More on the dissent: sales tax exemption

[Robert Destro]

     Just a quick follow up on the Texas Monthly point. I agree with the
     dissent: Texas Monthly doesn't make any sense, either from a taxation
     perspective, or from the all-important separation of powers angle.

     In fact, I have always been mystified by the outrage over Employment
     Division v. Smith; for it was actually Texas Monthly that set down the
     groundwork for much of what was done there. It was the late Justice
     Brennan, after all, who stated in Texas Monthly that no exemption for
     religious exercise was permissible save in the case of demonstrated
     "concrete need" established before a court. [His phrase was: "a
     demonstrated and possibly grave imposition on religious activity
     sheltered by the Free Exercise Clause."]

     I argue much of this in my Indiana Law Review article [29 Ind. L. Rev.
     1], so I'll just snip out and present here the main points:

     Texas argued that its tax exemption was justified as an accommodation
     of the religious publishers' rights under the Free Exercise Clause.
     The Texas Monthly argued that, whatever the result under Religion
     Clause analysis, the exemption was forbidden by the Speech and Press
     Clause.  The Court thus faced what might be called a "true categorical
     conflict": one norm or the other would have to yield.  And it was on
     the question "Which one?" that the three opinions in the plurality
     parted company.

     Justice Brennan announced the judgment of the Court in an opinion
     joined by Justices Marshall and Stevens.  Its sole focus was the
     relationship between the Establishment Clause claims made by The Texas
     Monthly and the Free Exercise interests the State of Texas sought to
     protect by the sales tax exemption.  No attempt was made to discuss
     the Free Speech implications of the controversy, to strike a balance
     between free exercise and the non-establishment concerns, or to
     reconcile the apparently disparate requirements of the three
     constitutional norms alleged by the parties to be controlling.

     Justices Blackmun and O'Connor dealt at some length with the
     relationship among the three lines of authority and the conceptual
     difficulty of the structural task of reconciling them; yet they were
     troubled by the substantive implications of resolving them in the
     manner suggested by either Justice Brennan (limiting the scope of the
     free exercise norm) or Justice Scalia (limiting the categorical nature
     of both non-establishment and speech analysis).  They suggested that
     it might be wiser for the Court to "avoid most of these difficulties
     with a narrow resolution of the case."

     The disagreement among these five justices was over whether or not it
     was possible (or desirable) to avoid a head-on collision between the
     Establishment and Free Exercise Clauses.  Justices Brennan, Stevens
     and Marshall saw a categorical conflict and resolved it by holding
     that the Establishment Clause limits the permissible scope of the Free
     Exercise Clause claims to cases of empirically demonstrable,
     "concrete," individual need.

        "It is virtually self-evident that the Free Exercise Clause does
        not require an exemption from a governmental program unless, at a
        minimum, inclusion in the program actually burdens the claimant's
        freedom to exercise religious rights."  Tony and Susan Alamo
        Foundation v. Secretary of Labor,  [citation omitted].  In this
        case, the State has adduced no evidence that the payment of a sales
        tax by subscribers to religious periodicals or purchasers of
        religious books would offend their religious beliefs or inhibit
        religious activity.  The State therefore cannot claim persuasively
        that its tax exemption is compelled by the Free Exercise Clause in
        even a single instance, let alone in every case.  No concrete need
        to accommodate religious activity has been shown.

     This, however, was the precise categorical conflict-and the
     result-that Justices Blackmun and O'Connor sought to avoid when they
     suggested that the Court consider a theory permitting a "narrow[er]
     resolution of the case." Since they agreed with Justice Brennan that
     the ultimate question to be decided was "whether a tax exemption
     limited to the sale of religious literature by religious organizations
     violates the Establishment Clause,"  the only way to avoid the
     conflict was to reserve for decision in a later case "the extent to
     which the Free Exercise Clause requires a tax exemption for the sale
     of religious literature by a religious organization."  [i.e. the issue
     presented in Swaggart]

     This characterization of the issues would have preserved the
     possibility that the Free Exercise Clause might be construed, at some
     time in the future, to require a "religious exemption" in a very
     limited class of cases. Such a characterization of the "reserved" Free
     Exercise issue would also enable them to characterize the non-
     establishment issue in the case before them as one of discretionary
     financial assistance to religion, unsullied by free exercise concerns.

     But by focusing on Follet v. McCormick  and Murdock v. Pennsylvania ,
     and deferring decision on "the ultimate scope of [those cases] ...
     [to] another day", Justices Blackmun and O'Connor unwittingly
     underscored the futility of their attempt to develop "narrowing"
     characterizations.  Murdock makes it clear that the activity
     involved-sale and distribution of religious tracts-is "a combination
     of both" preaching (which is both "pure" speech and religion) and the
     distribution of literature (which is both religion and press).  As a
     "hybrid" activity (to borrow a phrase from Smith II ), it has "the
     same claim to protection as the more orthodox and conventional
     exercises of religion" as well as "the same claim as the others to the
     guarantees of freedom of speech and freedom of the press."

      As a result, the only way to "narrow" the Texas Monthly case in the
     manner suggested by Justices Blackmun and O'Connor is to isolate its
     free exercise and speech components from those which sound in
     non-establishment.  And the only way to do that would have been to
     focus on the action of the State (granting a tax exemption) without
     regard to its intended purpose -- or its position in a larger taxing
     scheme that defines the scope of the term "retail sale."

     Viewed from an "establishment only" perspective, it is indeed possible
     to characterize the case as one involving only a tax exemption limited
     to religious publications, but the problem with such a device is both
     that it is too obvious -- and clearly wrong as a matter of both fact
     and law.

     Current standards under both components of the Religion Clause require
     an examination of the policy's intended purpose.  So does the Equal
     Protection Clause.  But under the formulation suggested by Justices
     O'Connor and Blackmun in Texas Monthly, an inquiry into both the
     purpose and effect of the tax exemption on the interests of
     others--most notably the religious groups which will lose their
     exemption and the press organizations which are ineligible to claim
     it--does not appear to be necessary. Nor does an examination of the
     claim that the "exemption" is enjoyed only by religious literature
     bear up under scrutiny. [There were lots of "exemptions" from the
     Texas Sales Tax!] The individual liberty interests at stake, including
     free exercise, free press, and, arguably, equal protection, simply
     drop out of the picture. Small wonder that none of the other seven
     Justices viewed the Blackmun/O'Connor approach as a viable one.

     -----------

     Justice White ignored the Religion Clause altogether and held that the
     Speech/Press Clause required the invalidation of the "content based"
     exemption.

     Justice Scalia was right: Not only was the majority's view of the Free
     Exercise norm too narrow, but that its very approach to the issue made
     no sense.  It doesn't -- either as a matter of "First Amendment
     jurisprudence," as a "tax" opinion, or as a matter of separation of
     powers (or federalism). It is not simply that an exemption should be
     permissible under the EC or S&P Clauses if arguably protected by the
     FX Clause, it is that "exemptions" are not always "subsidies." If they
     are, then whatever part of your income Congress does *not* tax (i.e.
     that is "exempt" or "excluded") is a "subsidy."

     Remember that next April 15.

     Bob Destro
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     Robert A. Destro                                      Destro at law.edu
     Columbus School of Law                                  202-319-5202
     The Catholic University of America                  fax:202-319-4498
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