Opinion ID: 2004064
Heading Depth: 1
Heading Rank: 7

Heading: Usurpation of the Power to Tax

Text: It is undisputed that if the payments at issue in this case are properly characterized as taxes, the State has violated the Constitution. Taxation is the province of the Legislature ( see NY Const, art III, § 1; art XVI, § 1) and DOCS makes no claim that it may levy taxes without legislative authorization. Taxation is, of course, the normal means by which states raise revenue, but two others have been recognized, which may be labeled as user fees (e.g., the State can charge for licenses to defray the cost of a regulatory program) and market transactions (e.g., the State can rent its unused office space, or sell its surplus property, for whatever it can get). (Perhaps there are still other valid ways of raising revenue, but no one has claimed that they are applicable in this case.) The payments in issue here cannot be defended as user fees, because the power to charge such fees is limited by the rule that the fees charged be reasonably necessary to the accomplishment of the regulatory program ( Suffolk County Bldrs. Assn. v County of Suffolk, 46 NY2d 613, 619 [1979]; see also Jewish Reconstructionist Synagogue of N. Shore v Incorporated Vil. of Roslyn Harbor, 40 NY2d 158, 162-163 [1976]). Thus, DOCS either unconstitutionally exercised the taxing power or it engaged in legitimate market transactions. I conclude that it did the former. The majority holds that DOCS was engaging in market transactions, drawing an analogy to a per-call commission that might be charged by an owner of real property for use of a pay telephone in a public airport or a private shopping mall (majority op at 486). The majority overlooks an obvious distinction: the people who use the phones at airports and shopping malls are not prevented from leaving the premises by armed guards. The owner of the shopping mall is ordinarily a private entity; the owner of the airport may be a public one, but in allowing use of its premises for a pay telephone it is acting essentially as a private market participant. It is not exploiting, to quote Judge Posner once more, the monopoly of force that is the definition of government ( Arsberry, 244 F3d at 566). Here, the State has used its imprisonment of inmates as a source of economic leverage. I cannot accept this as legitimate market activity. If the State can do this, why could it not charge for in-person visits to prison inmatesat a rate 50 times the cost of making such visits possible? Why could it not charge commissionslimited not by the State's costs, but only by what the traffic would bearon sums earned by inmates in work release programs? Why could it not charge prisoners who seek furloughs an amount limited only by the prisoners' willingness to pay? I cannot believe that the majority would characterize any of these transactions as normal attempts by a government agency to turn a profit in a marketplace, but the majority offers no adequate explanation of why the transactions in this case are different. A tax is a compulsory contribution for the purpose of defraying the cost of government ( American Ins. Assn. v Lewis, 50 NY2d 617, 623 [1980]). Our cases establish that a contribution may be compulsory without being literally compelled on pain of fine or imprisonment: thus, the fees imposed on insurers in American Insurance Association were taxes, even though the insurance companies were not literally compelled to transact business in the State; the fees in Jewish Reconstructionist Synagogue were taxes, though the synagogue was not compelled to apply for zoning permits and variances; and the fees in Suffolk County Builders would (if not legitimate user fees) have been taxes, though the builders were not compelled to seek licenses and approvals, or even to put up buildings. The question is whether the State has applied an unacceptable degree of coercion in exacting the payments. As Justice Holmes explained in Federal Land Bank of New Orleans v Crosland (261 US 374, 378 [1923])a case holding that fees charged for the recording of deeds were an unlawful tax, to the extent they exceeded the state's expenses of maintaining its registry: The State . . . cannot use its control as a means to impose a liability that it cannot impose directly. I would hold that where, as in this case, the State has leveraged its police power for a profit, enough coercion is present to make the transaction involuntarya tax, not an innocent marketplace exchange.