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Florida Tax Review

Abstract

This Article explores how the German Constitutional Court and the United States Supreme Court approach constitutionally based arguments in their tax decisions. The Article focuses its attention primarily on distributional fairness in taxation. Most cases involving fairness issues address the equal rights guarantees in Germany and the corresponding equal protection under U.S. law or apply the rule of law provision of the German constitution corresponding to the Due Process concept in the U.S. The article seeks to develop hypotheses to account for the differences in approach and outcome between in the two courts.

Part II of the article introduces the basic tax equality concepts of horizontal and vertical equity, and, in providing a brief overview comparing German and U.S. taxing structures, observes that neither system protects vertical equity (although Germany compensates in part for regressivity through its protected subsistence minima). Part III examines the U.S. cases that address or resolve constitutional arguments under the U.S. Constitution. Part III emphasizes tax decisions that apply the Bill of Rights and the 14th Amendment to the Constitution. Part III A describes a few taxpayer successes in non-Bill of Rights cases. Part III B highlights how the Supreme Court rejects taxpayers’ claims under the Bill of Rights in federal tax cases. Part III C turns to taxpayers’ challenges to state tax laws under the 14thAmendment. Part III D complements the discussion of the Equal Protection cases in Part III C with some of the Supreme Court’s Commerce Clause decisions where the Court applies a stricter equality standard. Part III E reviews issues relating to the federal government’s power to tax state activity and vice versa. A brief Part III F glances at the screening process by which the Court insulates itself from “frivolous” constitutional arguments. Part IV discusses decisions of the German Constitutional Court under the German Basic Law’s Due Process, Equal Protection, human dignity and social state provisions. More specifically, Part IV A traces the constitutional jurisprudence limiting the power of the legislature to tax the subsistence minimum as a matter of equality and protection of human dignity. Part IV B examines the decisions that interdict marriage penalties on the bases of equality and protection of marriage principles. Part IV C describes and discusses the recent decision mandating practical ability to assess and collect a tax as a condition to its imposition on equality principle grounds. Part IV D looks to the Constitutional Court’s approach to retroactive taxation under rule of law principles. Part IV E observes direct application of the equality principle to the Wealth and Inheritance Taxes. Part IV F reviews some Turnover Tax cases to demonstrate that horizontal equity in the turnover taxis required but vertical equity is not. Part V offers hypotheses to explain the reasons for the greater receptivity to constitutional challenges in the German Constitutional Court relative to the United States Supreme Court.

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