Instant Analysis: Arizona Christian School Tuition Organization v. Winn

April 4th, 2011

Back in November after oral arguments, I quipped that “Winn will fail.” Today, we see thatWinn in fact, did not win. #notwinning. Justice Kennedy, writing for a 5 member majority, found that the challengers lacked standing under Flast v. Cohen to challenge the tax credit, since it was not a governmental expenditure. Justice Scalia concurred in judgment, joined by Justice Thomas. Justice Kagan wrote the dissent for Ginsburg, Breyer, and Sotomayor. I think this is Kagan’s first prominent 5-4 dissent.

I will update this post as I make my way through the opinion.

Majority Opinion

From the syllabus, we see that the challengers do not fall within the “narrow” Flast exception.

The STO tax credit does not visit the injury identified in Flast. When the Government spends funds from the General Treasury, dissentingtaxpayers know that they have been made to contribute to an establishment in violation of conscience. In contrast, a tax credit allows dissenting taxpayers to use their own funds in accordance with their own consciences. Here, the STO tax credit does not “extrac[t] and spen[d]” a conscientious dissenter’s funds in service of an establishment, 392 U. S., at 106, or “ ‘force a citizen to contribute’ ” to a sectarian organization, id., at 103. Rather, taxpayers are free to pay theirown tax bills without contributing to an STO, to contribute to a religious or secular STO of their choice, or to contribute to other charitable organizations. Because the STO tax credit is not tantamount to a religious tax, respondents have not alleged an injury for standing purposes. Furthermore, respondents cannot satisfy the requirements of causation and redressability. When the government collects and spends taxpayer money, governmental choices are responsible for the transfer of wealth; the resulting subsidy of religious activity is, under Flast, traceable to the government’s expenditures; and an injunctionagainst those expenditures would address taxpayer-plaintiffs’ objections of conscience. Here, by contrast, contributions result from the decisions of private taxpayers regarding their own funds. Private citizens create private STOs; STOs choose beneficiary schools; and taxpayers then contribute to STOs. Any injury the objectors may suffer are not fairly traceable to the government. And, while an injunction most likely would reduce contributions to STOs, that remedywould not affect noncontributing taxpayers or their tax payments.Pp. 10–16.

Further, the Court rejected the position that because “Arizonans benefiting from the tax credit in effect are paying their state income tax to STOs,” “all income is government property, even if it has not come into the tax collector’s hands.”

This mirrors a comment that Justice Kennedy made during oral arguments:

JUSTICE KENNEDY: I’ll — I’ll give you credit, Mr. Bender. In your brief you say if you are wrong on that point that you are folding your tent and leaving, there’s –that there is no standing and that there’s no — no violation. But I must say, I have some difficulty that any money that the government doesn’t take from me is still the government’s money.

There is an interesting spin on economics in this opinion, and the role of taxes to stimulate economic productive.

Justice Kennedy, in a somewhat Keynesian position, writes.

When a government expends resources ordeclines to impose a tax, its budget does not necessarilysuffer. On the contrary, the purpose of many governmental expenditures and tax benefits is “to spur economicactivity, which in turn increases government revenues.” . . . Because it encourages scholarships for attendance at private schools, the STO tax credit may not cause the State to incur any financial loss

Justice Kagan rejects this position in a footnote.

The majority observes that special tax benefits may in fact “increas[e] government revenues” by “spur[ring] economic activity.” Ante, at 8 (internal quotation marks omitted). That may be so in the longrun (although the only non-speculative effect is to immediately diminish funds in the public treasury). But as the majority acknowledges, ibid., this possibility holds just as true for appropriations; that is whywe (optimistically) refer to some government outlays as “investments.”The insight therefore cannot help the majority distinguish between taxexpenditures and appropriations.

Justice Scalia’s Concurring Opinion

Scalia one-page concurring opinion, joined by Justice Thomas makes a simple point—Flast is an outlier, and he would get rid of it:

Flast is an anomaly in our jurisprudence, irreconcilable with the Article III restrictions on federal judicial power that our opinions have established. I would repudiate that misguided decision and enforce the Constitution.

Justice Kagan’s Dissenting Opinion

Justice Kagan, in what I believe is her first significant 5-4 dissent, wrote a substantial 23 page opinion (the majority’s opinion was less than 20 pages). The thrust of her opinion is that accsess to federal courts is further constrained (continuing the Iqbal trope), and that now violations of the establishment clause will go unaddressed.

She opens in very powerful language, how the Court departs from four decades of Flast, whereby plaintiffs, with or without meritorious claims, had their day in Court.

For almost half a century, litigants like the Plaintiffs have obtained judicial review of claims that the government has used its taxing and spending power in violationof the Establishment Clause. Beginning in Flast v. Cohen, 392 U. S. 83 (1968), and continuing in case after case for over four decades, this Court and others have exercised jurisdiction to decide taxpayer-initiated challenges not materially different from this one. Not every suit hassucceeded on the merits, or should have. But every taxpayer-plaintiff has had her day in court to contest thegovernment’s financing of religious activity.
Today, the Court breaks from this precedent by refusing to hear taxpayers’ claims that the government has unconstitutionally subsidized religion through its tax system.These litigants lack standing, the majority holds, becausethe funding of religion they challenge comes from a tax credit, rather than an appropriation. A tax credit, the Court asserts, does not injure objecting taxpayers, becauseit “does not extract and spend [their] funds in service of anestablishment.” Ante, at 15 (internal quotation marks and alterations omitted).
. . .
In not a single non-trivial respect could the Flast Court recognize its handiwork in the majority’s depiction.

Kagan rejects the Majority’s distinction between tax appropriations and tax credits/expenditures, and laments that today’s opinion will enable legislatures to “end-run Flast’s guarantee of access to the Judiciary.”

This novel distinction in standing law between appropriations and tax expenditures has as little basis in principle as it has in our precedent. Cash grants and targeted tax breaks are means of accomplishing the same government objective—to provide financial support to select individuals or organizations. Taxpayers who oppose stateaid of religion have equal reason to protest whether that aid flows from the one form of subsidy or the other. Either way, the government has financed the religious activity.And so either way, taxpayers should be able to challenge the subsidy.
Still worse, the Court’s arbitrary distinction threatens toeliminate all occasions for a taxpayer to contest the government’s monetary support of religion. Precisely becauseappropriations and tax breaks can achieve identical objectives, the government can easily substitute one for the other. Today’s opinion thus enables the government toend-run Flast’s guarantee of access to the Judiciary. From now on, the government need follow just one simple rule—subsidize through the tax system—to preclude taxpayer challenges to state funding of religion.

Curiously, Justice Kagan uses the example of bank bailouts, an example that surely likely appeals to supporters of the Tax Credit, to illustrate this “distinction . . . in search of a difference.”

To begin to see why, consider an example far afield from Flast and, indeed, from religion. Imagine that the Federal Government decides itshould pay hundreds of billions of dollars to insolvent banks in the midst of a financial crisis. Suppose, too, thatmany millions of taxpayers oppose this bailout on theground (whether right or wrong is immaterial) that it usestheir hard-earned money to reward irresponsible business behavior. In the face of this hostility, some Members ofCongress make the following proposal: Rather than givethe money to banks via appropriations, the Governmentwill allow banks to subtract the exact same amount from the tax bill they would otherwise have to pay to the U. S. Treasury. Would this proposal calm the furor? Or would most taxpayers respond by saying that a subsidy is a subsidy (or a bailout is a bailout), whether accomplished by the one means or by the other? Surely the latter; in deed, we would think the less of our countrymen if theyfailed to see through this cynical proposal

In very ominous language, Kagan signals the “effective demise of taxpayer standing.”

And that result—the effective demise of taxpayer standing—will diminish the Establishment Clause’s force andmeaning. Sometimes, no one other than taxpayers has suffered the injury necessary to challenge government sponsorship of religion. Today’s holding therefore willprevent federal courts from determining whether some subsidies to sectarian organizations comport with our Constitution’s guarantee of religious neutrality. Because I believe these challenges warrant consideration on the merits, I respectfully dissent from the Court’s decision.

Kagan’s concluding paragraph sounds a similarly alarmist tone.

Today’s decision devastates taxpayer standing in Establishment Clause cases. The government, after all, oftenuses tax expenditures to subsidize favored persons and activities. Still more, the government almost always has this option. Appropriations and tax subsidies are readily interchangeable; what is a cash grant today can be a taxbreak tomorrow. The Court’s opinion thus offers a roadmap—more truly, just a one-step instruction—to anygovernment that wishes to insulate its financing of religious activity from legal challenge. Structure the funding as a tax expenditure, and Flast will not stand in the way.No taxpayer will have standing to object. However blatantly the government may violate the Establishment Clause, taxpayers cannot gain access to the federal courts. And by ravaging Flast in this way, today’s decision damages one of this Nation’s defining constitutional commitments. “Congress shall make no law respecting anestablishment of religion”—ten simple words that have stood for over 200 years as a foundation stone of Americanreligious liberty. Ten words that this Court has longunderstood, as James Madison did, to limit (though by no means eliminate) the government’s power to finance religious activity. The Court’s ruling today will not shield all state subsidies for religion from review; as the Court notes, some persons alleging Establishment Clause violations have suffered individualized injuries, and therefore have standing, independent of their taxpayer status. See ante, at 1–2, 17–18. But Flast arose because “the taxingand spending power [may] be used to favor one religionover another or to support religion in general,” 392 U. S., at 103, without causing particularized harm to discrete persons. It arose because state sponsorship of religionsometimes harms individuals only (but this “only” is no small matter) in their capacity as contributing members of our national community. In those cases, the Flast Court thought, our Constitution’s guarantee of religious neutrality still should be enforced