The Court in Dole sidestepped this concern, however, because it deemed that the penalty involved was so small that it was merely an “encouragement.” Still, warned Chief Justice William Rehnquist, “Our decisions have recognized that in some circumstances the financial inducement offered by Congress might be so coercive as to pass the point at which pressure turns into compulsion.”
In that seeming concession to moderation lies a logical fallacy of huge institutional importance. Coercion is coercion, whether the “financial inducement” is one dollar or 20 billion. When the federal government first taxes money away from the states and then offers to give it back to them only on condition that they comply with certain conditions, there is coercion, regardless of how much money is put on the table. The practice is either permissible, or it is impermissible. There is in fact no “point at which pressure turns into compulsion.” A requirement backed by a tax penalty is either compulsion in all cases, or it is compulsion in no case.
To prove the point, in the 25 years since Dole
was handed down, virtually every federal court that has ruled on a Dole
coercion challenge was decided on summary judgment, before a trial on the facts. Summary judgment is appropriate when, of the facts as admitted by the parties before the full trial, one of them is entitled to judgment in its favor as a matter of law. And sure enough, in the case now before the Supreme Court, the trial court below ruled that the federal government was entitled to summary judgment because it didn’t matter how onerous the penalty was: The government can impose any and all conditions it wants on the funds it gives to the states. The doctrine of unconstitutional conditions seems a dead letter.
But it need not be. In dealing with this issue IJ relies on the Court’s historic decision in New York v. United States (1992), which struck down a law that required states either to take title to low-level radioactive waste within their borders, or regulate its disposal according to Congress’s instructions. In that case, the Supreme Court ruled that Congress could not impose upon the states a choice between two options, neither of which it could impose as a free-standing requirement.
New York on its own can’t sustain IJ’s argument because New York explicitly embraces Dole’s distinction between “encouragement” and “compulsion.” Demolishing that distinction should have been IJ’s first task, and it is a task to which the Supreme Court must turn sooner or later.
Yesterday the Supreme Court gave the solicitor general a rough time when he sought to justify the individual mandate as a use of the taxing power. Our hope is that in today’s argument, the Court will show a similar skepticism toward the use of the federal taxing in the Medicaid context. The Court should not let the federal government use its taxing power to coerce states into spending vast sums of money for programs that are directed from Washington.
The current program calls for the federal government to pick up most of the tab for the new programs, but that will not be true in the out years. If Dole remains controlling law, the federal government could scale down its own contributions to levels that threaten to push states, already in financial distress, over the brink. The states would likely buckle to the federal will as they always have before the taxing power, and that would spell the end of federalism.
In reaching the right decision, the Court can rely on earlier cases that understood the potential for abuse in the tax and spend power. That much was settled in the Child Labor Tax cases, which have not been overruled, and which show the power of the doctrine of unconstitutional conditions as a way to keep the federal government operating within its intended constitutional limits.
The time has come to revive this long-established constitutional tradition. The Court should recognize what has always been the case, namely, that “encouraging” compliance with some government scheme by threatening the loss of your tax dollars is every bit as much “compulsion” as when the government seeks to enforce some law through a penalty it can impose as a free-standing tax.
It should resolve the profound confusion that guided its decisions in Dole and New York, both of which embraced the foolish notion that the difference between an “encouraging” penalty and a “compelling” one is merely a matter of degree. The five conservative justices showed yesterday a renewed intellectual toughness. If they believe in the principles of limited federal power, they should ask the federal government to explain what limiting principle on the taxing power can save the Medicaid expansion from its well-deserved invalidation.
— Mario Loyola is director of the Center for Tenth Amendment Studies at the Texas Public Policy Foundation. Richard Epstein is the Laurence A. Tisch Professor of Law at the New York School of Law.