Suppose a state desires to reward Jews—by, say,$500 per year—for their religious devotion. Should the nature of taxpayers’ concern vary if the state allows Jews to claim the aid on their tax returns, in lieu of receiving an annual stipend?
Suppose the state of Hawaii, in its desire to preserve the ancient native Hawaiian religion, granted families sending their children to such schools a waiver of their income taxes for so long as their children were enrolled in qualified native Hawaiian religion schools. No such tax benefits were conferred to families with children enrolled in Buddhist or Christian parochial schools. Might taxpayers have any grievances about governmental subsidies for religious activities and the consequences for the public treasury?
Or assume a state wishes to subsidize the ownership of crucifixes. It could purchase the religious symbols in bulk and distribute them to all takers. Or it could mail a reimbursement check to those individuals who buy their own and submit a receipt for the purchase. Or it could authorize those persons to claim a tax credit equal to the price they paid. Now, really—do taxpayers have less reason to complain if the state selects the last of these three options? The Court today says they do, but that is wrong.
Justice Elena Kagan posed the first and third hypothetical situations in her dissenting opinion in a recent U. S. Supreme Court case.
We know very little about Justice Kagan, other than what appears in her stellar résumé, and constitutional law scholar Erwin Chemerinsky reminded us why: “Kagan offered President Obama a seemingly easy confirmation process. She has little paper trail; she was never a judge and has no judicial opinions to scrutinize and has written relatively few law review articles.”1
As to her specific views on religious liberty, other than what was briefly discussed during her Senate confirmation hearing, we also know very little—at least until now.
With the recent Arizona Christian School Tuition Organization v. Winn2 case Justice Kagan was given her first opportunity since her confirmation on August 7, 2010, to comment on religious liberty.
On April 4, 2011, Justice Anthony Kennedy delivered the opinion of the Court (in which Chief Justice Roberts and Justices Scalia, Thomas, and Alito joined), dismissing the case for want of standing. Justice Kagan (joined by Justices Ginsburg, Breyer, and Sotomayor) dissented, and her arguments against this tax credit provide an opportunity to consider her understanding of the Constitution’s guarantee of religious neutrality.
Just the Facts, Ma’am
The state of Arizona enacted a law giving state tax credits to taxpayers for contributions to qualified secular and religious school tuition organizations.3 Some taxpayers filed suit, claiming the law violated the U.S. Constitution’s establishment clause (“Congress shall make no law respecting an establishment of religion”), which clause was held applicable to the states.4
The Supreme Court had to determine two questions. First, did the taxpayers have standing5 to challenge the tax credit law? Second, if they had standing, whether the law had the purpose or effect of unconstitutionally advancing religion. Answering the first question regarding standing in the negative, the Court never reached the second question. That is, the Court did not find Arizona’s tax credit constitutional, only that taxpayers had no right (“standing”) to question its constitutionality in federal court.
Article III of the U.S. Constitution grants federal courts the power to hear “cases and controversies.” Genuine harm must be shown—that is, injury in fact, causation, and redressability—not simply the “generalized interest of all citizens” in a particular case.
Exceptions and Extractions
This rule against generalized taxpayer standing does have an exception enunciated in Flast v. Cohen,6 a near-unanimous opinion by Chief Justice Earl Warren involving a congressional expenditure. Flast held that a taxpayer had standing consistent with Article III to bring suit to prevent an unconstitutional expenditure.
Justice Kennedy’s majority opinion determined that the Arizona taxpayers failed to meet the requirements for the Flast exception. When the government appropriates tax revenues for religious activity, then under the exception in Flast a taxpayer has standing to bring suit under the establishment clause.
The majority saw this case as different because it involved a tax credit, not a tax. Decisions of taxpayers regarding their own funds determined where the money went. According to the Court, because the government had not extracted the money from the taxpayer in the first place, no Flast exception would be available for bringing a claim.
The Court conceded it had previously reached the merits in establishment clause cases involving tax expenditures. Indeed, it had previously decided this same Winn case in an earlier iteration. But those cases did not expressly discuss standing.
The upshot: the Arizona tax credit was not tantamount to a religious tax, as nothing had been actually extracted from the taxpayer, and so no injury could be alleged. The challengers lacked standing, they failed to fall within the Flast exception, and the case was “dismissed for want of jurisdiction.”
Justice Elena Kagan talks with President Barack Obama and Chief Justice John Roberts before Kagan’s Investiture Ceremony at the Supreme Court, Oct. 1, 2010.
A Split Decision
The divided Court, which split 5-4 in disposing of the appeal, arguably exemplified a similarly divided public, whose fault line did not follow the expected secular versus religious demarcation. Nor did the split occur between religions. Christian and Jewish groups, and others religiously inclined, were to be found on both sides of the issue. Some saw the credit as consistent with free exercise; others deemed the credit a breach of the antiestablishment principle. Reasonable minds can differ, especially when they hire accomplished attorneys.7
Some have speculated that Justice Kennedy, habitually the swing vote on the Court since Justice O’Connor’s retirement, sought the Aristotelian Golden Mean. It’s not easy to get into a man’s head without tousling his coiffure, as it were. But surely Justice Kennedy had colleagues to his right hankering for the outright overruling of Flast, which Justice Scalia considered anomalous, misguided, and worthy of repudiation. A cursory review of the numerous amicus curiae briefs filed in this case indicates that Justice Scalia was not alone in his thinking.
At the same time, Justice Kennedy may have perceived from his other colleagues a comparable tug to the left—a jurist’s version of Newton’s third law (for every action there is always an equal and opposite reaction). Reckoning a middle passage between the polarized positions, as Odysseus he attempted to sail between the Scylla of overruling Flast and the Charybdis of “extending” Flast. His opinion allowed Flast to be preserved, at least for purposes of challenging direct appropriations.
But as an attorney friend of mine quipped, Kennedy saved Flast only to “divulge that the key was under the doormat!”
Treasure for the Taking
Arizona’s own accounting showed the credit diverted nearly $350 million in tax revenue. Justice Kagan explained that when government calculated losses to its coffers attributable to tax law, such losses were often dubbed “tax expenditures.” It mattered not whether the revenue loss was occasioned by a tax exclusion, exemption, deduction, credit, preferential rate, or deferral of tax liability. If the tax provision caused a revenue loss, it was a “tax expenditure.”
Whatever vehicle for tax expenditures the tax system employed, it had to be accounted for in the budget. The bookkeeper’s complaint that “revenue loss is revenue loss” is a tautology, but it’s also true. And in a footnote to Justice Kagan’s dissenting opinion we learn that the National Commission on Fiscal Responsibility and Reform describes such tax subsidies, breaks, and loopholes as “just spending by another name.”
Given Shakespeare’s oft-quoted “rose by any other name would smell as sweet,” Justice Kagan called attention to the majority’s “novel distinction” between appropriations and tax expenditures, one never seen before when considering standing. For the first time, the Court found the distinction not only legally significant but dispositive as to taxpayer standing. Hereafter, a taxpayer might have standing to challenge an appropriation, but not a tax credit, which “financed” religion.
“A Distinction in Search of a Difference”
The New York Times recently wrote that “Justice Elena Kagan, judging by her simultaneously conversational and caustic debut dissent last month, is also a formidable writer.”8 The Times was right. Her fiery prose illumined and heated up the discussion, taking to task the majority’s rhetorical sleight-of-hand expenditure evasions.
“[It] has as little basis in principle as it has in our precedent,” she contended. The clear implication was that the determinative question should not be how but whether religion was subsidized by the government. “Taxpayers who oppose state aid of religion have equal reason to protest whether that aid flows from the one form of subsidy or the other,” she asserted. “Either way, the government has financed the religious activity. And so either way, taxpayers should be able to challenge the subsidy.”
Lowering the Wall
She warned that Justice Kennedy’s majority’s opinion shielded government financing of religion against judicial review by guiding governments to go by “just one simple rule—subsidize through the tax system—to preclude taxpayer challenges to state funding of religion.” The lesson: circuitous subsidies skirt scrutiny.
While her dissent was measured and dignified, its subtext was not overly subtle. Justice Kennedy and his acolytes were averting appraisal of government funding for religion, thus violating the Constitution’s guarantee of religious neutrality. Because enforcement requires a case to be brought, shrinking the pool of potential plaintiffs to challenge government subsidies of religion meant, in effect, lowering the proverbial Jeffersonian wall of separation between church and state. Legal scholar Ronald Dworkin doffed his derby to Justice Kagan’s “devastating” dissent, contrasting it sharply with that of the “embarrassing” majority opinion led astray by a “bad” argument.9
As Justice Kagan and the dissenting justices saw it, the Arizona taxpayers demonstrated standing.10 In fact, the majority admitted having reached the merits in previous establishment clause cases involving tax expenditures.11
End Runs and Endgames
Justice Kagan pointed out the Kafkaesque circumstance that if the government handed cash to religious schools, taxpayers would have had standing, but because Arizona utilized a more sophisticated tax credit, the same taxpayer would not have standing. In the endgame, the cost to the state coffers was identical, regardless of how the checkmate was accomplished. Potentially unconstitutional expenditures were effectively ensconced beyond the court’s ken.
This result was a classic case of form prevailing over substance, she opined, and “the casualty is a historic and vital method of enforcing the Constitution’s guarantee of religious neutrality.” She wouldn’t touch a colleague’s coif but neither would she shrink from pointing out a cowlick in one’s reasoning.
Whatever one’s inclinations as to the merits of this case, we the people of the United States will never know whether such a tax system (scheme?) is constitutional. The only “check and balance,” then, is the will of the Arizona legislature, which will remain free to divert hundreds of millions of tax dollars through tax expenditures to religious schools.
In conclusion, Justice Kagan has shown herself in full possession of both an analytical and discerning mind and an eloquent and persuasive pen. Her dissenting opinion reveals a jurist thoroughly committed to following case precedent, mindful that legal protections are most secure when access to the courts is not thwarted, and, while this case was not decided on the merits, it revealed a justice cognizant that a robust establishment clause is indispensable to the Constitution’s guarantee of religious neutrality. No doubt Justice Kagan will continue to contribute to our understanding of the Constitution for years to come.
1 Erwin Chemerinsky, The Conservative Assault on the Constitution (New York: Simon and Schuster, 2010), p. 28.
2 Decided April 4, 2011. www.supremecourt.gov/opinions/10pdf/09-987.pdf
3 Ariz. Rev. Stat. Ann. §43–1089.
4 The establishment clause setting forth the antiestablishment principle, as described by Harvard constitutional law scholar Laurence H. Tribe, is the first of several pronouncements in the First Amendment to the United States Constitution. Specifically, it provides that “Congress shall make no law respecting an establishment of religion. . . .” Paired with the free exercise clause (“Congress shall make no law . . . prohibiting the free exercise thereof . . . ”), together these two clauses comprise what are often called the “religion clauses” of the Constitution. The U.S. Supreme Court in Everson v. Board of Education, 330 U.S. 1 (1947), applied the religion clauses of the Bill of Rights to states.
5 The case was technically about “standing,” that is, whether there was a legal right to initiate a lawsuit because the taxpayer was affected by the matter and it presented a case or controversy resolvable by legal action. Procedurally, the U.S. Supreme Court reversed the U.S. court of appeals’ determination that the taxpayers had standing. Earlier the U.S. district court had dismissed the case, concluding that the taxpayers lacked standing to bring the suit.
6 392 U.S. 83 (1968); http://supreme.justia.com/us/392/83/case.html.
7 Perhaps the divided Court was foreseeable, as the matter proved contentious from its inception. Even, or perhaps especially, groups deeply committed to religious liberty fractured over the issue. On the one hand, Becket Fund for Religious Liberty, Rutherford Institute, and even President Obama’s solicitor general argued that the taxpayers had no standing to challenge the tax credit in the first place. On the other hand, American Catholic bishops, Orthodox Jewish rabbis, and the Christian Legal Society argued that the taxpayers had standing and that the tax credit passed constitutional muster. And finally, Americans United for Separation of Church and State, the American Jewish Committee, and the Anti-Defamation League argued that the challengers had standing, but that the tax credit was unconstitutional.
10 Justice Kagan opined that the exception in Flast was met when the taxpayers challenging the Arizona tax credit alleged that it was enacted (1) pursuant to the state constitution’s taxing and spending clause in (2) violation of the U.S. Constitution’s establishment clause. That allegation, she opined, satisfied both Flast conditions. Plaintiffs had a “stake as taxpayers” and should have been permitted to proceed to have the courts review Arizona’s tax expenditure aid to religious schools.
11 Justice Kagan identified five cases in which the Supreme Court decided on the merits cases brought by taxpayers alleging that tax expenditures subsidized religion. While the justices had varying opinions as to the constitutionality of the tax expenditure, the Court in each case unanimously concluded that the taxpayer had standing to bring the claim: Walz v. Tax Commission of City of New York, 397 U. S. 664 (1970) (church property tax exemption); Hunt v. McNair, 413 U. S. 734 (1973) (tax-exempt bonds available to churches); Committee for Public Education and Religious Liberty v. Nyquist, 413 U. S. 756 (1973) (tax deduction for religious school tuition); Mueller v. Allen, 463 U.S. 388 (1983) (state tax deduction religious schools), and Winn I, 542 U.S., at 112 (tax credit available to religious school tuition organizations). Neither the Arizona Department of Revenue nor the dissenting judges of the court of appeals had questioned the plaintiffs’ standing to file suit.
Author: David A. Pendleton
David A. Pendleton has served as a schoolteacher, college instructor, trial lawyer elected state legislator, and policy advisor to a state governor, and now adjudicates workers' compensation appeals in Honolulu, Hawaii.