Riverboat Robbery -- When does a tax become an illegal 'taking'?

Wall Street Journal ^ | March 24, 2009

[reaganaut1]

Illinois politics seems to be everywhere this year -- and now it may be headed to the Supreme Court in the form of a lawsuit brought against the state. The case, which has ties to impeached Illinois Governor Rod Blagojevich, could have an important impact on the definition of a "taking" under the Fifth Amendment -- as well as implications for the state's power of taxation.

In Empress Casino v. Giannoulias, the question involves the passage of a state law that took money from four riverboat casinos and gave it to five horse-racing tracks to use as purse money, among other things. According to the Illinois Supreme Court, the action cannot be considered a "taking" because it involved the transfer of money from one party to another, not the confiscation of land, as takings law has traditionally been applied. (The casinos are appealing to the U.S. Supremes, who will consider the certiorari petition soon.)

Property is property, however, whether it's the contents of a bank account, a factory, or a house with a white picket fence. If the Illinois Supreme Court ruling is allowed to stand, it could establish a precedent whereby the government may take money from any successful business to prop up a failing one. That means, in theory, the government could pass a law to take money from the successful dry cleaner on Main Street to subsidize the lousy one around the corner -- or from Barnes and Noble to subsidize the corner bookshop.

Broadly levied, wealth redistribution for public purpose has already been ruled Constitutional by the Supreme Court in the case of the income tax. Writ small, as it is in Empress Casino, it's a tool that might be wielded against unpopular industries and used by politicians to kiss up to favorite constituents.

[reaganaut1]

Discussed by Cato here .

[A_Former_Democrat]

“The power to tax is the power to destroy”

[Pfesser]

I have heard that this tax violates the “bill of attainder” clause in the Constitution. Doesn't it also violate the 5th amendment since it is the taking of property without due process?

[Question_Assumptions]

The Amendments passed in 1913 (income tax and election of senators by popular vote) broke the Constitution because they clearly didn't understand the implications of what they were passing (or, if they did, they were fools). The should have capped the income tax with a percentage (say, 10%) rather than leaving the door wide open and shouldn't have passed the 17th Amendment at all.

[skimbell]

If the proposal to cap a maximum income tax of 10% had been proposed in 1913, the citizenry probably still would be rioting.

[Question_Assumptions]

From what I’ve read, at the time they were trying to pass a 7% tax on the very rich and 10% was the historical tithing amount, so I think they could have gotten 10% passed. But I do think that suggestions closer to modern rates and relative income levels probably would have caused riots.

[LauraJean]

The reason for the tax was to allow riverboat casinos the right to remain docked instead of going back and forth on the river. It was also supposed to placate the race tracks who would like the ability to offer slot machines on the race tracks and probably the off-track operations too.

Supposidly the taxes would be used to increase the purses for races. This would make the races in Illinois more appealing to horse owners and provide larger fields. The larger fields would then appeal to the betters who then bet more money because their reward for being right would be larger.
When the casino owners signed on to the agreement they know they would be giving money to the tracks. They are the ones backing away from their contract.

[Blood of Tyrants]

It violates several provisions. Due process is one, bill of attainder is another, ex-post facto law, is a third.

[Blood of Tyrants]

They knew what they were doing and they weren’t fools. They were socialists who deliberately left off the cap on the income tax.