While the public focuses on the Biden administration’s vaccination mandate, many are overlooking yet another new federal mandate: Congress’s effort to ban state tax cuts.
Congress passed the so-called “American Rescue Plan Act” (ARPA) in March. The statute prohibits any state accepting ARPA funds from cutting state taxes if ARPA money reimburses the state “directly or indirectly” for funds “reduce[d]” from the tax cut. States must provide detailed records to federal regulators to justify their tax decisions.
As a matter of policy, Congress’s tax mandate makes no sense. If our goal is to recover from economic damage inflicted by COVID-19, then cutting taxes and unleashing private sector growth is the best way to do it.
Cole found that ARPA’s tax mandate wasn’t sufficiently clear and therefore wasn’t enforceable.
The 2 Cases That Rewrote the Constitution
The years from 1936 to about 1952 were perhaps the Supreme Court’s worst period. You can criticize the present justices, as I sometimes do. But compared to the court from 1936 to 1952, today’s bench is a paragon of judicial competence and virtue.The court ultimately reached the right decision by ruling the federal program invalid. But along the way, it did some mischief: It inserted in its opinion completely unnecessary—and deeply erroneous—cogitations about the Constitution’s taxation clause (Article I, Section 8, Clause 1).
- In reading the text, the court ignored 18th-century word definitions. In 18th-century political discourse, “common” and “general” usually meant national rather than regional or special. “Provide” meant “lay up provisions for,” not “spend” (pdf). Thus, the phrase “provide for the common Defence and general Welfare” meant only that taxes were limited to storing up funds for national, rather than local or special-interest, purposes.
- Immediately after the taxation clause, the Constitution’s text contains a long list of additional congressional powers. Other portions of the document add even more. Of course, all that verbiage would be largely pointless if the taxation clause gave Congress the authority to spend on anything it wants. The court’s conclusion necessarily assumes that the Constitution’s framers, although highly accomplished legal draftsmen, gratuitously inserted enormous blocks of useless script.
- The text also includes curbs on some of those additional powers. But if the taxation clause had given Congress power to spend whatever it wants on the “common Defence and general Welfare,” then those curbs would be nugatory. Again, draftsmen as accomplished as the framers do not waste language that way.
- Other constitutional provisions empower Congress to pay debts, fund certain programs, and defend the nation. There’s no need to read the taxation clause as authorizing expenditures.
- In view of all this, it’s not surprising that during the constitutional debates of 1787–1790, the Constitution’s advocates uniformly affirmed that most spending programs would be administered by the states and would be outside congressional control (pdf).
The Conversion of Dicta Into ‘Law’
Yet, the following year, the bench pretended those dicta were binding authority. Writing for the court in Helvering v. Davis, “progressive” Justice Benjamin Cardozo asserted:“Congress may spend money in aid of the ‘general welfare.’ ... United States v. Butler ...; Steward Machine Co. v. Davis, supra. There have been great statesmen in our history who have stood for other views. We will not resurrect the contest. It is now settled by decision. United States v. Butler, supra.”To put it bluntly, this statement was a lie. The Butler case hadn’t “settled” any such thing. The court’s ruminations on the spending power in the Butler opinion were extraneous to the case ruling, and the ruling effectively contradicted those ruminations.
Cardozo’s only “settled” authority was himself.
What happened next exemplifies how a single constitutional change can trigger massive long-term consequences. Before these cases were decided, the federal government rarely incurred a peacetime budget deficit. After they were decided, the federal government ran deficits almost every year.
These cases should have been reversed promptly by constitutional amendment, just as bad Supreme Court decisions had been overturned by the 11th and 14th Amendments. But because of the successive crises of the Depression and World War II, that didn’t happen.
So when you assign fault for our unsustainable national debt, don’t limit the blame to spendthrift politicians. Blame also the Supreme Court justices who enabled them.