Columns


John Lindstrom
Gongwer News Service

Presumed Constitutional

November 24, 2011

Governor Rick Snyder has even more to be thankful for as Thanksgiving dawns. He was handed a giant drumstick of a gift by the Michigan Supreme Court, which held most aspects of his signature tax on pensions were constitutional.

The ruling, which came late on Friday, November 18, pretty much clears the way for Mr. Snyder’s signature economic policy — eliminating the Michigan Business Tax while paying for it with the income tax applied to pension incomes — to take effect as planned on January 1.

While Mr. Snyder can be thankful he gets the chance to implement his policy, he needs to be sure his gift drumstick doesn’t choke him. After all, now Mr. Snyder and the rest of the state get to see if the policy actually does help improve Michigan’s economy.

And the Thanksgiving gift the court handed Mr. Snyder does come with a couple lumps in the gravy (more on that in a bit).

There is an interesting point in this case, however, for Supreme Court watchers to take note of. (That’s presuming there are Supreme Court watchers in the state ready to bore their brother Thanksgiving diners not already in a tryptophan stupor.)

This decision was very clearly telegraphed by the court. Mind, this is not to say the court told the administration what to expect. Sources within the administration say they did not know what the decision would be. Hell, while all the reporters were told when the decision was coming, the administration hadn’t even been informed of that.

No, this is to say all the external evidence pointed to the court rendering this decision. Anyone reading the clues could be assured of what the decision would be. It is less clear what a chef might prepare on Thanksgiving than what this decision was going to be.

Before the analysis on that assertion, the necessary background: Mr. Snyder was elected on the promise of getting rid of the Michigan Business Tax and replacing it with a 6 percent corporate income tax. Doing that, though, would have cut total state funding by nearly $2 billion. Mr. Snyder was not willing to cut state funding that much.

So he proposed requiring all public and private pensions be subject to the income tax. He also proposed a number of other ideas, such as getting rid of virtually all income tax credits. State workers argued taxing their pensions would violate the constitutional bar on diminishing their pension benefits.

And he proposed that high-income folks lose their personal exemption. That little bit alarmed some folks, who argued that it created a graduated income tax by base. No matter that many people believe a graduated income tax is the right way for Michigan and that when polled on the issue most of the public supports a graduated income tax, the Michigan Constitution forbids one.

But that issue largely fell by the wayside while Mr. Snyder and legislative leaders negotiated an agreement on how to handle the pension tax. Essentially, the agreement established the tax both on the basis of age and income.

This past Friday, while most people were out doing their Thanksgiving shopping early, the Supreme Court delivered its early gift to Mr. Snyder in saying the pension tax was constitutional and could take effect on January 1 as planned. Well, mostly it said that.

With the background now laid — to use a holiday image, the mashed potatoes, green bean casserole and marshmallow-sweet potatoes set out — let us now dig into the bird, the analysis of why this result was pretty clearly going to happen.

First, of course, the court has a four-three Republican/Democratic advantage.

We pause a moment to declaim officially that the court is nonpartisan and justices elected on a nonpartisan ballot. Then we go through the wink-wink, nod-nod, knowwhatImean-knowwhatImean drill routine, because Supreme Court candidates are chosen by the parties at their conventions and everyone knows what their partisan leanings are.

So, one could say the court already being 4-3 Republican/Democratic, it was clear they were going to rule in favor of Mr. Snyder/s position. But that is unfair to the court. One can reasonably expect the majority will give every sympathy to a governor and legislature of its party. But that did not guarantee this court would rule as it did. This court is certainly capable of slapping down the executive and legislature, even Republican executives and legislatures. In fact, it did so in one part of the ruling.

No, the salient issue for those few Michigan Supreme Court watchers out there is what the Republican justices have said previously in their rulings. Specifically, what Chief Justice Robert Young Jr. and Justice Stephen Markman (since Justice Mary Beth Kelly and Justice Brian Zahra are still judicial toddlers on the court) have written about the role of the judiciary and the legislature/governor.

The natural, constitutional, political leaning of these justices is to the judicially declared precept that what the legislature enacts is presumed constitutional. The Democratic justices have tended to be a touch less forgiving towards legislators, and a touch more willing to challenge that assumption.

Because the majority of the Supreme Court inclines towards giving the legislature the benefit of that constitutional doubt, one walking into the arguments in September could reasonably expect the court to come down in favor of taxing public and private pensions.

In fact, six members of the court did say taxing both public and private pensions was constitutional. There was some difference as to which public pensions could be taxed, but six did so say.

Then, there was what the justices focused their questions on to the attorneys arguing the case.

When it approved Mr. Snyder’s request for an opinion on the case, the court outlined a number of questions, including whether the tax violated the constitutional ban on impairing public pension benefits, and whether taking into account “total household resources” of a pensioner before determining if the pensioner were eligible for an exemption created a graduated income tax. (Don’t know what “total household resources” are? They’re something Mr. Snyder and the legislature rigged up as part of the compromise to get it passed. Nobody really understands what they were supposed to be either, except, of course, fodder for more lawsuits.)

Briefs were written on those subjects, and the briefs focused more on the impairment of a public worker’s contract than anything else.

When the justices heard the arguments though, what did they focus on? Why, the issue of whether the law created an unconstitutional graduated income tax. There were a few questions about the impairment issue, but the big bulk of the questions had to do with the graduated income tax.

Okay, these guys in the black robes ain’t dummies. They read the briefs. They read the law. They know the constitution. They form opinions based on all of the previous. So when they ask questions, one can reasonably infer they are asking questions about the subjects most troubling to them and that they have each reached a decision on the other points in the briefs. Okay, we do not know what decision they have made, but we can infer that a decision has been made.

Then, and you had to be in the courtroom with the retired ladies talking about their latest quilting projects while we waited for the court to begin to intuit this next point, there were the intangibles in the argument. The inflections, the emphasis, the arching of eyebrows, the scowling of features, the sense of worry and concern the judges seem to have over what the issue of a graduated income tax might do to the whole law. It was very clear the court, the majority of the court, wanted this to go ahead, wanted this law to be constitutionally good.

One last intangible, in one way the most important, was: when was the decision issued? It’s important because the arguments took place on September 7 and the tax is set to take effect on January 1. Justices like to play act and tell you the law is above politics, that justice does not live by a political calendar. Yeah, yeah. Again, these guys ain’t dummies. Hey, they read the papers, or the websites, or that magnificent publication, Gongwer News Service. They know what the practical aspects of this law are. They know as well how difficult it was to get passed.

If they came to the conclusion that the law was constitutionally invalid and could not stand, they knew they had to give Mr. Snyder and the legislature a fair shot at passing something to replace it. So if this law was going down, a decision almost assuredly would have been issued much earlier, probably no later than mid-October, to give the legislative players two full months to find a replacement.

The longer we waited for a decision, the more clear it was the decision was going the Snyder administration’s way.

And so it did. Okay, a portion was struck down as a graduated income tax. But that portion represents chump change. Still, that portion was the stack o’ lumps in the gravy of an otherwise scrumptious Thanksgiving gift the court gave the administration, a gift the administration really should have expected all along.

So now, we feast. And as was pointed out earlier, we see if the wishbone of Mr. Snyder’s policies foretells economic success or more economic doldrums for Michigan.

Because really that is the question that matters, especially since the question of how the court would rule was kind of decided a long time ago.

John Lindstrom is publisher of Gongwer News Service. For nearly 50 years in Michigan, Gongwer News Service has provided independent, comprehensive, accurate and timely coverage of issues in and around Michigan’s government and political systems. For subscription information, including a free trial, visit Gongwer online.