Paul L. Caron

Thursday, April 25, 2019

The Judicial Embrace Of Local Excise Taxation

Navad Shoked (Northwestern), Cities Taxing New Sins: The Judicial Embrace of Local Excise Taxation, 79 Ohio St. L.J. 801 (2018):

The past decade has witnessed an unprecedented expansion in the number and reach of local excise taxes. Though excise taxes have always formed part of the American fiscal system, they have traditionally been largely state, or even federal, level taxes. Therefore, contemporary excise taxes that have received much attention—soda taxes, plastic bag taxes, gun taxes, and more—are innovative not only in the products they target, but also in the identity of the government imposing them: a city or county government. From a legal perspective, the most striking—and heretofore, largely unacknowledged—feature of this development is the wholehearted legal embrace of this turn to the local. This Article demonstrates that when confronting the new local excise taxes, courts have completely reversed their typically hostile attitude towards local action.

Usually courts insist that a locality identify a source of authority for any act it adopts. But when the contested local act is an excise tax, courts will only strike it down if an explicit state preempting law is shown—and, when present, they will interpret such a law narrowly. This result is achieved through the manipulation of a series of doctrines that are at play when local excise taxes are challenged, including doctrines pertaining to the interpretation of enabling acts, to home rule initiative powers, to implied preemption, to home rule immunity powers, to uniformity in taxation clauses, and more. The justifications courts provide for these moves draw on a formalistic, and rather unpersuasive, distinction between taxation and regulation. Still, this Article argues that courts’ resultant permissive attitude towards local excise taxation is worthwhile for other, substantive, reasons: local decision-making in this specific field promotes the political and economic normative values normally ascribed to localism.

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