Jasper L. Cummings, Jr. (Alston & Bird, Raleigh, NC), Louis Brandeis, Antitrust, and a Functioning Tax System, 175 Tax Notes Fed. 241 (Apr. 11, 2022):
In this article, Cummings wonders what happened to Justice Louis Brandeis’s approach to deciding federal tax cases and whether it has anything to do with antitrust policy. ...
Justice Louis D. Brandeis was one of that small group of justices who wore the “tax wreath” during his tenure on the Supreme Court from 1916 to 1939. The chief justices assigned him the routine opinions in tax cases, which usually involved complex business arrangements or difficult but small-bore interpretational issues, or both. His fellow justices honored him by almost never dissenting or even concurring, and the few times they did, never writing a rebuttal to his reasoning.
He died 80 years ago so tax practitioners might know him only vaguely. To refresh, Brandeis makes Forrest Gump look like a shut-in. Brandeis was involved in most of the important legal and public events in the country during his lifetime.
He was not a narrow judge’s judge. He was the Court’s first Jewish member and an important leader of international Zionism, even though not an observant Jew. The American Bar Association opposed his appointment to the Court for reasons that are still debated, and his confirmation involved one of the first big fights over an appointment. He was a leading practitioner before joining the Court, both a litigator and a business lawyer, earning a lot of money in the practice of law. He taught at Harvard and wrote a seminal article on a civil right of great current interest — privacy. He involved himself in projects to help the disadvantaged, such as by inventing savings bank life insurance to help small savers buy insurance. He invented the Brandeis Brief, winning the first workers’ rights case in the Supreme Court, involving female workers. And he had substantial political influence with presidents Woodrow Wilson and Franklin D. Roosevelt. He was an architect of antitrust policy, based on the value of many small units actually competing with each other, as contrasted with the theory of competition now applied which seems to have resulted in hopefully benevolent practical monopolies.
Brandeis should be on any list of the top 10 justices of all time, including the great Chief Justice John Marshall, John Marshall Harlan, and Oliver Wendell Holmes Jr. From there the list might be more disputed, but this author would include Harlan Fiske Stone, Charles Evans Hughes, Robert H. Jackson, and Earl Warren.
Tax policy folks never consider that antitrust has any connection with taxation. But because Brandeis had fairly clear views on both, one can ask whether Brandeis’s federal tax opinions reveal a view of taxation that flows from the same sources as his view of competition and big business.
His tax opinions discussed in detail below reveal that Brandeis was a strong supporter of the federal taxing power who had little patience for the picayune arguments nontaxpayers like to make. He ruled or would have ruled for a federal taxpayer in less than 5 percent of the more than 60 federal tax cases in which he wrote an opinion. But he did not just say, “Taxpayer loses.” He was a consummate legal expert and precise writer who applied statutory interpretation with the sureness of a surgeon making her initial slice through the skin. He was a stickler for procedure and rejected many appeals for lack of jurisdiction, running of the statute of limitations, failure to raise an issue below, standing, need for lower court fact-finding, and so on.
Do strong antitrust policies and strong tax enforcement go together? Well, yes, they do. The link is the Founders’ purpose for replacing the confederation of colonies with the United States. They intended the federal government to be a power center that would play a strong role in offsetting other power centers. That role informs its relationship with the states as one possibly offsetting power center (which the Civil War supposedly settled), and it informs its role vis-à-vis the only other aggregators of power that could match its heft: wealth and big business. These were not identified as threats to federal power until the Gilded Age. Brandeis’s formative years as a lawyer for and against big business were during the Gilded Age when unbounded wealth and business combinations had their first heyday in America.
Brandeis supported regulating big business (and indirectly wealth) and also taxing it. It is no accident that today the political party that opposes antitrust enforcement also maintains only tepid support for the federal tax system. So the two do go together. Just as antitrust policy has slid into desuetude, tax enforcement has become a suspect activity to many. Brandeis didn’t think so.