If Taxes Can Be Retroactive to 1993, Why Not to 1990? : Law: The Supreme Court should clarify the constitutional limits on Congress’ ability to tax retroactively.


In 1819, Chief Justice John Marshall warned that “the power to tax involves the power to destroy.” Now, 175 years later, the Supreme Court is poised to decide the extent to which, if at all, the Constitution grants Congress the power to tax (and therefore to destroy) retroactively.

The Supreme Court will soon decide a retroactive tax case, United States vs. Carlton, which could also affect the pending challenges to the Omnibus Budget Reconciliation Act of 1993--enacted last August but retroactive to Jan. 1, 1993. The Clinton Administration claims that the 1993 tax increases affect “fewer than 2% of taxpayers.” Even if this claim were accurate, what is to prevent another tax increase in 1994--affecting “fewer than” 50%, and retroactive to Jan. 1, 1990?

In the Carlton case, to be argued before the Supreme Court today, a federal appeals court in California held that a 1987 amendment to a tax incentive enacted by Congress in 1986 was “so harsh and oppressive as to transgress the constitutional limitation.” Between 1986 and 1987, of course, taxpayers had relied on the new tax incentive. Everybody who pays federal taxes in 1994 should be watching this case, for its resolution may ultimately influence whether they pay retroactive taxes this year and in years to come.

Challenges to such laws predate the American Revolution. Blackstone’s “Commentaries on the Laws of England” (1765), the most authoritative legal treatise at the time, describes retroactive laws as procedurally “more unreasonable” than those of the Roman Emperor Caligula--who “wrote his laws in a very small character, and hung them up upon high pillars, the more effectively to ensnare the people.”


Retroactive laws were such a problem when this nation was formed that the drafters of the Constitution included two explicit prohibitions, forbidding both Congress and states from passing any “ex post facto Law” (after the fact law). One might ask: With these two explicit prohibitions, why is there even a debate over whether Congress can pass ex post facto tax laws?

The answer is complicated by a 1798 Supreme Court decision on a Connecticut case in which the state Legislature had overruled a decision of a probate court. In Calder vs. Bull, the Supreme Court is generally understood to have decided that the Constitution’s two ex post facto prohibitions apply only to criminal laws. However, a close reading of the separate opinions of Justices Iredell and Peterson in that case indicates that the outcome would have been different had the issue been federal instead of state legislative power. At that time, the Connecticut Legislature, unlike Congress, had the power to overturn judicial decisions retroactively.

In any event, even assuming that both ex post facto prohibitions only apply to criminal laws, if an individual does not pay his or her ex post facto taxes in 1994, he or she is likely to face federal criminal penalties.

The Carlton case may be the first opportunity in almost 200 years for the court to revisit the Calder vs. Bull decision, and to clarify the constitutional limits on Congress to impose new taxes after the fact. The court should clarify the constitutional Rule of Law so that Congress cannot pass any form of retroactive tax it deems “necessary,” regardless of the consequences on individuals.


As James (later Justice) Iredell observed during the debate over the federal Constitution in 1787, “Ex post facto laws . . . have been the instrument of some of the grossest acts of tyranny that were ever exercised, and . . . the plea of necessity is never wanting where it can be of any avail.”

If the court is unwilling to constrain Congress from passing ex post facto tax laws, then perhaps “we the people” need a constitutional amendment to constrain the federal government from taxing (and therefore destroying) after the fact. The practical difficulty is that the very body through which any amendment initiative must pass is the body least interested in losing its ability to tax retroactively-- i.e., Congress. The Supreme Court may thus be the last and only bastion for the individual against the power of the federal government to tax after the fact.