Tax Reform: Only One Part of a Broad Plan

Earlier this month, the New York State legislature passed a budget that included several important tax reforms. NFIB/NY identified several of these measures as priorities in its 2014 Legislative Agenda, including reform of the estate tax, tax cuts for manufacturers, the repeal of the 18A energy tax and a rate reduction for businesses filing as corporations. The Department of Tax and Finance yesterday released a summary of provisions with a detailed description of the reforms and effective dates.

Tax reform is only one part of a necessary and critical plan to improve the outlook for small business in New York State. A breakdown of recently passed legislation showed that policies have negatively impacted small business far more often than they have helped. With only nine weeks left in the legislative session, what should  Albany do to start fixing its small business problem? Leave a comment below with your suggestions.

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Albany’s Small Business Problem

In a town where superlatives flow unabated, perhaps at no greater intensity than the days that follow a state budget deal, its time for a reality check.

Albany has a small business problem.

This is not a new problem that appeared overnight.   Frankly this is a long standing issue that has slowly simmered for decades and every now and then reaches a breaking point.

We are now close to that point.

When you look at the facts and examine the issues outside the proverbial vacuum, it becomes clear that for every legislative “achievement” aimed at reforming New York’s business climate or tax code, small businesses are receiving minimal benefits while being forced to deal with the maximum struggles.

This most recent escalation of Albany’s small business problem starts with the minimum wage increase last year.  While some of the bigger box stores and major manufacturer’s could absorb an increase, small businesses are dealing with the blunt impact of the hike.  Yes, it is going to be phased in and was not indexed to inflation, but minimum wage (labor costs) are a crucial cost driver that is hampering small business.

After the minimum wage debacle and perhaps as a counter to some constant criticism that Albany had yet to push a comprehensive business-centric initiative, Tax-Free or now Start UP NY appeared in the closing days of session last June.

No taxes?!  Albany is finally listening and cutting taxes?!  Hold the phones!!

Well, not really.  Albany must have found dealing with the current tax structure would be too complicated, so the push was to offer massive tax breaks for businesses not yet here in the comfy business confines of New York.  So while main street got handed a minimum wage hike, Albany is offering a major handout to entice entrepreneurs to move to New York.  Political simplicity at its finest.

Imagine how that sits with small businesses.

Albany then turned its attention to cutting taxes for businesses actually in New York in 2014.  Through public hearings, tax commissions, a budget process and no shortage of positive soundbites, what did we end up with? A very muddy mixed bag.

We have a property tax freeze (really a rebate check scheme) that may help some communities, will minimally help others and by the way, do absolutely nothing to help reduce property tax costs for small business.

Then we have a corporate tax cut which will reduce taxes for big business and some small businesses, but not the majority.  While this is positive, it holds scattered positive impact for mom and pop businesses.

A much needed estate tax reform.  Ok, I’ll give that one it’s proper due.  This is very helpful to family owned businesses and farms and perhaps the one small business specific reform in the entire package.

And finally, substantial tax reform/reductions for New York’s manufacturers.  Definitely a part of New York’s economy, particularly in upstate New York, that could use a infusion of cost reductions.

Now NFIB/NY supported three of those initiatives while strongly opposing the property tax scheme.   We also continuously called the plan incomplete and pushed to broaden the impact.  Perhaps it was deaf ears or maybe hubris, but the plan unfortunately remained largely as proposed. And while it is positive that Albany focused on cutting taxes and helping restore some fiscal flexibility for businesses, once again small business is left searching for the maximum impact of this reform.

This is where Albany’s small business problem is coming to a head.  Too often, particularly in an election year, small business is a popular soundbite.  What has Albany done specifically for small business?  Little.

Our members do not have time for soundbites.  They have heard them for far too long and seen far too little actual positive action.  Small business cannot continue to be the altar where progressive new mandates are laid upon while big business gets all the tax breaks.

Albany needs to understand that one out of five New Yorkers work for a business that employs twenty or fewer.  Albany needs to come to grips that for all the talk of righting the course for business in New York, there has not been much done for main street.  So for all the TV commercials and commentary that this is a “new NY” or that the trajectory is changed for business, the fact remains that while maybe true for some, it is false for small business.  This isn’t being negative for the sake of being negative.  This is being nuance free and offering a reality check.

To be fair, some lawmakers understand this and have pushed to reduce the tax and regulatory burdens on main street.  We know who they are and appreciate their efforts.

But the fact remains.

Albany has a small business problem and it is up to lawmakers to decide if it continues to boil these last two months of session.




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State Budget Is Better Than Last Year, But Not A Grand Slam

With the final votes cast less than twelve hours earlier, yesterday morning the Governor and legislative leaders held a celebratory press conference on the enacted state budget for 2014-15.  The message, in perhaps a nod to beginning of of baseball season, was that the budget was a “grand slam” for New York.

As our statement from earlier in the week indicated, this budget was a mixed bag for small business – definitely not a “grand slam” – but to be fair, not a fly out to center like last year was.

In further looking through the budget and dissecting the various components, one thing is definitely sure. This was an election year budget designed to mitigate broad dissatisfaction and provide something for the various special interests all across New York.

The biggest “something” for small business in the broadest sense is the estate tax reform.  The reform ebbed and flowed from the fire to the back burner as an issue on the Albany center stage.  The opponents, seemingly fixated on the connotations of “estate”, touted the reform as a hand out to the uber wealthy.

Throughout the debate we made the argument that this reform was essential to our family owned small businesses and farms.  Sustaining existing business and attempting to stem the tide of business and people leaving New York for more tax friendly environments are paramount to the fiscal and economic future of our state.

Critical to pointing out the numerous flaws in the anti-reform argument was the Empire Center for Public Policy’s report on the estate tax.  Through comprehensive factual and anecdotal data, this report was essential in painting a very different, and more accurate, picture of the issue.  The business community writ large embraced these findings and ultimately “won” the day.

Over the next few years, New York’s estate tax will be more, though not entirely, in line with the rest of the nation.  A much needed victory for small business!

Outside of this, the other tax reform components for business were targeted to corporations and manufacturers.  While we represent some small business that file their taxes as corporations and represent many manufacturers, main street was left out of the final deal in a broad sense.  Please note, we supported these reforms, but continued to push and offer solutions for more broad tax reform to fully capture the entirety of the small business community.  We are disappointed we were not successful.

Also enacted was the property tax “freeze”, or more accurately, the property tax rebate.  The Governor’s rhetoric on property taxes is spot on, it is unfortunate however that he choose to dig in his heels on this approach.  The rebate checks will come to most homeowners this and next fall (assuming local governments share services, etc.) in various amounts of money.  The administration touts rebates as high as $450, while some local leaders across New York have calculated the checks as low as $16.

Does that sound like reform?  What happens in year 3 when the freeze goes away?  The property tax burden is still there, as it is today, and your bill is going to be higher.

All this “freeze” represents is a two year detour from comprehensively addressing the unfunded mandates Albany has imposed on your schools and communities.  Until actual mandate relief is enacted, the property tax burden will remain a major impediment to creating a fair and equitable tax climate in New York.

Overall, the plan avoided placing new cost mandates on small business (think paid leave or minimum wage last year) and enacted a good package of tax cuts for business.  The flip side is small business broadly won’t receive those cuts and will continue to see the “new New York” TV commercials touting a better tax climate (or no taxes for businesses that don’t exist yet) that they do not necessary see.

This plan could have been a “grand slam” if the tax reform was more broad and the tax rebate program was replaced with mandate relief initiatives.  Does it move New York forward?  Yes, a good step, but not the leap main street was looking for.






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NFIB/NY Responds to Budget Agreement

“We are pleased that the announced budget agreement will continue the path of recently enacted fiscally responsible state spending plans. We also applaud the Governor and lawmakers for agreeing to substantial reform to the estate tax, providing essential financial peace of mind for our family owned small businesses and farms. We additionally are strongly supportive of the comprehensive tax reform targeted to New York’s manufacturers.

While we largely support the additional tax reforms in this agreement, we once again are forced to remind Albany that a corporate only approach largely ignores the tax struggles for small business. We also strongly oppose the property tax freeze which fails to effectively address the structural deficiencies caused by unfunded mandates which are plaguing our schools and communities.

We are encouraged that the discussions so far this session have focused on improving New York’s business climate and hope that the Governor and lawmakers not only continue these efforts, but be mindful of the needs and concerns of main street businesses across New York.”

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Sensible Regulations: Two different mindsets on hiring ex-felons

jailA lack of employment opportunities is often cited as a contributing factor to ex-felons ending up back in the prison system. Cutting down on the number of repeat offenders in the Corrections system is one way to reduce prison costs and restore offenders to a productive role in society.

Legislation currently pending in the Michigan House reveals two different approaches, the carrot and the stick, to address the issue.

First, the stick. This would make it unlawful for an employer to inquire about, or require an applicant to disclose, any criminal convictions during the application process and interview. These efforts have been called “ban the box,” as they would require removal of a common check box on many job applications that ask if an applicant has a previous criminal conviction.

The legislation would also prohibit any oral questions regarding an applicant’s criminal history during the interview process. Background checks, including a criminal history check, could only occur after the interview process.

This approach creates difficulties for employers in a number of ways. Under current practice, an employer can eliminate an applicant for a cashier position who has a theft conviction. The new restrictions in the proposed “ban the box” legislation would force the business owner to incur the expense of a background check after the interview. Many employers will be discouraged from considering criminal history for fear of potential litigation. This may put employers in a difficult position because they have a responsibility to ensure a safe environment for employees and customers alike, yet could be subject to costly litigation for a negligent hiring decision. This “Ban-the-box” legislation has been introduced by State Rep. Fred Durhal Jr., D-Detroit, as House Bill 4366.

Other legislation being considered by the state House would take more of a carrot” approach. This bipartisan package of bills seeks to encourage employers to hire former prison inmates, with incentives and protections for doing so. The legislation would allow the Michigan Department of Corrections to issue “certificates of employability” to inmates who take part in educational programs and who the department determines are suitable for employment upon release.

If a former prison inmate with the certificate demonstrated after being hired that he or she was a danger to individuals, the employer who hired the individual would not be liable in a civil action unless it could be proven that the employer had knowledge that the person was dangerous. So the employer receives the benefit of a prospective employee that has documented skills and is protected from liability if that person creates a problem with employees or customers after being hired.

The bills in this package are HB 5216, HB 5217 and HB 5218 and the bills’ sponsors are Reps. Klint Kesto (R-Commerce Twp.), John Walsh (R-Livonia) and Harvey Santana (D-Detroit) respectively. This week the Legislature moved forward on these bills and reported them out of the House Commerce Committee. The stick bill, Durhal’s HB 4366, is stuck in committee, where it deserves to stay.

The “command and control” regulatory stick approach to business regulation is the least productive way to encourage desired behavior and outcomes. It is the method currently being employed by the White House and the “off the leash” federal agencies like the NLRB, EPA, OSHA and the other alphabet soup departments that are smothering the economy. It is no wonder the nations job market is in a shambles when employers are faced with uncertainty at every turn because of this style of public policy by bureaucracy.

The difference in approach illustrated by the bipartisan efforts of these Michigan lawmakers serves as a valuable lesson to Congress and the administration on how things should be done if they really care about jobs more than just as a sound bite for reelection speeches.

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NFIB NY to Albany: No Anti-business Surprises in Budget

NFIB New York State Director Mike Durant today issued the following statement on the Legislature’s effort to finalize the state budget:

“As the push to finalize the state budget intensifies, small businesses are concerned by reports of new, costly mandates from Albany.  Small business owners will be deeply disappointed if the final budget agreement includes a paid leave requirement, a costly out-of-network health care mandate or an effort to link project labor agreements to design build.  All three of those measures would dramatically increase costs on small employers and taxpayers and that’s exactly what New York doesn’t need. 


“The tone in Albany last fall signaled a willingness to cut taxes and reduce the cost of doing business in New York.  That should remain the focus and we hope it’s reflected in the budget.  Anything less will be deflating.  We need to change, not enhance, our reputation as an unfriendly place for business.”


To learn more about NFIB please visit

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New York State Credit Card Surcharge Restrictions in Limbo

Do you know the New York State law regarding credit card surcharges? If not, you’re not alone. Until October 2013, New York State law prohibited merchants from imposing surcharges on credit card transactions. N.Y. Gen. Bus. Law § 518 (McKinney) and N.Y. Gen. Bus. Law § 511(1) states, “No seller . . may impose a surcharge on a cardholder who elects to use a credit card in lieu of payment by cash, check or similar means…”

In October,  a federal district court judge issued a preliminary injunction that effectively blocks enforcement of that law while a case about the surcharges is litigated. The case appears to be a matter of semantics—“surcharges” are prohibited by New York State law, but merchants can give “discounts” for cash transactions. Yet the law does not define “surcharge” or “discount” anywhere.

U.S. District Court Judge Jed S. Rakoff wrote, “Under the most plausible interpretation of that section, if a vendor is willing to sell a product for $100 but charges $102 when a purchaser pays with a credit card, the vendor risks prosecution if it tells the purchaser that it is adding a 2% surcharge because the credit card companies charge the vendor a 2% ‘swipe fee.’ But if, instead, the vendor tells the purchaser that its regular price for the product is $102, but that it is willing to give the purchaser a $2 discount if the purchaser pays cash, compliance with Section 518 is achieved.”

Each time a customer pays with a credit card, merchants incur “swipe fees.” The case stems from five plaintiffs that wanted to pass the swipe fee along to only customers that pay with a credit card. The judge determined that the law is unconstitutionally vague and violates First Amendment right to freedom of speech by restricting what merchants can communicate about pricing. More specifically, the law prohibits specific words– “surcharge” rather than “discount.” The case is Expressions Hair Design v. Schneiderman, 1:13-cv-03775, U.S. District Court, Southern District of New York (Manhattan).

What does this mean for merchants? In theory, they can charge a surcharge for using a credit card. However, because the judge only issued a preliminary injunction, merchants should wait to charge surcharges until there is a final determination. Even if Section 518 is determined to be unconstitutional, merchants should post signage telling customers if they are charging different prices between cash and credit card purchases.

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The Tenth Circuit’s Punt in Kerr v. Hickenlooper Opens the Door for a Torrent of Litigation

In 1992 the people of Colorado voted to amend their Constitution with adoption of a Taxpayer Bill of Rights (TABOR). This was a historic initiative that put the power in the hands of the people to decide for themselves whether to approve new taxes or tax-hikes. While many states have constitutional protections to prevent new or increased taxes—such as California’s requirement of a supermajority vote in the legislature—Colorado’s TABOR was unique in that it made the citizens of the state the final word on new taxes or increased taxes. TABOR therein served as a model that has been implemented through constitutional amendments in other states, and which NFIB has supported as a means of protecting small business owners from new and ingenious taxing schemes. But TABOR is under attack—and this may have profound implications, not only in Colorado but throughout the country.

TABOR’s Legal Challenges

TABOR was upheld as constitutional in the Colorado Supreme Court last year in the face of a lawsuit advanced by educators and the parents of school-aged children who complained that TABOR makes it harder for schools to get necessary funding. NFIB Small Business Legal Center filed in that case to defend the law, and we were pleased to see the Court ultimately affirm the constitutionality of TABOR. But TABOR faces yet another challenge—this time in federal court.

In Kerr v. Hickenlooper, a group of politically motivated legislators complain that they would like to be able to raise taxes, or to enact new taxes, but that TABOR has taken away the legislature’s power to do so. Whether this constitutes an injury sufficient for Article III standing purposes is a legitimate question—one that the Colorado Attorney General has taken issue with in a motion to dismiss the case. But, the concerning aspect of this case—for those of us outside of Colorado—is that the plaintiff’s theory, as to why a federal court should strike-down TABOR, has far-reaching implications.

A Guarantee Clause Challenge… Seriously?

The plaintiffs invoke an arcane constitutional provision. The Guarantee Clause of the United States Constitution provides simply that the United States must guarantee a “republican form of government” to every state. OK, so what does that mean?

Well, that is hard to say because no court has ever decided a Guarantee Clause case. In the 19th Century the Supreme Court refused to resolve a Guarantee Clause claim in a case challenging the constitutionality of Rhode Island’s government. In that case the Supreme Court refused to weigh into an essentially political dispute between rival groups claiming to represent the government of Rhode Island. The Court essentially said it was the prerogative of the other branches to decide which group to recognize as the legitimate state government—which is essentially what would happen if someone should ask the Court to decide which faction represents the legitimate government in Crimea today.

Since then, courts have treated Guarantee Clause arguments as non-justiciable claims because they invite the court to wade into the proverbial political thicket. Though courts have long decided cases with political ramifications (see e.g., NFIB v. Sibelius), the courts have refused to decide Guarantee Clause cases because they would essentially be impossible to decide without exercising political judgment. So the political questions doctrine holds that any decision requiring the exercise of political judgment—as opposed to the application of legal standards and reasoned analysis—is more appropriately viewed as the prerogative of the other branches of government.

Accordingly, the Supreme Court has long suggested that Guarantee Clause claims are categorically barred by the “political questions doctrine.” For this reason, in Pacific States v. Oregon, the Supreme Court rebuffed a Guarantee Clause challenge to Oregon’s direct voter initiative process in 1912—refusing to dive into the question of whether direct democratic measures (like voter initiatives) are somehow anti-republican. One would have thought the door was shut and closed on Guarantee Clause challenges since then.

But, in the Supreme Court’s opinion in New York v. United States in 1992, Justice O’Connor suggested that the door might still be ajar. This apparently gave hope to those who would like to breath life into the Guarantee Clause—who would like to see it wielded as a weapon in challenge to initiatives they might dislike, or political acts that they find offensive to their sense of good government and political philosophy. I know there are folks on the libertarian side of the equation who would welcome the opportunity to raise the Guarantee Clause in challenge to redistributive social programs or taxes. Meanwhile, the plaintiffs in Kerr advance a progressivist vision for the Guarantee Clause as a means of striking down a state constitutional amendment that impedes them from pursuing their preferred tax and spend policies. Needless to say, the Guarantee Clause could be an unruly weapon, if ever unsheathed.

A Radical Theory

In Kerr the plaintiffs maintain that Colorado is no longer a “republican form of government” because the citizens have taken away the Legislature’s power to set the state’s tax and spend policies. Though they paint this as a narrow challenge to TABOR itself, the premise of their argument is far reaching in implication. Their assumption is that a state government becomes anti-republican if the citizens assume for themselves certain functions that have traditionally been performed by the legislature. That would call into question any direct initiative process, or referendum. Accordingly, NFIB Small Business Legal Center, TABOR Foundation and other concerned organizations, argued that the case should be dismissed as a nonjusticiable challenge to the initiative process.

But, even if the Plaintiff’s theory is viewed more narrowly, as alleging only that there is a Guarantee Clause violation when citizens usurp certain fundamental legislative powers, it is still nonjusticiable. On what basis can a court determine which—if any—legislative powers are so fundamental to ‘republican government’ that the citizens of the state cannot adopt constitutional restrictions to assert direct democratic control? And by what standard can a court determine when the citizens of a state have gone too far in restricting the prerogative of their legislature to exercise any given power?

In this case the plaintiffs assume that a “republican form of government” requires the legislature to maintain at least some degree of power to raise taxes, or to create new taxes. It is unclear how they derive that posited principle from the requirement that every state must be guaranteed a “republican form of government.” And the theory has far reaching implications because it would potentially call into question any constitutional amendment restricting a legislature’s prerogative to tax and spend. It opens the door for ideologically driven litigants to challenge California’s requirement that you need a 2/3rds vote for new taxes, to North Carolina’s requirement that the legislature must balance its budget before spending taxpayer dollars, or any other abridgement of the legislature’s traditional tax and spend powers.

And even if we assume that the powers to tax and spend are somehow immutable rights of the legislature, by what discernible principle can a court say when the citizens have gone too far in restricting their legislature’s tax and spend powers through a voter approved constitutional amendment? As we argued in our amici brief, the Court cannot draw a line without addressing sticky questions: Where is this (unwritten) mandate guarantying the Legislature some minimum unfettered stream of public revenue? How can the Court determine an appropriate stream of revenue without setting public policy? Does this assume that certain programs must be funded—and at certain minimal levels? Just why is it that the Guarantee Clause requires the Legislature—and not the people—to have a final say on tax and spend issues? 

The point is that the Plaintiff’s dissolves into a series of political issues when examined closely. Since they ultimately ask the courts to enter the realm of political philosophy, NFIB Legal Center maintains that the case should have been dismissed.

The Tenth Circuit Panel Decision Failed to Identify Judicially Manageable Standards

Unfortunately the Kerr lawsuit has survived a motion dismiss thus far. Just last week the federal court of appeals for the Tenth Circuit held that the case was not barred by the political questions doctrine. This means the case will be remanded for the district court to address the merits question of whether TABOR affirmatively violates the Guarantee Clause.

The problem is that the Tenth Circuit punted instead of actually identifying judicially manageable standards for how the district court should address this Guarantee Clause challenge. In Vieth v. Jubelirer, the Supreme Court made clear that cases must be dismissed if the court cannot identify judicially manageable standards derived from the Constitution. Writing for the plurality, Justice Scalia (joined by J. Thomas, O’Connor and Chief Justice Renquist) said that an Equal Protection Clause challenge to an allegedly gerrymandered redistricting plan raised a nonjusticable claim because, on close examination, all of the proposed tests for identifying such a constitutional violation boiled down to a series of questions that required the exercise of political judgment. In concurrence Justice Kennedy agreed that the claim was nonjusticiable because the plaintiffs had failed to offer a judicially manageable test rooted in constitutional principles.

Kennedy’s concurrence only departed from the plurality in that he was not willing to say that all political gerrymandering claims are nonjusticiable. Whereas the plurality concluded outright that there were no judicially manageable standards, Kennedy held out the possibility that some plaintiff might eventually offer judicially manageable standards in a future case; however, he agreed with the plurality that all of the proposed standards thus far have been unmanageable. For this reason Kennedy agreed that the case was nonjusticiable.

Importantly all of the dissenting Justices seemed to agree that it was incumbent upon the court itself, or the plaintiff, to identify judicially manageable standards before allowing the case to move forward. They dissented only because they believed they had identified such standards. But the point remains that all nine Justices assumed that the court must first identify manageable standards before a case can be resolved on the merits.

So in Kerr, the Tenth Circuit’s panel opinion made a fundamental mistake in assuming the case to be justiciable without affirmatively identifying judicially manageable standards for resolving the case on the merits. The panel opinion assumes that a standard can be identified upon a thorough analysis of the Federalist Papers and other historical records.  But, as the plurality in Vieth makes clear, a case cannot move forward simply because the defendant has failed to prove a total lack of judicially manageable standards. Rather, the burden is on the plaintiff to identify such standards. And in this case the plaintiffs have simply failed to offer any set of workable standards.

Are Guarantee Clause Claims Categorically Barred?

It is worth noting that there is a legitimate debate as to whether Guarantee Clause challenges are categorically barred by the political questions doctrine. To be sure, we should be cautious of any approach to constitutional law that would effectively neuter a constitutional provision. And I can envision potentially viable Guarantee Clause claims.

For example, if Governor Jerry Brown should declare himself King of California, or if the Canadians should invade Minnesota and declare it the province of her Majesty the Queen, I should think there would be a Guarantee Clause problem. Short of that happening, I don’t see a viable theory for advancing a Guarantee Clause claim. And if we are at the point where a Governor is calling himself King, or another nation is asserting sovereignty over a State—like the current situation in Crimea—its highly doubtful that an opinion from a court is going to matter much in practical terms, except potentially to spur the executive branch to take action. But, I would nonetheless posit that there would be a legitimate Guarantee Clause claim in such a situation and I would be able to offer a judicially manageable standard for its resolution.

Scholarship on the Guarantee Clause confirms that if anything the term “republican form government” was used, and understood, in contradiction to monarchal rule, or more generally in contradiction to any form of governance that denies the people the right of self-determination through the political process. Contrary to the assertions of the plaintiffs in Kerr, republicanism was not used exclusively to connote a system of representative government, but more generally to refer to a government that allows the citizens a meaningful opportunity for self-governance. Accordingly, I think we could divine a judicially manageable standard for determining the viability of a Guarantee Clause challenge: Does the challenged action deprive the citizens of a state the right to self-determination through the political process?

With that posited standard guiding its analysis, a court could easily determine that Jerry Brown’s declaration of monarchal rule in California (or the Canadian occupation of Minnesota) violates the Guarantee Clause—or more precisely the United States’ failure to take action to redress such problems would constitute a violation.  Of course that proposed judicial standard is completely unhelpful for the plaintiffs in Kerr because they are challenging a constitutional amendment that affirmatively puts more power in the hands of the citizenry, not less.

So it may well be that there are some judicially manageable standards for assessing the propriety of a Guarantee Clause claim. But it is incumbent upon the plaintiff to demonstrate that there are identifiable, and judicially manageable, standards for a specific theory of an alleged constitutional violation. As recognized in Justice Kennedy’s concurrence in Vieth, a plaintiff may well be able to identify judicially manageable standards for a contemplated Guarantee Clause challenge in some future case; however, the courts have yet to find such principles in any Guarantee Clause challenge to date. The closest we have come to that is the Tenth Circuit’s ipsi dixit conclusion that there are manageable standards for assessing Kerr’s claims; however, we do not know what those standards are, only that the Tenth Circuit assumes they can be found.


I am updating this post to clarify a few points. First, Colorado is one of several states that now require voter approval for new taxes. Other states have followed Colorado’s lead, and adopted nearly identical taxpayer protections through constitutional amendments. But, as Professor Robert Natelson points out, Colorado’s TABOR “is only one of the stronger fiscal-restraint provisions that appear in the constitutions of the 49 states. (The exception is Vermont).” And to our point, all such taxpayer protections may be subject to challenge if TABOR is struck-down.

Second, I was painting with too broad of a brush in saying that no court has ever decided a Guarantee Clause case. To be sure, in 1875, the Supreme Court said, in Minor v. Happersett: “No particular government is designated as republican, neither is the exact form to be guaranteed, in any manner especially designated.” But, in so rejecting an appeal to the Guarantee Clause, the opinion suggests only that there is a lack of identifiable and judicially manageable standards for assessing Guarantee Clause claims.

Of course, it must be conceded that state courts have heard Guarantee Clause cases—as they are not bound by federal justiciability rules. But, I believe those cases suffer from the same vexing problem as the courts had struggled with before Vieth in attempting to resolve political gerrymandering cases without any identifiable, principled or judicially manageable standard. On close examination, state-based Guarantee Clause decisions either prove entirely unhelpful for the plaintiffs in Kerr or they fail to offer any discernible, principled and judicially manageable standard.

Finally, I must clarify that I am not convinced that there are any justiciable Guarantee Clause cases. But regardless of whether Guarantee Clause cases are categorically barred by the political questions doctrine, my fundamental point remains that the plaintiffs in this case have utterly failed to identify judicially manageable standards for the court to address their claim that TABOR has rendered Colorado anti-republican. And the Tenth Circuit’s decision has likewise failed to identify such standards. The case should have been dismissed.

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The Right to Full and Fair Compensation: Making Sure Small Business Gets a Fair-Shake

Since the Supreme Court’s infamous decision, in Kelo v. New London, there have been some big eminent domain reforms across the country. That was the decision that allowed government to take private property from ordinary homeowners, and small businesses, for the benefit of large corporate developers. But if there was a silver-lining, Kelo brought a lot of attention to the problem of eminent domain abuse in America. The result is that citizens in some states have succeeded in limiting the government’s power of eminent domain through legislation and the initiative process. For example, last fall Virginians voted to amend their State Constitution to prohibit municipalities from taking private property for the benefit of private corporations.

NFIB Legal Center has been vocal about eminent domain abuse in both the court of law and the court of public opinion. To be sure, we led a coalition of 12 different groups in urging the Supreme Court to reconsider Kelo last year. And we continue to fight eminent domain abuse in other ways—including challenging the authority of state and local government to proceed with eminent domain takings where the authorities have failed to comply with procedural rules that are designed to protect private property owners. But, one of our biggest concerns—in the fight to end eminent domain abuse—is the problem of undervaluation. Accordingly, NFIB Legal Center has launched a special initiative to advocate for rules that ensure small business owners are fully and fairly compensated for their losses when they suffer a taking in eminent domain.

As part of our Just Compensation Project, NFIB Legal Center recently filed in an Ohio case to defend the rights of a small business owner. In that case, the City of Westerville decided to use eminent domain to take a landscaping easement—taking the owner’s right to control landscaping on his property. This was all part of a municipal beautification project. But, in taking this right for itself, the City’s actions caused the remainder of the owner’s property to depreciate in value. This is because the City was taking away the owner’s right to ensure unobstructed views to and from public roads—an especially valuable right for commercial property owners because there is a strong correlation between public visibility and consumer traffic.

But, the City is refusing to compensate the owner for the resulting depreciation, and the City is appealing a lower court’s decision in favor of the landowner. Accordingly, NFIB Legal Center filed an amicus brief arguing that the Constitution requires compensation for depreciation in value to private property when government takes away valuable property rights through eminent domain. We also defended the owner’s right—under the Ohio Constitution—to receive compensation for the taking of his legal right to continue using an existing access point. As we argued, loss of an access point can result in further depreciation to commercial property, even when there are other ways to access the property.

This is just the latest in NFIB Legal Center’s ongoing effort to ensure full and fair valuation in eminent domain cases. You would be amazed at the ingenious—sometimes Orewellian—arguments that governmental lawyers come-up with to justify low-ball compensation awards. But that is all the more reason for us to fight harder. We may have a long-way to go in the fight to end eminent domain abuse in America, but we are not going to give-up. We’re rolling-up our sleeves and ready to defend small business rights from coast-to-coast.

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How the West Was Won: What Does the Brandt Decision Mean for Property Rights?

Brandt Revocable Trust v. United States is a case that any property rights advocate should love—especially if you also happen to be an American history buff. Writing for the majority—which included the entire court, with exception of only Justice Sotomayor—Chief Justice Roberts’s eloquent opinion tells a narrative of the American west: “In the early to mid-19th century, America looked west. The period from the Louisiana Purchase in 1803 to the Gadsen Purchase in 1853 saw the acquisition of the western lands that filled out what is now the contiguous United States.”

Of course key to settlement and development of the west was the emergent railroad system. Though popular sentiment supported the expansion west and the development of railways in that process, the political ethos of the American people would not have supported publicly funded railway projects of the sort we now see in many metropolitan areas. Accordingly, the federal government supported private railroad companies in other ways—first by giving generous land grants, and later giving more limited “right of ways” to the railroads across public lands. So what does all of this 19th Century history have to do with our current fight for property rights in America?

Well, a lot has happened since Congress passed the Railroad Right-of-Way Act of 1875. This was the Act that gave railroads a “right of way” to build and maintain infrastructure across public lands for the purpose of promoting western settlement and development. In 1942 the Supreme Court explained, in Great Northern R. Co. v. United States, that the 1875 Act gave railroad companies only a limited right to use the subject property—i.e. an easement in the land, which would be extinguished if the railroad ever abandoned its railway. That would mean that the owner holding title the land on which the railroad easement once existed would then own the full and complete title to the land. Indeed, the United States argued as much in the Great Northern R. Co.

But, in Brandt —decided yesterday—the United States took the exact opposite position, arguing that the 1875 Act conveyed something other than an easement, and that upon its abandonment the subject property reverted back to the United States. In other words the United States was staking out a new position in Brandt in a manner that was essentially redefining previously recognized property rights. For the Brandt family who brought the case to the Supreme Court on a petition for certiorari, this was unacceptable because the government was now claiming public ownership of land that it had long ago conveyed to the family. Indeed, the Brandts own the full title to the land subject only to the railroad easement, which is now abandoned.

The NFIB Small Business Center and the Owners Council of America teamed up in this case to defend property rights, making the case for why government should not be able to redefine previously recognized property rights out of existence. Indeed if the United States could get away with redefining previously settled property interests in this case, it may do the same in other cases—as might state or local governments. Government should not be able to take an end-run around constitutional protections for property rights in this manner. Of course that’s the big picture issue. But on a practical level the case is of immediate concern to thousands of western landowners—especially ranchers and farmers—who have abandoned railways running across their land. The decision reaffirms what we have been saying all along: if the United States wishes to acquire these lands from the owners who now hold title to the underlying property, it must pay for what it is taking. Or as one columnist summed it up: Supreme Court tells government to take a hike — but not on private property.

On a final note, it is relieving to see the United States called out on taking explicitly contradictory positions on the same legal issues—albeit 72 years later. In previous cases I have observed, with extreme frustration and angst, that the United States has switched its position in the midst of litigation so as to defeat legitimate legal claims. For ordinary citizens–for whom government exists to serve–the doctrine of judicial estopple would prevent us from changing positions during the midst of litigation for expedient reasons; however, in at least some cases the federal government has successfully argued that this equitable principle cannot apply against the United States. That seems unconscionable and patently unjust. This is an issue that I should hope the Court will eventually address in a future case. But, perhaps the Brandt opinion offers further grounds for a citizen to hold the federal government to positions it has previously taken on a given legal issue. What is clear is that once property rights are recognized, no legislative enactment or executive order can outright extinguish that right without raising serious constitutional problems. 

For further comments and analysis check out Robert Thomas’ blog at Also Brian Hodges offers interesting thoughts at the Liberty Blog. And Trevor Burrus offers further insights at Cato Institute’s blog.

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