Conservative forum

Court Urged to Strike Retroactive Tax Increases

The Washington Legal Foundation (WLF) recently filed a brief with the United States Court of Appeals for the 9th Circuit in California, on behalf of itself and one dozen U.S. senators and representatives, urging the court to reverse an Arizona federal district court's decision upholding the retroactive increase in the rates of federal gift and estate taxes.

The case stems from a tax provision of the 1993 Omnibus Budget Reconciliation Act made retroactive to Jan. 1, 1993, even though President Clinton did not sign the act into law until Aug. 10, 1993. Because of the retroactive provisions, taxpayers who died or made gifts on or after Jan. 1, 1993, found that the estate and gift tax rates shot up to 55%.

In its 38-page brief, WLF argued that retroactive tax increases violate the fundamental principle of the rule of law and due process by increasing taxes on events that occurred when lower tax rates were in effect. The brief also argued that the retroactive tax increases are ex post facto laws, expressly forbidden by the U.S. Constitution.

The district court agreed with the Justice Department that the desire to raise additional revenues is sufficient to justify raising taxes retroactively and that the taxpayers in this case should not obtain what the court characterized as a "windfall" by paying the tax rate in effect in January 1993 (when the taxable events occurred) simply because the rate at one time had been higher. The district court based its decision, in part, on the 1994 Supreme Court decision in United States v. Carlton.

In the Carlton case, the Supreme Court upheld a retroactive provision of a different tax law. In that case, however, the Supreme Court was careful to note that the estate tax deduction was being broadly interpreted beyond what Congress had originally intended, and therefore Congress was closing a loophole that would have, against Congress's wishes, drained the U.S. Treasury of over $7 billion and could do so retroactively. By sharp contrast, there was no mistake in the Quarty case or misinterpretation being corrected. The gift and estate tax rates were simply raised retroactively to generate more revenue.

"If this decision is allowed to stand, future Congresses can undo any tax relief legislation and retroactively raise income, gift and estate taxes, eliminate or reduce tax deductions to Individual Retirement Accounts, Educational Savings Accounts, or impose all kinds of penalties on the American taxpayers," said WLF's Executive Legal Director Paul D. Kamenar upon filing the brief. "Retroactive taxes are worse than changing the rules in the middle of the game. It's changing the rules after the game is over."

Sen. Paul Coverdell (R.-Ga.) has proposed SJ Res 17, a constitutional amendment that would preclude all retroactive taxes. Other proposals pending in the Senate would ban all estate taxes.

A decision in the case is expected later this year. For further information, contact WLF Executive Legal Director Paul D. Kamenar (202-588-0302).

Unions Would Need Written Permission From Members

The Worker Paycheck Fairness Act, recently introduced in Congress by Rep. Harris Falwell (R: Ill.), would require unions to get written permission from their members before using dues to pay for political contributions.

In a recent analysis of the proposed legislation, "The Worker Paycheck Fairness Act: Ending the Involuntary Use of Union Dues," Mark Wilson, the Heritage Foundation's Rebecca Lukens fellow in labor policy, says the act is aimed at enabling workers to exercise their rights under the 1988 Supreme Court decision in Communications Workers v. Beck, which ruled that workers are entitled to a refund if their union dues are used for political purposes with which they disagree. Unfortunately, Wilson says, "most union members are not even aware of their rights" under Beck.

"When it comes to issues related to the payment of union dues, workers have no single independent source upon which they can rely tbr accurate information concerning their rights," Wilson says. "Moreover, the U.S. Department of Labor refuses to provide union members with the information they need to make informed decisions.... Even worse, many workers who have tried to exercise their legal rights regarding union dues have been threatened, intimidated and stonewalled by union officials."

"As long as federal lay requires employers to bargain with union officials and gives unions exclusive representation rights over their members," Wilson concludes, "individual workers must have the freedom to decide, up front, whether their hard-earned money should be used for non-collective bargaining purposes, including political campaigns."

To obtain a copy of Wilson's report, contact the Heritage Foundation at 214 Massachusetts Ave. N.E., Washington, D.C. 20002 (202-54-4400), or visit the Heritage website at http://www.heritage.org.

Time to End Regulation Without Representation

Although Americans spend hundreds of billions of dollars every year to comply with federal environmental, safety and economic regulations, detailed, formal official accountings for regulatory costs rarely exist, asserts policy analyst Clyde Wayne Crews in '"en Thousand Commandments: A Policymaker's Snapshot of the Federal Regulatory State," published by the Competitive Enterprise Institute (CEI).