Opinion ID: 2223139
Heading Depth: 1
Heading Rank: 5

Heading: Differential Tax Cases

Text: Minneapolis Star & Tribune Co. v. Minnesota Commissioner of Revenue, 460 U.S. 575, 103 S.Ct. 1365, 75 L.Ed.2d 295 (1983), involved a challenge to a Minnesota use tax on the cost of paper and ink used in the production of publications. Ink and paper used in producing publications were the only items subject to the use tax that were components of goods to be sold at retail. The Minnesota legislature later amended the statute to exempt the first $100,000 worth of ink and paper consumed by a publication in any calendar year. After the exemption went into effect, only 11 publishers, producing 14 of the 388 paid circulation newspapers in the state, incurred a tax liability. Minneapolis Star & Tribune Co., 460 U.S. at 577-79, 103 S.Ct. at 1367-68, 75 L.Ed.2d at 299-300. The Supreme Court held that the tax statute violated the first amendment for two different reasons: (1) the tax singled out the press for special treatment ( Minneapolis Star & Tribune Co., 460 U.S. at 582-89, 103 S.Ct. at 1370-74, 75 L.Ed.2d at 302-07); and (2) the $100,000 exemption meant that only a handful of publishers paid any tax, and even fewer paid a significant amount of tax ( Minneapolis Star & Tribune Co., 460 U.S. at 591-92, 103 S.Ct. at 1375, 75 L.Ed.2d at 308-09). Thus, a small group of newspapers had been targeted. The Court struck the statute down, because the only state interest identified was in raising revenue. The Court explained that: A power to tax differentially, as opposed to a power to tax generally, gives a government a powerful weapon against the taxpayer selected. When the State imposes a generally applicable tax, there is little cause for concern. We need not fear that a government will destroy a selected group of taxpayers by burdensome taxation if it must impose the same burden on the rest of its constituency. Minneapolis Star & Tribune Co., 460 U.S. at 585, 103 S.Ct. at 1371, 75 L.Ed.2d at 304. Arkansas Writers' Project, Inc. v. Ragland, 481 U.S. 221, 107 S.Ct. 1722, 95 L.Ed.2d 209 (1987), involved a first amendment challenge to an Arkansas sales tax exemption from a generally applicable sales tax for newspapers and `religious, professional, trade, and sports journals and/or publications printed or published within this State.' Arkansas Writers' Project, Inc., 481 U.S. at 224, 107 S.Ct. at 1725, 95 L.Ed.2d at 216, quoting Ark. Stat. Ann. § 84-1904(j). The publisher of a general interest magazine that covered a wide variety of topics, including religion and sports, claimed that denying it the exemption that was allowed to other magazines violated its rights under the first and fourteenth amendments. The Court struck down the statute, explaining that selective taxation of the press  either singling out the press as a whole or targeting individual members of the press  poses a particular danger of abuse by the State. Arkansas Writers' Project, Inc., 481 U.S. at 228, 107 S.Ct. at 1727, 95 L.Ed.2d at 219. The Court held that the tax at issue impermissibly targeted a small group within the press. The Court found this tax scheme particularly problematic because a magazine's tax status depended entirely on its content. Arkansas Writers' Project, Inc., 481 U.S. at 229, 107 S.Ct. at 1728, 95 L.Ed.2d at 219-20. Because the Court invalidated the tax scheme on this basis, it did not reach the magazine's alternate claim that treating magazines and newspapers differently violated the first amendment. Justice Scalia and Chief Justice Rehnquist dissented, arguing that the subsidy scheme struck down here was no different from others that the Court had upheld. Arkansas Writers' Project, Inc., 481 U.S. at 235-38, 107 S.Ct. at 1730-32, 95 L.Ed.2d at 223-25 (Scalia, J., dissenting, joined by Rehnquist, C.J.). In Leathers v. Medlock, 499 U.S. 439, 111 S.Ct. 1438, 113 L.Ed.2d 494 (1991), a cable television subscriber and a trade organization of cable operators brought a first amendment challenge to Arkansas's sales tax on cable television services. Arkansas imposed a gross receipts tax on the sale of tangible personal property and specified services. However, the statute in question expressly exempted receipts from subscription and over-the-counter newspaper sales and subscription magazine sales. Cable television was not exempted. Leathers, 499 U.S. at 441-43, 111 S.Ct. at 1440-41, 113 L.Ed.2d at 500-01. The Court rejected the first amendment challenge, explaining that differential taxation of first amendment speakers is constitutionally suspect when it threatens to suppress the expression of particular ideas or viewpoints. Leathers, 499 U.S. at 447, 111 S.Ct. at 1443, 113 L.Ed.2d at 503. The Court explained that the government may not, without a compelling justification: (1) exercise its taxing power to single out the press; (2) target a small group of speakers; or (3) discriminate on the basis of the content of taxpayer speech. Leathers, 499 U.S. at 447, 111 S.Ct. at 1443-44, 113 L.Ed.2d at 503-04. The Court found none of those situations present. First, the tax was a tax of general applicability that did not single out the press. Second, a narrow group had not been selected to fully bear the burden of the tax. Third, the Court found that the Act was not content based; it simply applied to all cable television services. Leathers, 499 U.S. at 447-48, 111 S.Ct. at 1443, 113 L.Ed.2d at 503-04. The Court explained that differential taxation 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. Leathers, 499 U.S. at 453, 111 S.Ct. at 1447, 113 L.Ed.2d at 507-08. The Court found no problem with the Arkansas statute because the state legislature had chosen simply to exclude or exempt certain media from a generally applicable tax. Nothing about that choice has ever suggested an interest in censoring the expressive activities of cable television. Nor does anything in this record indicate that Arkansas' broad-based, content-neutral sales tax is likely to stifle the free exchange of ideas. Leathers, 499 U.S. at 453, 111 S.Ct. at 1447, 113 L.Ed.2d at 508. In Speiser v. Randall, 357 U.S. 513, 78 S.Ct. 1332, 2 L.Ed.2d 1460 (1958), a group of honorably discharged World War II veterans were denied property tax exemptions for failing to sign a loyalty oath. The California constitution provided veterans with a property tax exemption. Beginning in 1954, the form to apply for the exemption contained a loyalty oath whereby the applicant would agree not to advocate the overthrow of the United States or California governments by force, violence or other unlawful means or to advocate the support of a foreign government against the United States. The oath was added pursuant to a statute that attempted to implement a constitutional amendment that provided that no one who advocates the overthrow of the government can receive any tax exemption. The veterans argued that the statute denied them freedom of speech without the procedural safeguards required by the due process clause of the fourteenth amendment. Speiser, 357 U.S. at 514-17, 78 S.Ct. at 1336-37, 2 L.Ed.2d at 1466-67. The Court found that, although the state constitutional provision was valid, the method that the state had chosen to implement it was not, and that the veterans could not be required to execute the declaration as a condition for obtaining a tax exemption. The Court ultimately invalidated the statute on due process grounds, but, as part of its analysis, the Court explained: It cannot be gainsaid that a discriminatory denial of a tax exemption for engaging in speech is a limitation on free speech. The Supreme Court of California recognized that these provisions were limitations on speech but concluded that `by no standard can the infringement upon freedom of speech imposed by section 19 of article XX be deemed a substantial one.' [ First Unitarian Church v. County of Los Angeles ], 48 Cal.2d 419, 440, 311 P.2d 508, 521. It is settled that speech can be effectively limited by the exercise of the taxing power. Grosjean v. American Press Co., 297 U.S. 233[, 56 S.Ct. 444, 80 L.Ed. 660]. To deny an exemption to claimants who engage in certain forms of speech is in effect to penalize them for such speech. Its deterrent effect is the same as if the State were to fine them for this speech. The appellees are plainly mistaken in their argument that, because a tax exemption is a `privilege' or `bounty,' its denial may not infringe speech. This contention did not prevail before the California courts, which recognized that conditions imposed upon the granting of privileges or gratuities must be `reasonable.' It has been said that Congress may not by withdrawal of mailing privileges place limitations upon the freedom of speech which if directly attempted would be unconstitutional. See Hannegan v. Esquire, Inc., 327 U.S. 146, 156[, 66 S.Ct. 456, 90 L.Ed. 586]; cf. Milwaukee Publishing Co. v. Burleson, 255 U.S. 407, 430-431[, 41 S.Ct. 352, 65 L.Ed. 704] (Brandeis, J., dissenting). This Court has similarly rejected the contention that speech was not abridged when the sole restraint on its exercise was withdrawal of the opportunity to invoke the facilities of the National Labor Relations Board, American Communications Assn. v. Douds, 339 U.S. 382, 402[, 70 S.Ct. 674, 94 L.Ed. 925], or the opportunity for public employment, Wieman v. Updegraff, 344 U.S. 183[, 73 S.Ct. 215, 97 L.Ed. 216]. So here, the denial of a tax exemption for engaging in certain speech necessarily will have the effect of coercing the claimants to refrain from the proscribed speech. The denial is `frankly aimed at the suppression of dangerous ideas.' American Communications Assn. v. Douds, supra, at 402 [70 S.Ct. 674]. Speiser, 357 U.S. at 518-19, 78 S.Ct. at 1338, 2 L.Ed.2d at 1468.