The New Murphy’s Law: If the Debate Can Go On, It Will Go On . . . .

Another installment in the Murphy pop-up symposium

Daniel Hemel
May 17, 2018 · 5 min read

Over at the Volokh Conspiracy, Ilya Somin offers an illuminating response to my last post. In that last post, I had offered the following hypothetical:

Let’s say that Congress passes a law that’s essentially the reverse of PASPA (we’ll call it APSAP). All APSAP says is that “no state shall pass any law regulating sports gambling”; it does not establish any federal regulatory regime for sports gambling. Would APSAP be constitutionally valid under Murphy?

I think the answer is no. Ilya says that it would be (setting aside any Commerce Clause challenge). Ilya writes:

I think this hypothetical law would indeed be permissible under Murphy. It’s a law that “confers rights on private actors” because it gives them the right to be free of regulation of sports gambling. If, as Alito notes in his opinion, Congress is allowed to regulate activity X and then forbid state regulations that regulate X beyond what the federal regulations require, then it is also free to conclude that the level of federal regulation of that activity should be zero, and that states also can’t regulate beyond that ceiling. The power to set a regulatory ceiling that applies to both federal and state regulation includes the power to set that ceiling at zero. . . . And, if “APSAP” is permissible under Murphy, the same goes for the various real-world tax preemption laws Hemel lists.

I agree with Ilya that if APSAP passes muster under Murphy, so too would a law that says “no state shall pass any tax on Internet access,” or “no state shall pass any tax on Treasury bonds,” or the dozens of other provisions identified by Brian that effectively say “no state shall pass any law taxing X.” In other words (and on this point I think Ilya and I agree): It doesn’t matter whether the federal statute in question says “no state shall pass any law taxing X” or “no state shall pass any law regulating X.” These two types of provisions rise and fall together. The question is whether Murphy prohibits Congress from passing a statute that says “no state shall pass any law regulating/taxing X.”

My view is that the answer to that question is “no” unless one of three exceptions applies: the Reconstruction Amendments exception, the Reno v. Condon exception, and the preemption exception. I think Ilya and I agree on those first two, and the disagreement has to do only with the third. And per Justice Alito, all valid preemption provisions “work in the same way: Congress enacts a law that imposes restrictions or confers rights on private actors; a state law confers rights or imposes restrictions that conflict with the federal law; and therefore the federal law takes precedence and the state law is preempted” (p. 22 of slip opinion). So as I read Justice Alito’s opinion, a federal statute that says “no state shall pass any law regulating/taxing X” survives Murphy only if there exists some other federal provision regulating/taxing X or granting X immunity from regulation/taxation. See also pp. 23–24: “[E]very form of preemption is based on a federal law that regulates the conduct of private actors, not States.”

All three cases of apparently “valid” preemption discussed in Justice Alito’s opinion fit this model. In Mutual Pharmaceutical Co. v. Bartlett, 570 U.S. 472 (2013) (cited at p. 22), federal law (specifically, 21 U.S.C. § 355 and accompanying regulations) prohibited Mutual Pharmaceutical Co. from altering the warning label on the drug sulindac. New Hampshire tort law imposed a duty on Mutual to strengthen the warning label on sulindac. The Court “held that the state law was preempted because it imposed a duty that was inconsistent — i.e., in conflict — with federal law” (p. 22). Likewise, in Morales v. Trans World Airlines, Inc., 504 U.S. 374 (1992) (cited at pp. 22–23), federal law (specifically, the Civil Aeronautics Act of 1938 and amendments thereto) gave first the Civil Aeronautics Board (and then, after the CAB was abolished, the Department of Transportation) authority to regulate deceptive practices with respect to airline fares. The Airline Deregulation Act of 1978 then prohibited states from regulating airline fares. The Court in Morales held that federal law preempted state airline fare regulations. So too, in Arizona v. United States, 567 U.S. 387 (2012) (cited at p. 23), the federal Alien Registration Act and subsequent federal statutes “provided a full set of standards governing alien registration” (p. 23). Arizona then passed a law of its own allowing it to prosecute alien registration violations. The Court held that the federal statutes preempted the Arizona law.

By contrast, our APSAP hypothetical envision that there was no federal law regulating sports gambling — only a federal law prohibiting state regulation of sports gambling. (As a matter of fact, there are a number of federal laws that regulate various aspects of sports gambling — including the Federal Wire Act of 1961, 18 U.S.C. §§ 1081–1084, but those provisions evidently weren’t enough to save the statute at issue in Murphy.) And in the real-world example of the Internet Tax Freedom Act (discussed at length in my last post), there is no federal law taxing Internet access or exempting Internet access from taxation; there is just a federal law prohibiting (some) states from taxing Internet access. ITFA, like dozens of other federal statutes restricting state taxing authority on Brian’s list, does not fit Justice Alito’s model.

More evidence in favor of my reading comes from page 18 of Justice Alito’s opinion:

The PASPA provision at issue here — prohibiting state authorization of sports gambling — violates the anticommandeering rule. That provision unequivocally dictates what a state legislature may and may not do . . . . [S]tate legislatures are put under the direct control of Congress. It is as if federal officers were installed in state legislative chambers and were armed with the authority to stop legislators from voting on any offending proposals. A more direct affront to state sovereignty is not easy to imagine.

Murphy brooks no distinction between federal laws that dictate what a state legislature must do (i.e., “states must regulate X”) and federal laws that dictate what a state legislature may not do (i.e., “no state shall regulate X”). Both are a “direct affront to state sovereignty.”

Finally, my last post and the one before it explained why I think that the result in Murphy is broadly consistent with the justifications for the anticommandeering doctrine. Ilya disagrees, writing that “[t]he real bottom line here is that federal preemption of state taxes, unlike commandeering, does not amount to a federal takeover of the machinery of state government.” But does it not? Per the Tax Injunction Act, state taxes generally can be challenged only in refund actions. Thus, a law that says “no state shall pass any tax on Internet access” is equivalent to a law that says “states must grant a refund to any taxpayer who is charged a tax on Internet access.” Is that so different from a law that tells states how they must spend their money? If anything, I think the Internet Tax Freedom Act amounts to more of a “federal takeover of the machinery of state government” than PASPA, which did not require states to lift a finger or spend a cent on the enforcement of laws against sports gambling.

Will the Supreme Court walk back from Murphy’s implications in subsequent cases? Maybe. I’m enough of a legal realist to believe that teasing out the logical implications of a judicial opinion is not always the most reliable way to predict how a court will act in a future case. But if we take Murphy seriously, then I think it really does sweep broadly. And in my view, that may be for the better.

Whatever Source Derived

Thoughts on tax and the law

Daniel Hemel

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Assistant Professor; UChicago Law; teaching tax, administrative law, and torts

Whatever Source Derived

Thoughts on tax and the law

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