Opinion ID: 5142158
Heading Depth: 4
Heading Rank: 1

Heading: Supreme Court Case Law

Text: Taxation is, of course, essential to the support of government – a certainty sometimes equated to mortality.9 Unsurprisingly, perhaps, the Supreme Court has reiterated that, even in the context of the First Amendment, there is a strong presumption in favor of the validity of tax legislation. Leathers v. Medlock, 499 U.S. 439, 451 (1991); Regan v. Taxation with Representation, 461 U.S. 540, 547-48 (1983). Nevertheless, the choices that a legislature makes in devising a tax scheme may be a means of penalizing or discouraging speech and thereby violate the First Amendment. The Supreme Court has 9 Benjamin Franklin is said to have coined the phrase “Nothing is certain except death and taxes.” National Constitution Center, Benjamin Franklin’s last great quote and the Constitution (November 13, 2019). 12 grappled in a series of cases with defining when a taxation scheme involving public media may infringe First Amendment rights. See Leathers, supra.; Arkansas Writers’ Project, Inc. v. Ragland, 481 U.S. 221 (1987); Minneapolis Star & Tribune Co. v. Minnesota Commissioner of Revenue, 460 U.S. 575 (1983); Grosjean v. American Press Co., 297 U.S. 233 (1936). Grosjean In Grosjean, Louisiana imposed a 2% gross receipts tax on the sale of advertising in newspapers, magazines and other publications with a circulation of more than 20,000 copies per week. 297 U.S. at 240. Only 13 of the 137 newspapers circulating in Louisiana at that time were subject to the tax. Id. at 241. The publishers of the newspapers subject to the tax brought an action to enjoin it, invoking the First Amendment. In discerning the purpose of the First Amendment, the Supreme Court recounted a brief history of British taxes on newspapers that were effectively “taxes on knowledge” and that acted as a prior restraint on the free press, which the Court lauded as “one of the great interpreters between the government and the people.” Id. at 246-50. The Court observed that the opposition to such laws was not so much an effort to avoid taxation as to “preserve the right of the English people to full information in respect of the doings and misdoings of their government.” Id. at 247. On the other hand, the Court stated that the concern that a particular tax might be motivated to suppress criticism did not relieve newspapers from “ordinary forms of taxation for support of the government.” Id. at 250. In the case before it, the Court found the Louisiana tax to be “suspicious” as the tax was measured, not by the volume of advertising, but solely by the extent of the newspaper’s 13 circulation, with the “plain purpose of penalizing the publishers and curtailing the circulation of a selected group of newspapers.” Id. at 251. Although not explicitly mentioned in the Court’s opinion, it was apparently well known at the time that the proponents of the measure had a retaliatory motive similar to that underlying the English tax legislation described in the Court’s opinion as part of the Framers’ inspiration for the First Amendment.10 Minneapolis Star The Minneapolis Star decision concerned certain amendments to the Minnesota sales and use taxes. Prior to the amendments, periodic publications such as newspapers had been exempt from those taxes. 460 U.S. at 577. As a result of the amendments, the newspapers remained exempt from the sales tax, but ink and paper used in the publications were made subject to the use tax; a provision exempted the first $100,000 of those items consumed by a publication. Id. at 577-78. The end result was that only a small fraction of the newspapers circulating in Minnesota – 14 of 388 newspapers – were subject to the use tax and one publisher accounted for two-thirds of the revenues from the tax. Id. at 578-79. 10 See City of Baltimore v. A.S. Abell Co., 218 Md. 273, 284-85 (1958) (noting that the tax under review in Grosjean was supported by Senator Huey Long as a form of retaliation against publications that had opposed his political agenda); Minneapolis Star & Tribune Co. v. Minnesota Comm’r of Revenue, 460 U.S. 575, 579-80 (1983) (quoting a circular distributed by the Louisiana governor and Senator Long characterizing the publications subject to the tax as “lying newspapers” and the Louisiana tax as a “tax on lying”); see also Edward J. Gerald, The Press and the Constitution 1931-1947 at 100-01 (1948). 14 The Supreme Court found that, although newspapers are appropriately subject to general economic regulation, including taxes, this application of the Minnesota sales and use taxes singled out the press for special treatment. 460 U.S. at 582. The Court observed that the use tax on paper and ink did not serve the normal function of a use tax – offsetting the incentive a sales tax creates for purchasing taxable items out-of-state – because the Minnesota tax applied to items (ink and paper) that were exempt from the sales tax. Id. at 582. In addition, and contrary to the “ordinary rule” in Minnesota that only the ultimate retail sale and not intermediate transactions were taxed, this use tax applied to intermediate components even though they would ultimately become part of a publication sold at retail. Id. Moreover, the tax not only singled out the press, but targeted a small subset of the press – those using paper and ink costing in excess of $100,000. The Court rejected Minnesota’s justification for this disparity – that it was favoring smaller businesses – because the state’s tax “resemble[d] more a penalty for a few of the largest newspapers than an attempt to favor struggling smaller enterprises.” Id. at 592. The Court stated that, even if the legislature had no “illicit” intent, “a tax that singles out the press, or that targets individual publications within the press, places a heavy burden on the State to justify its action.” Id. at 592-93. Arkansas Writers’ Project The Arkansas Writers’ Project decision concerned application of a gross receipts tax on the sale of tangible personal property in Arkansas. There were numerous exemptions from the tax, including for: “[g]ross receipts or gross proceeds derived from the sale of newspapers” and “religious, professional, trade and sports journals and/or 15 publications printed and published within this State ... when sold through regular subscriptions.” 481 U.S. at 224. The Court struck down the tax on two grounds. First, as with the sales and use tax in Minneapolis Star, the exemptions from the Arkansas tax meant that the tax effectively targeted a small group of speakers – those magazines not encompassed in the exemptions. Id. at 229. Second, the tax discriminated based on content of a taxpayer’s speech because application of the magazine exemption depended on a review of the subject matter of the publication. Id. As to the latter rationale, the Court stated that it did not matter that the tax was based on the general subject matter of the publication, as opposed to the expression of a particular viewpoint on that subject matter. Id. at 230. Leathers In the Leathers decision, the Supreme Court reprised its prior discussions of the First Amendment in the context of tax laws affecting the media, but distinguished the operation of the tax in question from those that the Court had found to violate the First Amendment in Grosjean, Minneapolis Star, and Arkansas Writers’ Project. The Leathers case arose from an amendment that extended an Arkansas sales tax on sales of personal property and specified services to include the services of cable television operators. Sales of newspapers and magazines remained exempt from the tax, and the amendment did not extend the tax to satellite broadcast television services. 499 U.S. at 441-43. The tax was challenged as violative of the First Amendment. The Court thus addressed the question “whether the First Amendment prevents a State from imposing its sales tax on only selected segments of the media.” Id. at 444. 16 The Court summarized the principles it distilled from its prior decisions: [D]ifferential taxation of First Amendment speakers is constitutionally suspect when it threatens to suppress the expression of particular ideas or viewpoints. Absent a compelling justification, the government may not exercise its taxing power to single out the press. The press plays a unique role as a check on government abuse, and a tax limited to the press raises concerns about censorship of critical information and opinion. A tax is also suspect if it targets a small group of speakers. Again, the fear is censorship of particular ideas or viewpoints. Finally, for reasons that are obvious, a tax will trigger heightened scrutiny under the First Amendment if it discriminates on the basis of the content of taxpayer speech. 499 U.S. at 447 (citations omitted).11 The Court also stressed that the inevitable classifications and distinctions made by legislatures in designing a tax statute are entitled to a strong presumption of constitutionality. Id. at 451-52. As to the case before it, the Court observed that the Arkansas tax was generally applicable and did not single out the press; nor was it structured so as to raise suspicions that it was intended to interfere with a cable operator’s First Amendment activities. 449 U.S. at 447-48. In contrast to the operation of the tax and exemption in Arkansas Writers’ Project – which effectively targeted a small group of magazines for the tax and exempted others – the tax at issue in Leathers applied uniformly to all cable systems in the state. Id. Finally, the Supreme Court concluded that the tax did not discriminate on the basis of the content of taxpayer speech. Id. at 449. The Court stressed that the underlying concern of the First Amendment is the potential for censorship of ideas. Thus, “differential taxation 11 Although the Leathers opinion referred to the standard of review in such cases with the phrase “heightened scrutiny,” the Supreme Court later indicated that the standard was equivalent to that meant by the more familiar phrase “strict scrutiny.” See Turner Broadcasting System, Inc. v. FCC, 512 U.S. 622, 661 (1994). 17 of speakers, even members of the press, does not implicate the First Amendment unless the tax is directed at, or presents the danger of suppressing, particular ideas.” Id. at 453.12