggered a similar boom. It might have been greater under a President Rubio or President Kasich or less under a President Clinton. But the upsurge would have come because its principal cause has not been who was elected, but who has departed.

Those departed are Barack Obama and an administration comprised largely soft-totalitarian “progressives” who showed little respect for the rule of law during their eight-year reign.

Economists across the political spectrum agree that the rule of law is key to a healthy economy, particularly in developed countries. When legal rules are clear and predictable, investors are more willing to risk their capital than when rules are fuzzy and subject to random change.

The American Founders recognized this. One reason they adopted the Constitution was to strengthen the rule of law. Under the Articles of Confederation (1781 – 1789) legal stability was jeopardized by demagogic policies pursued in some of the states. Partly as a result, the United States in the 1780s was mired in an economic depression.

James Madison wrote in Federalist No. 44:

The sober people of America are weary of the fluctuating policy which has directed the public councils. They have seen with regret and indignation that sudden changes and legislative interferences, in cases affecting personal rights, become jobs [i.e., opportunities for unfair gain] in the hands of enterprising and influential speculators, and snares to the more-industrious and less informed part of the community. They have seen, too, that one legislative interference is but the first link of a long chain of repetitions, every subsequent interference being naturally produced by the effects of the preceding. They very rightly infer, therefore, that some thorough reform is wanting, which will banish speculations on public measures, inspire a general prudence and industry, and give a regular course to the business of society.

Madison focused on legislative violations of the rule of law. The Obama years saw some of these, including largely inscrutable legislation that mauled our health care and financial systems.

However, most of the threats to the rule of law came from executive action: a frenzy of new economic regulations; illegal immigration orders; unwarranted privileges to the politically-powerful, such as exemption from Obamacare mandates; the use of federal grants to skew scientific research; IRS attacks on dissident groups; subsidies to some businesses at the expense of others; and increased surveillance of political opponents.

Of course, the Obama administration was not the first presidency to threaten the rule of law. But most other serious presidential attacks occurred during wartime. Moreover, the Obama administration’s assault was unusually comprehensive—far more so than, for example, sporadic efforts by prior presidents to turn the IRS against political enemies.

President Trump also has expressed an unfortunate preference for distorting the legal playing field. But so far his administration has done nothing comparable to the Obama presidency’s third-world-style behavior.

No wonder why so many Americans are breathing a sigh of relief—and then following it up with concrete investments in our country’s future.

Abolish the Filibuster? Maybe We Should

Abolish the Filibuster? Maybe We Should

Should freedom advocates support the U.S. Senate’s “filibuster” rule? The traditional answer has been “yes.” But we might want to take another look.

The Senate’s filibuster system allows individual Senators to block legislative action by making long speeches (i.e., “filibuster”) on the floor. When several Senators take turns speaking, they can block legislative action indefinitely.

The Senate adopted the filibuster system in 1806. The system derives from optional Senate rule, not from the Constitution. In 1917 the Senate adopted Rule 22, which allowed a two-thirds majority to force an end to a filibuster (“cloture”). In 1975, the Senate reduced the required cloture margin to 60 percent.

Advocates of limited government tend to favor super-majority requirements because—in theory anyway—(1) they stall government action and (2) they assure that when government does act, its measures benefit a very broad segment of the public.

In recent years, however, some researchers have questioned the benefits of super-majorities in legislative chambers with significantly more than 50 members. Apparently a rule that works well in a smaller chamber may prove counterproductive in a larger one.

Whether or not this generalization is correct, experience does show that the filibuster has not restrained the growth of the federal government. Instead it has helped create a one-way ratchet whereby the federal government sometimes expands, sometimes remains constant, but never shrinks.

One reason appears to be a large, highly organized and permanent pro-government element in national politics. This element includes the media, the education establishment, the bureaucracy, and certain powerful lobbying groups such as the AARP. These groups amplify the effect of liberal electoral victories while diluting the effect of conservative victories. (Think of how they have molded public perceptions of so-called “government shutdowns”). As a result, in the U.S. Senate liberal majorities sometimes become super-majorities, while conservative majorities almost never do.

Another reason the filibuster has acted as a one-way ratchet may be the different levels of respect for rules displayed by liberals and conservatives. When conservatives are in majority, they usually respect the prerogative of the liberal minority to filibuster against proposals to reduce the size of government. Liberals tend to grant less respect to conservative filibusters.

As a result, “filibuster politics” usually ends well for the Left. Here are some historical examples:

* In 1917, the Democratic Senate adopted Rule 22 at the request of President Woodrow Wilson to allow cloture for the first time—by a two thirds majority.

* In 1965, Senate Democrats enjoyed a 67-32 majority, which enabled them to override any filibuster possibility and enact Medicare and Medicaid—thereby rendering the federal government the dominant player in American health care.

* In 1975 a liberal Senate reduced the cloture margin to 60. Note that when Senate conservatives recovered their majority, they did not reverse this action.

* In 2007, a liberal Senate used a technique called “reconciliation” to override a filibuster threat and pass the College Affordability and Accountability Act. That measure assured greater federal control of higher education.

* In 2010, a liberal Senate did the same to adopt Obamacare.

* In Nov. 2013 a liberal Senate adopted the so-called “nuclear option” to abolish filibusters on judicial nominees. But they carefully excepted the Supreme Court from the change, so liberals still could filibuster against appointment of more originalist justices such as Clarence Thomas and Antonin Scalia. This change was not reversed when the Republicans took control of the Senate in 2015.

Note how the filibuster rule was swept aside when it stood athwart a liberal majority’s wish to expand government. I was able to find no instances in which a Senate majority lifted the filibuster to reduce the size of government.

In some countries, the size of government has been reduced significantly in recent years. Illustrations include Margaret Thatcher’s Britain and Roger Douglas’ New Zealand. However, the parliamentary majorities accomplishing this were never super-majorities. Had the filibuster rule been in effect in those countries, both would still be languishing in socialist stagnation.

The Most Radical Decision Ever?

The Most Radical Decision Ever?

041410 Rob Natelson-2

This article first appeared in The American Thinker.

A complete commentary on the same sex marriage case would take far more than a single short article. Accordingly, I offer only some discrete thoughts:

* A big expansion of federal power. Many libertarians believe the courts should use the Fourteenth Amendment to protect rights unenumerated in the Constitution, and some urged the Court to declare that civil marriage was among those rights. They need to be careful what they ask for. What they have just “won” is a major expansion of federal power.

The case removes limitations on Substantive Due Process, the principal way judges create “rights” unmentioned by the Constitution. Removal of those limits augments the authority of the federal courts. But it also widens the power of Congress. Whenever the courts create a new right under the Fourteenth Amendment, Section 5 of that amendment operates to give Congress “power to enforce [it], by appropriate legislation.” As a result of this case, Congress now enjoys substantial authority over civil marriage, a realm previously considered to be almost wholly reserved to the states.

* The Court’s principal flaw in logic. This is my summary of the essence of the holding:

We recognize marriage as a fundamental constitutional right because it is so important to personal fulfillment, so long-honored, and creates such good social results. Hence, we now require states to loosen the prerequisites for marriage.

The flaw in this assertion is assuming that the “marriage” that has been such as successful institution is the same thing as “marriage” under the Court’s re-definition. An institution whose essence is a relationship between people of the opposite sex is not the same thing as an institution without that characteristic. We do not know what the long-term results of the latter might be.

* The radical result. I could be persuaded to the contrary, but the case has me thinking it may be the most radical in Supreme Court history. An obvious reason is the result: The Court constitutionalized a pop-definition that didn’t exist 20 years ago. Speaking jurisprudentially (although not morally), this was a much greater departure than such widely-criticized Substantive Due Process cases as Dred Scott, Lochner v. New York, or Roe v. Wade.

* The radical methodology. (1) The Court did not, as is customary, rest its holding on the most narrow grounds supporting the result, but on the widest possible grounds—i.e., Substantive Due Process rather than Equal Protection or Full Faith and Credit. (2) The Court announced explicitly that even the prior flaccid limits on Substantive Due Process no longer applied. (3) The Court’s own precedents required that after a judge finds a right “legitimate” or “important” or (as here) “fundamental,” the judge next must consider the weight of the government’s justification for limiting the right. But the Court didn’t even purport to do the latter. In other words, the Court granted same sex marriage a status above enumerated fundamental rights (such as free speech) and other unenumerated rights (such as privacy or abortion).

* Yet, constitutionally speaking, civil marriage is not a “right” at all, much less a fundamental one. As Justice Thomas pointed out in dissent, civil marriage is what the Founders called a “privilege”—a government-created entitlement. Same sex couples have the right to cohabit without being molested by the state, to contract with each other, and to take religious vows. Neither they nor anyone else has the “right” to the government-created entitlement called civil marriage.

Civil marriage does not create the right to cohabit. It is principally a vehicle for distribution of certain special benefits. The first-named plaintiff could have married his long-term partner any time after Massachusetts recognized same-sex marriage in 2003, but he did so only after his partner was critically ill and inheritance became an issue. The Court’s description of the facts strongly suggests that as to that plaintiff at least, the case was as much about entitlement as about love.

* Are you religious? Be afraid. The Court’s opinion shows the justices know their holding has grave implications for the free exercise of religion, but the paragraph in the opinion that purports to reassure does not. Pointedly, it mentions only the freedom to dissent and debate on matters of religion and morality, not the freedom to act on one views. In the wake of this decision, family businesses, non-profits and perhaps even religious congregations will be sued under state and federal civil rights laws. This opinion implies the Court will do nothing to relieve them.

* Hypocrisy. Some of same voices that urged “restraint” in considering Obamacare because it was (just barely) adopted pursuant to the democratic process, urged the Court to sweep away scores of democratically-adopted laws that reflect long popular understanding. Consider the disparate approaches by editors of Time Magazine, for example—for restraint in the Obamacare case, but against restraint in this one.

* Constitutional corruption. As Justice Alito pointed out in dissent, this holding exemplifies how corrupted constitutional interpretation has become. Justice Alito did not mention, but probably would agree, that the nation’s law schools are largely to blame. Lawmakers and alumni: Take note next time universities with law schools ask for money.

* “Same ole same ole” won’t cure the problem. Justice Alito also noted the futility of past efforts to address this corruption. That’s one reason we need a convention to propose amendments under Article V of the Constitution. Those who have been arguing that traditional methods of response are sufficient have been thumpingly proven wrong.

New Origination Clause Article Now Published

New Origination Clause Article Now Published

2009 RGN

The Harvard Journal of Law and Public Policy has now published my article on the Origination Clause. That’s the article documenting the research that found—contrary to all expectations—that the taxes in Obamacare were validly adopted.

But it also found that the regulations and appropriations in Obamacare were invalidly adopted.

You can read a summary of my findings here, and new evidence to support them (which just barely made it into the article) here.

You can find the article itself here.