Recent Stanford Law School graduate Beverly Moore discusses last Monday’s decision in Polar Tankers.
On Monday, June 15, the Supreme Court shed light on the contours of the Constitution’s Tonnage Clause. The Court, in a 7-2 decision reversing the Alaska Supreme Court, held that a tax implemented by the City of Valdez, Alaska on “[b]oats and vessels of at least 95 feet in length†that regularly use the City’s port violated the Tonnage Clause. The Court consequently did not reach the question whether the tax also violated the Commerce and Due Process Clauses.
Noting that “We begin, and end, with Polar Tankers’ Tonnage Clause claim,†Justice Breyer wrote the opinion for the Court, which was joined in full by Justices Scalia, Kennedy, and Ginsburg and in part by the Chief Justice and Justices Thomas and Alito. It began by focusing on the Framers’ intent in drafting the Tonnage Clause, as well as the Court’s subsequent interpretation of the Clause. The Framers, Breyer wrote, adopted the Tonnage Clause to prevent States from evading the Import-Export Clause’s prohibition of duties on imports and exports by simply taxing the vessels transporting merchandise instead. The Tonnage Clause was thus intended to prevent States from obtaining certain “geographical vessel-related tax advantages.†Breyer noted that, in light of the Framers’ intent, the Court had previously interpreted the Clause to encompass “all taxes and duties . . . which operate to impose a charge for the privilege of entering, trading in, or lying in a port.â€
Breyer then went on to address whether or not the specific tax implemented by Valdez violated the Tonnage Clause. He focused on the fact that the tax, in practice, applies only to only one type of property—large vessels. Rejecting the City’s argument that the tax did not impose a duty, but rather a fee for “services rendered†to vessels using its port, Breyer concluded succinctly that “[t]his case lies at the heart of what the Tonnage Clause forbids.†The tax depends on the value of the vessels—a factor closely related to tonnage and not related to services provided. Thus, Breyer wrote, the tax is unconstitutional.
In the plurality portion of his opinion, joined by Justices Scalia, Kennedy, and Ginsburg, Breyer went on to address the City’s claim that the tax fell outside the prohibitions of the Tonnage Clause because it was simply a personal property tax based on valuation of the property. Justice Breyer, however, rejected the City’s argument on the ground that a tax may only escape the prohibitions of the Tonnage Clause if it taxes vessels in the same manner as other personal property owned by citizens of the State. The Clause thus requires that a State also impose a similar tax on other businesses. The requirement helps serve as a political check on States that might seek to take economic advantage of their port’s geographic position. The City of Valdez did not satisfy this requirement, Breyer wrote, because “[w]e can find little, if any, other personal property that it taxes.†The City’s argument that it also imposes a value-based tax on certain other property such as mobile homes and trailers operates as a tax on real, not personal property, since it requires the property to be “affixed†to the site. In addition, Breyer rejected the City’s claim that the tax is simply another form of Alaska’s state-level tax on oil-related property. The City’s ship tax, unlike the tax on oil-related property, is a purely municipal tax, defined, administered, and collected solely by the City of Valdez. Moreover, unlike the broader tax on oil-related property, the City’s tax affects only ships. The City, Breyer wrote, is therefore not constrained by the need to treat vessels like other types of business property, and thus the tax “lacks the safeguards implied by this Court’s statements that a property tax on ships escapes the scope of the Tonnage Clause only when that tax is imposed on ships ‘in the same manner’ as it is imposed on other forms of property.†Breyer concluded by declaring the tax unconstitutional.
Chief Justice Roberts, joined by Justice Thomas, agreed that the tax is unconstitutional but rejected the City’s argument that its tax should be upheld as a property tax similar to its other property on the ground that an unconstitutional tax on maritime commerce is not justified simply because it is grouped together with taxes on other activities or property.
Justice Alito concluded that the tax is an unconstitutional duty of tonnage even if the Clause permits a “true, evenhanded property tax†to be applied to vessels.
Justice Stevens, joined by Justice Souter, dissented. Stevens concluded that the Valdez tax is constitutional because the Tonnage Clause allows a State to impose a property tax on ships, regardless of whether it also taxes other property. Even if that were not the case, Stevens wrote, the City’s tax is nonetheless constitutional since the City also taxes other types of property such as mobile homes and trailers.
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