After Windsor, The Federal Corporate Tax Must Go

 

The Windsor decision has been hailed as a victory for federalism, with cheers coming from such respected scholars as Randy Barnett. Justice Kennedy’s majority opinion goes to great lengths to point out that marriage is a creature of state law. Indeed, the “whole subject of the domestic relations of husband and wife, parent and child, belongs to the laws of the States,” and not federal law, according to Kennedy. DOMA represents a “federal intrusion on state power” because it puts “a thumb on the scale” and influences how a state might structure its marriage laws.

You know what else is a creature of state law? Corporations. And yet the federal government imposes a complex tax scheme on these state franchises. A thumb on the scale? Federal corporate tax law (like all other tax laws) is designed to affect behavior as well as to raise revenue. The tax code offers the usual bag of definitions, deductions, and credits, which surely must have a profound influence on the way states organize and treat corporations (and other limited liability entities).  

In the 1922 book, Our Changing Constitution, Charles W. Pierson argued that the federal corporation tax (enacted in 1909) was unconstitutional because it invaded a state’s exclusive right to determine the extent and nature of the corporate franchise within its borders. The power to tax, after all, is the power to destroy. If Congress could impose a tax of 1 percent, why not 50 percent or 100 percent? Alas, as Pierson points out, the Supreme Court rejected that argument, on a 7-2 vote, in Flint v. Stone Tracy Co. (1911). 

But that was a century ago. And in the world of the living Constitution, anything goes. Now that the Supreme Court has announced that Congress may not so much as put a “thumb on the scale” in an area of policy that historically “belongs to the States,” it is clearly time for the federal government to get out of the  business of imposing taxes. Ditto for any other federal law that micromanages corporate governance, especially Sarbanes-Oxley.   

All we need is a courageous congressman. No wait, that’s not how we do things — what we need is an enterprising plaintiff.   

There are 10 comments.

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  1. Profile Photo Member
    @BrianClendinen
    J.Maestro: Joe Biden and Mike Bloomberg have just seen their foolish dreams of federal gun control similarly pre-empted.According to our robed masters, the federal government may not diminish the equal dignity of those citizens of free states who have been issued licenses to peaceably own and carry firearms.

    As of this week, federal officials may not act upon their anti-Second-Amendment animus; they are prohibited from further burdening us liberty-loving citizens.

    Make them own it, all of it. Subject every federal intrusion to the Kennedy test. (Well, whatever sense we can make of it.) · 9 hours ago

    Actually I have always wondered why the Full Faith and Credit Clause of the Constitution has  never applied to job licensing. If I have a barber licensee in Florida I should be able to practice in California, and vise verse for practicing law.

    How do states get away with blatantly violating this constitutional concept? The argument that one needs to make sure you know a states laws and regulation is not valid. Not knowing a states law is never a valid excuses for any laws, including traffic,  when you go before a judge or any state offical.

    • #1
  2. Profile Photo Thatcher
    @Percival

    Adam, the utter deviousness of this takes my breath away.  Somewhere the shade of Niccolo Machiavelli is giggling like a schoolgirl.

    Let’s do it.

    mask: But Kennedy’s decision was also based on the “fact” that DOMA was enacted by overwhelming majorities in Congress and signed by a Democra President exclusively because of an animus towards gay people and it’s only purpose was to harm gay people.

    And in response, we offer into evidence everything Democratic politicians have said about Evil Corporations for the last eighty years.  As a punishment detail, we could have some recent Republican miscreants (yeah, Sen. Rubio, as a matter of fact, I was looking at you) read in the entire archive of Democratic Underground’s sentiments on corporate governance into the Congressional Record.

    • #2
  3. Profile Photo Inactive
    @ScarletPimpernel

    The income tax was created by amendment and, hence, can be understood to change federalism.

    The logic of Windsor, however, is that that is irrelevant. The logic of windsor, however,  is also that the federal government has no right to distinguish between married and un-married.

    • #3
  4. Profile Photo Inactive
    @DespairTroll

    Why are you trying to extract a silver lining from a self contradicting court opinion with logic?  

    Round pegs do not go in round holes here, my friend.

    • #4
  5. Profile Photo Inactive
    @BrentB67
    CoveredUp: Why are you trying to extract a silver lining from a self contradicting court opinion with logic?  

    Round pegs do not go in round holes here, my friend. · 8 minutes ago

    Get a bigger hammer.

    • #5
  6. Profile Photo Inactive
    @DavidWilliamson

    Er, no it mustn’t – Mr Obama will not sign it (oh, and it wont get through the Senate).

    • #6
  7. Profile Photo Inactive
    @mask

    But Kennedy’s decision was also based on the “fact” that DOMA was enacted by overwhelming majorities in Congress and signed by a Democra President exclusively because of an animus towards gay people and it’s only purpose was to harm gay people.

    Of course when it comes to taxation a rational reason for federal intrusion will suddenly be considered (unlike DOMA for magical reasons).

    • #7
  8. Profile Photo Inactive
    @JMaestro
    Joe Biden and Mike Bloomberg have just seen their foolish dreams of federal gun control similarly pre-empted.According to our robed masters, the federal government may not diminish the equal dignity of those citizens of free states who have been issued licenses to peaceably own and carry firearms.

    As of this week, federal officials may not act upon their anti-Second-Amendment animus; they are prohibited from further burdening us liberty-loving citizens.

    Make them own it, all of it. Subject every federal intrusion to the Kennedy test. (Well, whatever sense we can make of it.)

    • #8
  9. Profile Photo Inactive
    @UmbraFractus

     

    Percival: Adam, the utter deviousness of this takes my breath away.  Somewhere the shade of Niccolo Machiavelli is giggling like a schoolgirl.

    Let’s do it.

    mask: But Kennedy’s decision was also based on the “fact” that DOMA was enacted by overwhelming majorities in Congress and signed by a Democra President exclusively because of an animus towards gay people and it’s only purpose was to harm gay people.

    And in response, we offer into evidence everything Democratic politicians have said about Evil Corporations for the last eighty years.  As a punishment detail, we could have some recent Republican miscreants (yeah, Sen. Rubio, as a matter of fact, I was looking at you) read in the entire archive of Democratic Underground’s sentiments on corporate governance into the Congressional Record. · June 28, 2013 at 3:13pm

    I don’t think they’d view that as punishment. Remember conservatives are mad at Rubio about one single issue. Granted it’s a big one, but taking aim at the corporate income tax doesn’t seem like something he’d need to be dragged kicking and screaming into.

    • #9

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