IN THE SUPREME COURT
No. 104 / 01-0011
Filed February 3, 2004
RACING ASSOCIATION OF CENTRAL
IOWA, IOWA GREYHOUND ASSOCIATION,
DUBUQUE RACING ASSOCIATION, LTD.,
and IOWA WEST RACING ASSOCIATION,
MICHAEL FITZGERALD, TREASURER,
STATE OF IOWA,
On remand from the United States
from the Iowa District Court for Polk County, Scott D. Rosenberg, Judge.
Plaintiffs appeal district courts
order rejecting their challenge to tax statute under Iowa Constitutions
equality provision. REVERSED AND REMANDED.
McCormick, Thomas L. Flynn, and Edward M. Mansfield of Belin Lamson McCormick
Zumbach Flynn, a Professional Corporation, Des Moines, for appellant Racing
Association of Central Iowa.
Crawford and Brad Schroeder of The Crawford Law Firm, Des Moines, for
appellant Iowa Greyhound Association.
C. Krumpe of OConnor & Thomas, P.C., Dubuque, for appellant Dubuque Racing
P. McLellan of Sullivan & Ward, P.C., Des Moines, for appellant Iowa West
Thomas J. Miller, Attorney General,
and Jeffrey D. Farrell and Jean M. Davis, Assistant Attorneys General, for
When this case was initially before our
court, we held that a statute taxing gross gambling receipts generated at
racetracks at a rate nearly twice the rate imposed on gross gambling receipts
generated on riverboats violated the United States Constitution and the Iowa
Constitution. See Racing Assn v. Fitzgerald, 648 N.W.2d
555, 562 (Iowa 2002) (reversing district courts summary judgment for the
State) [hereinafter RACI].
On certiorari to the United States Supreme Court, that part of our
decision holding the statute violated the Equal Protection Clause of the United
States Constitution was reversed. See Fitzgerald
v. Racing Assn, 539 U.S. ___, ___, 123 S. Ct. 2156, 2161, 156 L.
Ed. 2d 97, 105 (2003). The Supreme Court then remanded
the case for further proceedings not inconsistent with [its] opinion. Id. Although this courts ruling that the
statute also violated the equality provision contained in the Iowa Constitution
was not reviewed by the Supreme Court, id.
at ___, 123 S. Ct. at 2159, 156 L. Ed. 2d at 102, we take the opportunity on
remand to reconsider our prior decision on the state constitution claim in
light of the Courts ruling on the federal constitution issue.
giving due consideration to the Courts analysis and decision, we find no basis
to change our earlier opinion that the differential tax violates article I,
section 6 of the Iowa Constitution.
Therefore, we reverse the trial courts contrary ruling and remand this
case for a determination of the appropriate relief.
I. Review of
Pertinent Background Facts and Proceedings.
action was commenced by the appellant, Racing Association of Central Iowa
(RACI), to enjoin the collection of that portion of taxes it was required to
pay on adjusted gross receipts from gambling in excess of the tax charged to
excursion boats on such receipts. See generally 1989 Iowa Acts ch. 67
(authorizing gambling on excursion boats).
RACI claimed the tax was unconstitutional under the Equal Protection
Clauses of the United States and Iowa Constitutions.
operates a pari-mutuel horse racetrack and casino known as Prairie Meadows
Racetrack and Casino in Altoona, Iowa.
Appellant, Dubuque Racing Association, Ltd., which intervened in RACIs
lawsuit, operates a pari-mutuel dog racetrack and casino known as Dubuque
Greyhound Park and Casino in Dubuque, Iowa.
Another intervenor, appellant Iowa West Racing Association, holds the
gaming license and owns the slot machines for Bluffs Run Racetrack and Casino
in Council Bluffs, Iowa. The fourth
appellant, Iowa Greyhound Association, intervened to protect the interests of
its members, greyhound owners who race at the Dubuque and Council Bluffs dog
tax statute challenged by these parties is Iowa Code section 99F.11 (1999),
which imposes a tax on the adjusted gross receipts received annually from
gambling games. The maximum rate is
twenty percent. See Iowa Code §
99F.11. The statute has an exception,
however, for the adjusted gross receipts . . . from gambling games at
racetrack enclosures. Id.
The tax rate on racetrack gambling receipts began at twenty-two percent
in 1997, and has automatically increased by two percent each year to a maximum
rate of thirty-six percent in 2004. See id.
In our first
consideration of this case, we held this differential tax violated the Equal
Protection Clause of the United States Constitution and article I, section 6 of
the Iowa Constitution. See RACI, 648 N.W.2d at 562. As already mentioned, the United States
Supreme Court reversed our decision to the extent it rested on federal
constitutional grounds. See Fitzgerald, 539 U.S. at ___, 123 S.
Ct. at 2161, 156 L. Ed. 2d at 105. It
did not, however, consider the legality of the differential tax rates under the
Iowa Constitution. Thus, the case was
remanded for further proceedings not inconsistent with [the Courts]
fact the Supreme Court did not discuss the validity of the statute under the
Iowa Constitution, we find it appropriate to reconsider our ruling on the state
constitution claim since our court applied the federal rational basis test in
determining whether the tax violated the Iowa Constitution. See RACI,
648 N.W.2d at 558. Thus, we again
address, in light of the Courts certiorari ruling on the federal claim,
whether section 99F.11 violates the Iowa equality provision. See
generally Chicago & N.W. Ry. v.
Fachman, 255 Iowa 989, 996, 125 N.W.2d 210, 214 (1963) (labeling
article I, section 6 of the Iowa Constitution the equality provision); Sperry & Hutchinson Co. v. Hoegh, 246
Iowa 9, 19, 65 N.W.2d 410, 416 (1954) (same).
Before doing so, however, we consider the effect of the Courts decision
on our analysis.
Import of Supreme Courts Decision
that Statute Did Not Violate the Equal Protection Clause of the United States
is this courts constitutional obligation as the highest court of this
sovereign state to determine whether the challenged classification violates
Iowas constitutional equality provision.
Callender v. Skiles, 591
N.W.2d 182, 187 (Iowa 1999) (noting that while we have deemed the federal and
state . . . equal protection clauses to be identical in scope, import, and
purpose[,] . . . it is the exclusive prerogative of our court to determine the
constitutionality of Iowa statutes challenged under our own constitution); Bierkamp v. Rogers, 293 N.W.2d 577, 581
(Iowa 1980) (noting that notwithstanding Supreme Court decision on issue, [i]t
is our constitutional obligation to determine whether the classifications drawn
. . . are violative of Article I, section 6, of our Constitution); see William
H. Rehnquist, The Supreme Court: How It was, How It Is 172 (1987)
(stating the question of the meaning of the Iowa Constitution is preeminently
a question to be decided by the Supreme Court of Iowa, and not by some other
court); Robert F. Williams, Equality
Guarantees in State Constitutional Law, 63 Tex. L. Rev. 1195, 1197
(1985) (When faced with state constitutional equality claims, state courts
should recognize their obligation to take these provisions seriously.)
[hereinafter State Equality Guarantees]. While the Supreme Courts judgment on the
constitutionality of Iowas disparate tax rates under the federal Equal
Protection Clause is persuasive, it is not binding on this court as we evaluate
this law under the Iowa Constitution. See Callender, 591 N.W.2d at 187; Bierkamp, 293 N.W.2d at 579.
methodologies have been identified for an independent analysis of state equal
protection claims: Under the first,
the state court adopts the federal frame of analysis but applies those
constructs independently. Under the
second, courts reject the federal constructs and apply their own analytical
frameworks. State Equality Guarantees, 63 Tex. L. Rev. at 1219 (footnote
omitted). In determining the proper
analysis here, it is appropriate to consider both methodologies.
analysis. We begin with the
second approachapplying an independently crafted analysis. Notwithstanding the broad statement made by
this court in its initial opinion that we will apply the same analysis under
the state equal protection provision as is applied under the federal Equal
Protection Clause, this court has always reserved to itself the ability to
employ a different analytical framework under state constitutional provisions. See,
e.g., Bowers v. Polk County Bd. of Supervisors, 638 N.W.2d 682, 689
(Iowa 2002) (We usually deem the
federal and state equal protection clauses to be identical in scope, import,
and purpose. (Emphasis added.)); In re
Interest of C.P., 569 N.W.2d 810, 811 (Iowa 1997) (Typically, we deem the federal and state
due process and equal protection clauses to be identical in scope, import, and
purpose. (Emphasis added.)); Krull v.
Thermogas Co., 522 N.W.2d 607, 614 (Iowa 1994) (In equal protection
challenges based on the federal and Iowa Constitutions, we usually interpret both federal and state
equal protection provisions the same. (Emphasis added.)); Exira Cmty. Sch. Dist. v. State, 512
N.W.2d 787, 792-93 (Iowa 1994) (We usually deem
the federal and state due process and equal protection clauses to be identical
in scope, import, and purpose. (Emphasis added.)). The implication of these cases is that while we will generally
apply the same analysis to federal and state equal protection claims, this
court has not foreclosed the possibility that there may be situations where
differences in the scope, import, or purpose of the two provisions warrant
divergent analyses. See generally State Equality Provisions,
63 Tex. L. Rev. at 1207-08 (noting the distinction between federal equal
protection and Jacksonian [e]quality [p]rovisions).
this courts right to fashion its own test for examining claims brought under
our state constitution, we do not think this
case is the proper forum to consider an analysis that might be more
compatible with Iowas constitutional language. We decline to do so here because the racetracks did not propose
in their initial briefing that the test to be applied to their claim under the
Iowa Constitution was any different than that applied under the federal Equal
Protection Clause. Therefore, it is
prudent to delay any consideration of whether a different analysis is
appropriate to a case in which this issue was thoroughly briefed and
explored. See In re Detention of Garren, 620 N.W.2d 275, 280 n.1 (Iowa
2000) (refusing to deviate from federal analysis in considering state
constitutional claim because appellant ha[d] suggested no legal deficiency in
the federal principles . . ., nor ha[d] he offered an alternative test or
application of federal test.
That brings us to the alternative manner in which this court might
exercise its obligation to rule upon the state constitutional claim: by
applying federal principles independently.
This approach is nothing new. As
noted above, this court ruled many years ago that federal decisions are
persuasive, but not binding, on this court in its consideration of claims based
on the Iowa Constitution. See Bierkamp, 293 N.W.2d at 579; accord State v. Cline, 617 N.W.2d 277, 283
(Iowa 2000) (refusing to adopt federal good faith exception to exclusionary
rule for searches that violate Iowa constitution), overruled in part on other grounds by State v. Turner, 630
N.W.2d 601, 606 n.2 (Iowa 2001). It
follows, then, that this courts independent application of the rational basis
test might result in a dissimilar outcome from that reached by the Supreme
Court in considering the federal constitutional claim. See State
Equality Guarantees, 63 Tex. L. Rev. at 1219 (Courts that apply the
federal constructs independently . . . often reach results that directly
conflict with those reached by the federal courts.); William J. Brennan, Jr., State
Constitutions and the Protection of Individual Rights, 90 Harv. L.
Rev. 489, 500 (1977) ([E]xamples abound where state courts have independently
considered the merits of constitutional arguments and declined to follow
opinions of the United States Supreme Court they find unconvincing, even where
the state and federal constitutions are similarly or identically phrased.)
[hereinafter Brennan]. This result is particularly possible in view of the
the ill-defined parameters of the equal protection clause. Miller v.
Boone County Hosp., 394 N.W.2d 776, 781 (Iowa 1986); see also Chicago
& N.W. Ry., 255 Iowa at 996, 125 N.W.2d at 214 (noting, in
considering state and federal equal protection claims, [w]hile the general
rules applicable in such cases seem pretty well settled, as is so often the
case the difficulty arises in their application).
Our courts decision
in Bierkamp illustrates this
proposition. In Bierkamp, we acknowledged Iowas guest
statute did not violate the Equal Protection Clause of the Fourteenth Amendment
in view of a United States Supreme Court decision upholding a similar statute
against an equal protection challenge and the Courts more recent dismissal of
a series of appeals on the same issue for want of a substantial federal
question. 293 N.W.2d at 579. Notwithstanding the validity of the statute
under the federal constitution, our court, applying the same analysis as that
used by the Supreme Court, held the guest statute violated article I, section 6
of the Iowa Constitution. Id. at 582.
Based on our prior
precedents and the sovereign nature of our state and its constitution, our
court has an obligation to evaluate independently the validityunder the Iowa
Constitutionof the differential tax rates imposed on excursion boats and
racetracks. See Brennan, 90 Harv. L.
Rev. at 502 ([T]he decisions of the Court are not, and should not be,
dispositive of questions regarding rights guaranteed by counterpart provisions
of state law.). When we independently
consider this issue, we arrive at a conclusion different from that reached by
the Supreme Court under the federal constitution.
start our review of the challenged legislation with a statement of the
governing principles of law. The
Supreme Court has stated that the Equal Protection Clause is essentially a
direction that all persons similarly situated should be treated alike. City of
Cleburne v. Cleburne Living Ctr., 473 U.S. 432, 439, 105 S. Ct.
3249, 3254, 87 L. Ed. 2d 313, 320 (1985); accord
Chicago & N.W. Ry., 255 Iowa at 1002, 125 N.W.2d at 217 (All
persons in like situations should stand equal before the law. No favoritism should be tolerated.). Whether this ideal has been met in the
context of economic legislation is determined through application of the
rational basis test. See Fitzgerald, 539 U.S. at ___, 123 S.
Ct. at 2159, 156 L. Ed. 2d at 103. In its consideration of the case
at hand, the Court described the rational basis test as follows:
Protection Clause is satisfied so long as there is a plausible policy reason
for the classification, the legislative facts on which the classification is
apparently based rationally may have been considered to be true by the
governmental decisionmaker, and the relationship of the classification to its
goal is not so attenuated as to render the distinction arbitrary or
(quoting Nordlinger v. Hahn,505 U.S. 1, 11, 112 S. Ct. 2326, 2332,
120 L. Ed. 2d 1, 13 (1992)). The Court
has in the past more succinctly stated this standard as whether the
classifications drawn in a statute are reasonable in light of its
purpose. McLaughlin v. Florida, 379 U.S. 184, 191, 85 S. Ct. 283,
288, 13 L. Ed. 2d 222, 228 (1964); accord College Area Renters & Landlord Assn v.
City of San Diego, 50 Cal. Rptr. 2d 515, 520 (Ct. App. 1996)
(Although equal protection does not demand that a statute apply equally to all
persons, it does require that persons similarly situated with respect to the legitimate purpose
of the law receive like treatment.
(Original emphases omitted and emphasis added.)). It was this enunciation of the rational
basis test that our court said in Bierkamp
was appropriate for analyzing a claim based on the Iowa equality provision
found in article I, section 6 of the Iowa Constitution. 293 N.W.2d at 580.
Based on these
principles, this court must first determine whether the Iowa legislature had a
valid reason to treat racetracks differently from riverboats when taxing the
gambling revenue of these businesses. See Fitzgerald, 539 U.S. at ___, 123 S.
Ct. at 2159, 156 L. Ed. 2d at 103 (requiring a plausible policy reason for
the classification (citation omitted)).
In this regard, the statute must serve a legitimate governmental
interest. Glowacki v. State Bd. of Med. Examrs,
501 N.W.2d 539, 541 (Iowa 1993).
Moreover, the claimed state interest must be realistically conceivable.
Miller, 394 N.W.2d at 779
(emphasis added). Our court must then decide whether this
reason has a basis in fact. See
Fitzgerald, 539 U.S. at
___, 123 S. Ct. at 2159, 156 L. Ed. 2d at 103 (requiring that legislature
could rationally believe facts upon which classification was based are
true). Finally, we must consider
whether the relationship between the classification, i.e., the differences
between racetracks and excursion boats, and the purpose of the classification
is so weak that the classification must be viewed as arbitrary. See id.
(requiring that the relationship of the classification to its goal [not be]
so attenuated as to render the distinction arbitrary or irrational (citation
omitted)); accord Chicago Title Ins. Co. v.
Huff, 256 N.W.2d 17, 29 (Iowa 1977) (requiring rational relationship
between classification and a legitimate state purpose or governmental
interest). This approach was followed
by our court in Federal Land Bank v. Arnold,
426 N.W.2d 153 (Iowa 1988), where we said: First we must examine the
legitimacy of the end to be achieved; we then scrutinize the means used to
achieve that end. 426 N.W.2d at 156.
Our examination of
this statute must also be guided by the general legal principles that control a
courts review of the constitutionality of a legislative enactment. These tenets are well established. Statutes are cloaked with a strong
presumption of constitutionality. In re Detention of Morrow, 616 N.W.2d 544,
547 (Iowa 2000); accord Home Builders Assn
v. City of West Des Moines, 644 N.W.2d 339, 352 (Iowa 2002) (Taxing
statutes are presumed to be constitutional.).
Therefore, a person challenging a statute shoulders a heavy burden of
rebutting this presumption. In re Detention of Morrow, 616 N.W.2d at
547; Glowacki, 501 N.W.2d at
541. This burden includes the task of
negating every reasonable basis that might support the disparate
treatment. Home Builders Assn, 644 N.W.2d at 352. In summary, [a] statute must clearly, palpably,
and without doubt infringe upon the constitution before we will declare it
unconstitutional. Glowacki, 501 N.W.2d at 541 (citation
standards have not, however, prevented this court from finding economic and
social legislation in violation of equal protection provisions. See,
e.g., Glowacki, 501 N.W.2d at 541-42 (statute limiting stays of
disciplinary orders issued by board of medical examiners); Federal Land Bank, 426 N.W.2d at 157-58
(redemption periods for property sold at foreclosure sale); Miller, 394 N.W.2d at 781 (notice
requirement for claims against local government); Bierkamp, 293 N.W.2d at 585 (guest statute); Gleason v. City of Davenport, 275 N.W.2d
431, 435 (Iowa 1979) (notice requirement for claims against municipalities); Chicago & N.W. Ry., 255 Iowa at
1004-05, 125 N.W.2d at 218-19 (wage payment statute); Sperry & Hutchinson Co., 246 Iowa at
24-25, 65 N.W.2d at 419 (issuance of trading stamps by certain retailers). Our prior cases illustrate that, although
the rational basis standard of review is admittedly deferential to legislative
judgment, it is not a toothless one in Iowa. Mathews v. De Castro, 429 U.S. 181, 185, 97 S. Ct. 431, 434,
50 L. Ed. 2d 389, 394 (1976) (citation omitted); accord Fed. Land Bank, 426
N.W.2d at 156 (recognizing the deferential scrutiny accorded the state in
the realm of economic policy and regulation, but stating that even in the
economic sphere, a citizens guarantee of equal protection is violated if
desirable legislative goals are achieved by the state through wholly arbitrary
classifications or otherwise invidious discrimination); Bierkamp, 293 N.W.2d at 581 (noting
courts considerable deference to the judgment of the legislature . . . is
not, in and of itself, necessarily dispositive). Indeed, this courts meaningful review of social and economic
legislation is mandated by our constitutional obligation to safeguard
constitutional values by ensuring all
legislation complies with those values.
See Luse v. Wray, 254
N.W.2d 324, 327 (Iowa 1977) (holding it is for the judicial branch to determine
whether another branch of government has exceeded its constitutional
limitations); Davenport Water Co. v. Iowa
State Commerce Co., 190 N.W.2d 583, 592 (Iowa 1971) ([Q]uestions
relative to constitutionality of legislation . . . stand as law issues
determinable by the judiciary alone.).
turn now to a consideration of the Iowa taxing scheme in light of these
Although the State has
advanced several reasons for the legislative classification challenged in this
case, we focus our discussion primarily on those found satisfactory by the
Supreme Court, as that is the reason for our reconsideration of the state
constitutional claim. The Supreme Court
viewed the issue as whether there was rational support for the 20 percent/36
percent differential. Fitzgerald,
539 U.S. at ___, 123 S. Ct. at 2160, 156 L. Ed. 2d at 104. It then concluded [t]hat difference was
helpful to the riverboats because it (1) encourage[d] the economic development
of river communities [and] promote[d] riverboat history; (2) protect[ed] the reliance interests of
riverboat operators who were accustomed to a twenty percent tax rate; and (3)
aid[ed] the financial position of the riverboats. Id. We will address
each suggested purpose separately.
A. Economic development of river communities and
promotion of riverboat history. Our
court does not accept the economic development of river communities and the
promotion of riverboat history as a rational basis for the legislatures
distinction between excursion boats and racetracks. Although these are laudable legislative goals, the legislative
facts on which the classification is apparently based [cannot] rationally [be]
considered to be true by the governmental decisionmaker, as required by the
Courts articulation of the rational basis test. See id. at ___, 123
S. Ct. at 2159, 156 L. Ed. 2d at 103.
We note initially that excursion boat gambling was never anticipated as
solely a river activity so as to promote river communities. When the legislature authorized gambling on
excursion boats in 1989, it was envisioned that these boats would be located
on inland waters, such as lakes and reservoirs, as well as on the Mississippi
River and Missouri River, the historical location of riverboats. See
1989 Iowa Acts ch. 67, § 7(1) (The commission shall decide the
number, location and type of excursion gambling boats licensed under this
chapter for operation on the rivers, lakes,
and reservoirs of this state. (Emphasis added.)) (codified at Iowa
99F.7(1) (1991)); id. § 7(13)
(An excursion gambling boat operated on
inland waters of this state shall meet all the requirements of
chapter 106 . . . . (Emphasis added.)) (codified at Iowa Code §
99F.7(13) (1991)). Moreover, there is
nothing peculiar about racetracks that prevents their location in river
cities. In fact, two of the three
communities in which racetracks are locatedDubuque and Council Bluffsare
river communities. See generally Miller, 394 N.W.2d at 779
(For the purpose of ascertaining whether or not the classification is
arbitrary and unreasonable, we must take into consideration matters of common
knowledge and common report and the history of the times. (Citation
omitted.)). The Dubuque racetrack is
actually on an island in the Mississippi River. On the other hand, the excursion boat docked near Osceola, Iowa,
is moored on a lake, not a river, and is certainly not located in a river
community. In addition, one river
communityCouncil Bluffshas both a racetrack and an excursion boat, only
blocks apart. So, to justify the
differential tax treatment of these enterprises on the supposed connection of
excursion boats to river communities and riverboat history and the absence of
such a connection by racetracks is illogical.
We acknowledge the
overinclusive-underinclusive dichotomy is usually applied only as part of a
strict scrutiny analysis. Bierkamp, 293 N.W.2d at 584. But our court has stated, in holding
legislation violative of the state constitution under the rational basis test,
that as a classification involves extreme degrees of overinclusion and
underinclusion in relation to any particular goal, it cannot be said to
reasonably further that goal. Id.
That is precisely the case here insofar as the differential tax is based
on the promotion of river communities and riverboat history. Thus, this legislative purpose cannot withstand
review under the rational basis standard.
See Fed. Land Bank, 426
N.W.2d at 157-58 (holding discrimination in redemption periods was equal
protection violation where class membership did not correlate with purported
class distinctions drawn by legislature); Chicago
& N.W. Ry., 255 Iowa at 997, 125 N.W.2d at 214 (It is often
said a reasonable classification is one which includes all who are similarly
situated, and none who are not.); Dunahoo
v. Huber, 185 Iowa 753, 756, 171 N.W. 123, 124 (1919) (finding
statute violated state constitution because classification made by legislature
was unwarranted where the evil to be remedied relates to members of one class
quite as well as to another); see also Ill. Sporting Goods Assn v. County of Cook,
845 F. Supp. 582, 591 (N.D. Ill. 1994) (holding ordinance that prohibited location
of gun shop within .5 miles of a school or public park was under-inclusive in
violation of the equal protection clause because the ordinance contained
exceptions to the ban that permitted certain businesses to continue to sell
guns within the restricted geographical area);Callaway
v. City of Edmund, 791 P.2d 104, 107-08 (Okla. Crim. App. 1990)
(finding state equal protection violation because ordinance prohibiting persons
under eighteen years of age from entering any pool hall or similar establishment
sweeps too broadly and is not rationally related to the ultimate objective
of regulating gambling: Singling out
poolhalls or other similar businesses from all other amusement establishments
is an act of discrimination, not policy.);
ex rel. Boan v. Richardson, 482 S.E.2d 162, 168 (W. Va. 1996)
(rejecting as legitimate basis for challenged classification that statute
reducing workers compensation benefits upon receipt of old age insurance
benefits under Social Security Act avoided duplication of benefits because the
statute did not in fact avoid duplication of benefits).
this court were to take a more expansive view of potential legislative purposes
and assume the general assembly sought to promote economic development in general,
the taxing scheme still suffers from an irrational classification. There is nothing in the record, nor is it a
matter of common knowledge, that excursion boats are a superior economic
development tool as compared to racetracks.
To the contrary, it appears that both types of gambling enterprises have
the potential to enhance the economic climate of the communities in which they
are located. If we presume the
legislature thought the promotion of gambling was in the economic interests of
the general public, then we find no rational basis for distinguishing between
gambling that takes place on a floating casino and gambling that occurs at a
land-based casino. Regardless of the
relative number of such establishments or the size of the city in which they
are to be found, excursion boats and racetracks contribute in the same manner
to the economy of the local area: they are both gambling enterprises generating
gambling receipts that are indistinguishable in terms of the economic benefits
to the local community. See Arneson v. State, 864 P.2d 1245,
1248-49 (Mont. 1993) (holding statute violated equal protection clause of state
constitution because the statutory classifications lacked a rational
relationship to the asserted purpose of the legislation, noting a
classification must distinguish one class from another taking into
consideration the purpose of the statute).
B. Reliance interests of riverboat operators. We also find insufficient the suggestion
that excursion boat operators had a reliance interest on a lower tax rate so as
to justify their different treatment.
The taxation lines are not drawn on the basis of when the affected gambling
establishments first invested in slot machines or in their business. Rather, the taxation lines are drawn on the
basis of where
the slot machines are located, regardless of the time of investment.
We found a similar
flaw in the statute challenged in our Federal Land Bank decision. In that case, a statute established
different redemption periods after foreclosure based on the identity of the purchaser
at the foreclosure sale. Fed. Land
Bank, 426 N.W.2d at 155. If
the property was purchased by a member institution (a lending institution
belonging to the federal deposit insurance corporation, the federal savings and
loan insurance corporation, or the national credit union administration), the
redemption period was one year; in all other cases, the property could be
redeemed within two years of the sale. Id. One asserted basis for this distinction was
that non-member lenders did not have a stake in the community and would not
have the incentive to make arrangements with the landowner to enable the owner
to retain the homestead; a longer redemption period presumably supplied this
incentive. Id. at 157. We rejected the concerns of mortgage lenders as a legitimate rationale for
setting different redemption periods in the statute, however, noting the
distinction in redemption periods is triggered by the identity of the sheriffs
sale purchaser, not the status of
the institution or individual extending credit in the first instance. Id.
Similarly, here, the
statute cannot be sustained on the basis of concerns that established
businesses relied on the lower tax rates, because the differential tax is
triggered not by whether the business engaged in gambling prior to the
implementation of the new tax rates, but on whether the gambling takes place on
a floating casino. Thus, this
legislative purpose fails the rational basis test because the relationship of
the classification to its goal is so attenuated as to render the distinction
irrational. See id.; see also Coalition Advocating Legal Hous. Options v.
City of Santa Monica, 105 Cal. Rptr. 2d 802, 809 (Ct. App. 2001)
(holding restriction on occupancy of second residential unit to relatives or
caretakers of residents of primary unit did not bear a rational relationship to
legitimate legislative goal of minimizing population and traffic in residential
Breeders Sales Co. v. Fla. Gaming Ctrs., Inc., 731 So. 2d 21, 27
(Fla. Dist. Ct. App. 1999) (finding equal protection violation where statute
required prospective licensee for pari-mutuel betting to hold a permit to race
quarter horses, holding there was no rational relationship between this
requirement and the public purpose of benefiting thoroughbred horse breeding
sales and related economic activities); DeCoste v. City of Wahoo, 583 N.W.2d 595,
602 (Neb. 1998) (striking down ordinance imposing landfill management fees only
on residences or businesses with an individual electric meter because this
classification did not bear any relationship to the citys objective of
raising revenue for closing the city landfill in compliance with federal and
state guidelines); State v. LaPorte, 587 A.2d 1237, 1239
(N.H. 1991) (holding statute barring depositions of witnesses who were under
the age of sixteen at the time of alleged sexual offense had
no rational relationship to goal of protecting children under the age of
sixteen from the trauma of being questioned because it denied defendant the
opportunity to depose witness who was over the age of sixteen at time of
deposition); cf. Nordlinger, 505 U.S. at 13-14, 112 S.
Ct. at 2333, 120 L. Ed. 2d at 14-15 (upholding California property tax system that
limited annual increases in assessed valuation unless there was new
construction or a change of ownership as legitimately protecting the reliance
interests of existing owners).
C. Assisting financial position of riverboats. That brings us to the last reason upon
which the Court relied to sustain the challenged legislation: the legislature
wanted to aid the financial position of the riverboats. Fitzgerald, 539 U.S. at ___, 123
S. Ct. at 2160, 156 L. Ed. 2d at 104.
While one can hardly dispute that being taxed at twenty percent puts a
business in a better financial position than if it were taxed at thirty-six
percent, one must still consider whether there is a relationship between this
purpose and the classification that makes it reasonable to distinguish between
excursion boats and racetracks. See id. at ___, 123 S. Ct. at 2159, 156 L.
Ed. 2d at 103 (requiring, in addition to a credible legislative objective, that
the relationship of the classification to its goal is not so attenuated as to
render the distinction arbitrary or irrational); accord Fed. Land Bank, 426 N.W.2d at 156-57 (The question
is whether these legitimate goals are rationally served by [the] legislative
scheme . . . .); Chicago & N.W. Ry.,
255 Iowa at 1002, 125 N.W.2d at 217 (There must be some substantial
reference to the subject matter of the proposed legislation, between
the objects or places embraced in such legislation and the objects and places
excluded. (Emphasis added.)); Dunahoo, 185 Iowa at 756, 171 N.W. at 123
(stating the distinction in dividing must not be arbitrary, and must be based
on differences which are apparent and reasonable). If this were not so, then any
differential tax would be constitutional because a lower tax always benefits the financial situation of
the taxpayer subject to the lower rate. Obviously more is required: there must be
some reasonable distinction between excursion boats and racetracks that
justifies taxing gambling revenue earned at such establishments differently. See Fitzgerald, 539 U.S. at ___, 123 S.
Ct. at 2161, 156 L. Ed. 2d at 105 (requiring rational relationship between
classification and legislative goal).
In determining whether
an adequate relationship exists between the classification and the legislative
goal, we examine the rationale advanced . . . to justify th[e] class
distinction. Fed. Land Bank, 426 N.W.2d at 157. The rationale here has always been that
riverboats are different from racetracks and therefore gambling receipts earned
on a riverboat can constitutionally be taxed differently than gambling receipts
earned at a racetrack. But how are
these enterprises different?
[S]omething more tangible than a mere name, business, or purpose of a
corporation is exacted by the courts as a basis of classification. Chicago
& N.W. Ry., 255 Iowa at 999, 125 N.W.2d at 216; cf. Gleason, 275 N.W.2d at 435 (In the
absence of a rational basis for distinction, all municipalities in Iowa
constitute a class upon which the law should operate in a uniform manner
regarding civil liability.). Certainly
the financial needs of excursion boats cannot be a basis for distinction
because both industries were losing significant revenue when the challenged
legislation was enacted. RACI, 648 N.W.2d at 557; see Chicago & N.W. Ry., 255 Iowa at
998, 125 N.W.2d at 215 (Where . . . the economic benefits to be realized . . .
relates to members of one class quite as well as to another, such a
classification would be unwarranted.).
Nor do we find it
plausible that the legislature had a realistic expectation in 1994 that
racetracks would be financially able to pay radically higher taxes based on the
same amount of revenue than excursion boats would be able to pay. As noted, both types of establishments were
losing money prior to the legislative action taken in 1994. Accordingly, the legislature addressed this
problem by significantly expanding gambling at
both enterprises. The
addition of slot machines at racetracks in 1994 was clearly intended to enhance
the profitability of the tracks, but favorable concessions were made in the
same legislation for excursion boats.
The 1994 act removed prior limitations on wagering, eliminating the five
dollar maximum wager per hand or play, as well as the two hundred dollar
maximum loss per person during each gambling excursion. See
1994 Iowa Acts ch. 1201, §§ 11, 19. In addition this legislation repealed the restriction that no
more than thirty percent of an excursion boat could be used for gambling
activity. Id. § 16.
These changes suggest that the gambling receipts of racetracks and riverboats would likely increase
More importantly, we
find nothing in the record or in our common knowledge supporting a conclusion
that the legislature could have rationally believed that racetracks would be
significantly more profitable than excursion boats. See Fitzgerald, 539
U.S. at ___, 123 S. Ct. at 2159, 156 L. Ed. 2d at 103 (requiring the
legislative facts on which the classification is apparently based rationally
may have been considered to be true by the governmental decisionmaker
(citation omitted)). In fact, the
legislative history indicates otherwise.
The legislative study committee that recommended the statutory changes
enacted by the general assembly in 1994 suggested that [b]ecause the
land-based casinos could function with a lower operating cost, the state should
receive . . . 24% of adjusted
gross revenues over three million.
(Emphasis added.) The
recommendation of a four percent
tax differential does not support the sixteen
percent differential that was adopted, a four-fold increase. The plaintiffs clearly met their burden to
show there was no credible factual basis for the legislature to believe that
the racetracks would be able to pay nearly twice the amount of taxes as the
excursion boats on the same amount of revenue.
We return, then, to
the requirement that the classification must relate to the purpose of the law,
which may be either the elimination of a public mischief or the achievement
of some positive public good. Chicago & N.W. Ry., 255 Iowa at 997,
125 N.W.2d at 215; accord Glowacki, 501
N.W.2d at 541 (stating rational basis test requires a legitimate governmental
interest); see also Chicago Title Ins. Co.,
256 N.W.2d at 29 (upholding statute because it prevented invidious practices .
. . deemed inimical to the public interest).
The only public interest identified by the Court to justify treating
excursion boats more favorably is the statement that riverboats promote river
communities and riverboat history and racetracks do not. But as we have already discussed, this
assertion has no basis in fact.
A similar flaw exists
in the public interest asserted by the State on appeal: maintaining riverboats
in Iowa. While the State has argued the
differential tax was designed as an incentive to keep the excursion boats
located on the border rivers from moving to another state with a more favorable
regulatory climate, the legislative history belies that argument. The legislative study committee, recognizing
the adverse effect on excursion boats due to competition from other states,
recommended that the legislature eliminate the betting limits on excursion boat
gambling, remove the restriction on the amount of space on the boat that could
be used for gambling, and modify the cruising requirements. It did not recommend lowering the taxes
imposed on the riverboats to make them more profitable. Moreover, the legislature could not
reasonably have believed that taxing racetracks at thirty-six percent rather
than at the twenty-four percent rate recommended by the committee would have
any impact on the competitive position of the excursion boats vis-à-vis their
out-of-state counterparts. There is
simply no rational connection between this conceivable legislative purpose and
the discriminatory tax rate imposed on the racetracks.
In the end, we return
to the fact that the item taxedgambling revenueis identical. The higher tax rate is triggered by the
location where such revenues are earned.
Yet there is no legitimate purpose supported by fact that justifies
treating one gambling enterprise differently than another based on where the
gambling takes place, other than an arbitrary decision to favor excursion
boats. See Ill. Sporting Goods Assn,
845 F. Supp. at 591 (There is no rational reason to distinguish between a gun
sold within .5 miles of a school or park by a person who owns the premises on
which the gun shop is operated and a gun sold by a person who leases the
premises on which a gun shop is operated.
In both instances, guns will be sold near areas where children
congregate and play.); Indus. Claim Appeals Office v. Romero, 912
P.2d 62, 69 (Colo. 1996) (holding statute terminating workers compensation
benefits for permanently totally disabled claimants upon age sixty-five, but
not for partially disabled workers, violated state and federal equal protection
on basis that classification was irrational in relation to asserted purposes of
legislation); Thompson v. KFB Ins.
Co., 850 P.2d 773, 782 (Kan. 1993) (finding statute allowing
evidence of collateral source payments only when damages in excess of $150,000
are claimed in violation of state equal protection: [W]here, as here, the only basis for the classification is to
deny a benefit to one group for no purpose other than to discriminate against
that group, the statutory classification is not only mathematically imprecise,
it is without a rational basis and arbitrary.); Flagship Ctr., Inc. v. City of
New Orleans, 587 So. 2d 154, 157 (La. Ct. App. 1991) (striking down
city ordinance treating cable television bingo operators more favorably than
bingo hall operators with respect to the frequency of bingo games, stating the
citys favoring of cable facilities over hall facilities does not rationally
relate to achieving the [citys stated] interest); Nankin v. Village of Shorewood, 630 N.W.2d 141, 154 (Wis.
2001) (holding statute providing different procedures to challenge property tax
assessments depending on whether property was located in populous county
unconstitutional: We are unable to
identify any difference in situation or circumstance between properties located
in populous counties and properties located in other counties in the state that
would necessitate different legislation for the classes in challenging their
property assessment.). As one
commentator has stated, [e]ven under the rationality test, the legislature is
not entitled to pick out a group it disfavors, declare that group to be different,
and then impose a special tax burden on the disfavored group. 3 Ronald D.
Rotunda and John E. Nowak, Treatise on
Constitutional Law § 18.3(e),
at 244 (3d ed. 1999).
Conclusion and Disposition.
decision today is a difficult one because we have great respect for the
legislature. Notwithstanding our
preference to defer to its judgment, we declare the differential tax at issue
here invalid under the Iowa Constitution because we are convinced the
classifications made in section 99F.11 lack a rational basis in the
constitutional sense. Because we are
keenly aware of the legislatures constitutional role to make decisions of a
policy and political nature, we have not lightly undertaken todays
decision. Nonetheless, [o]ur
obligation not to interfere with the legislatures right to pass laws is no
higher than our obligation to protect the citizens from discriminatory class
legislation violative of the constitutional guaranty of equality of all before
the law. Sperry & Hutchinson Co., 246 Iowa at 24, 65 N.W.2d at
419. Consequently, we decline the
opportunity to alter our prior decision that the statutory exception to the
twenty percent tax rate on gambling receipts violates article I, section 6 of
the Iowa Constitution. We reverse the
decision of the district court upholding the higher tax rate on racetracks
under the Iowa Constitution and remand for further proceedings.
REVERSED AND REMANDED.
concur except Carter, J., who dissents and Cady, J., who dissents separately.
Assn of Cent. Iowa v. Fitzgerald
CARTER, Justice (dissenting).
It is unfortunate that the court has
squandered the opportunity to correct its prior decision in this case, which,
for reasons pointed out by the Supreme Court, was completely outside the
mainstream of equal-protection jurisprudence.
That mainstream is accurately reflected in the following:
no precise formula has been developed, the Court has held that the Fourteenth
Amendment permits the States a wide scope of discretion in enacting laws which
affect some groups of citizens differently than others. The constitutional safeguard is offended
only if the classification rests on grounds wholly irrelevant to the
achievement of the States objective.
State legislatures are presumed to have acted within their
constitutional power despite the fact that, in practice, their laws result in
some inequality. A statutory
discrimination will not be set aside if any state of facts reasonably may be
conceived to justify it.
McGowan v. Maryland, 366
U.S. 420, 425, 81 S. Ct. 1101, 1105, 6 L. Ed. 2d 393, 399
are two very legitimate reasons why the legislature could justifiably tax the
gross receipts of racetracks at a higher rate than those of the casinos. First, the legislature may have simply
preferred casinos over racetracks as vehicles for public entertainment and
sought to give them more assistance than the racetracks for that very simple
reason. That would have been an
entirely proper decision for the legislature to make. The second reason for the distinction that the legislature drew
was the very distinct possibility that some of the casinos, particularly those
along the Mississippi River, would view an increased tax burden as a reason to
move their operations to a friendlier taxing venue. That was a risk not presented by the racetracks, which were
firmly attached to the Iowa soil and several of which enjoyed the vestiges of
to the majoritys assumption, casinos and racetracks are distinctly different
types of gambling enterprise. The
former provides a broad array of gaming activities in a place where gambling is
the main event. The latter are places
where horse races and dog races are run with pari-mutuel betting and slot
machines as a side attraction. Based on
these clear differences, the legislative decision to tax them differently may
not be attacked on the grounds that, in fact, the taxing scheme adopted will
not better promote economic development or state revenue enhancement than would
be the case if the two types of gambling facilities were taxed at the same
rate. The legislature could properly
elect which horse to ride in the context of gaming activity, and its decision
may not be challenged on the ground that it was mistaken.
Stores of Ohio, Inc. v. Bowers, 358 U.S. 522, 528, 79 S. Ct.
437, 441, 3 L. Ed. 2d 480, 485 (1959), the Supreme Court recognized
that a state may tax certain corporations and not tax others in an effort to
encourage the location of certain companies within the state. I see no reason why the same principle may
not be applied in order to assure the retention of certain activities in this
state. That is what the legislature was
attempting to do in not increasing the taxes on the casinos while taxing the
racetracks substantially more. This is
the type of choice that legislators are elected to make and involves the type
of policy-making that should be the province of the legislative branch of
government. I would affirm the judgment
of the district court upholding these tax statutes as enacted by the General
Assn of Cent. Iowa v. Fitzgerald
CADY, Justice (dissenting).
I respectfully dissent. The doctrine of independent constitutional
interpretation by state courts is a powerful and vital aspect of constitutional
law. Yet, it is not well suited for equal
protection claims involving a rational basis analysis of taxation statutes, and
is entirely inappropriate when it arises within the very same case in which the
United States Supreme Court has decided the issue. Since this court applies the same tests and follows the same
analysis as the Supreme Court in equal protection claims involving taxation, a
conflicting decision by this court within the context of the same case
necessarily means this court finds the Supreme Court decision to be totally and
completely irrational and renders it a nullity, or at least merely
advisory. This unprecedented action by
the majority in this case is offensive to the institutional integrity of our system
of justice in this country and is disruptive to the essential balance of power
between the judicial and legislative branches of government in this state. It forces me to part from my colleagues and
to, regrettably, express my ardent disagreement.
The majority correctly recognizes that
conflicting conclusions can occur when state courts independently apply
constitutional principles to challenges of discriminatory statutes, including
challenges based on equal protection.
For sure, this court has a proud and storied history, dating back to our
earliest decisions, of viewing our state constitution as protecting individual
rights not recognized by federal courts.
See In the Matter of Ralph,
1 Morris 1, 7 (Iowa 1839) (When, in seeking to accomplish his object, [one]
illegally restrains a human being of his liberty, it is proper that the laws,
which should extend equal protection to [persons] of all colors and conditions,
should exert their remedial purpose.).
However, the doctrine of independent interpretation cannot be used to
justify a decision that conflicts with the Supreme Court in every instance,
especially in cases involving challenges to taxation statutes. Unlike other areas of constitutional law,
the legislature enjoys its broadest discretion in the realm of social and
economic legislation. Courts, without
exception, apply a minimal standard of rationality that requires any challenged
discriminatory classification to be wholly and totally arbitrary before it
violates equal protection.
the area of taxation, more than any other field, we recognize the legislature
possesses the greatest freedom of classification. Motor Club of Iowa v. Dept of
Transp., 265 N.W.2d 151, 154 (Iowa 1978); Dickinson v. Porter, 240 Iowa 393, 401, 35 N.W.2d
66, 72 (1948); accord Madden v.
Kentucky, 309 U.S. 83, 87-88, 60 S. Ct. 406, 408, 84 L. Ed. 590, 593
(1940); see also Williams v. Vermont,
472 U.S. 14, 22-23, 105 S. Ct. 2465, 2471, 86 L. Ed. 2d 11, 19 (1985). We give our greatest deference to the
legislature in tax matters because taxation policy is recognized to be
peculiarly a legislative function, involving political give-and-take and an
awareness of local conditions. Metro.
Sports Facilities Commn v. County of Hennepin, 478 N.W.2d 487, 489
(Minn. 1991). As noted by the Supreme
The broad discretion as to classification
possessed by a legislature in the field of taxation has long been recognized. .
. . [T]he passage of time has only
served to underscore the wisdom of that recognition of the large area of
discretion which is needed by a legislature in formulating sound tax policies.
. . . It has . . . been pointed out
that in taxation, even more than in other fields, legislatures possess the
greatest freedom in classification.
Since the members of a legislature necessarily enjoy a familiarity with
local conditions which this Court cannot have, the presumption of
constitutionality can be overcome only by the most explicit demonstration that
a classification is a hostile and oppressive discrimination against particular
persons and classes. . . .
No scheme of taxation, whether the tax is
imposed on property, income, or purchases of goods and services, has yet been
devised which is free of all discriminatory impact. In such a complex arena in which no perfect alternatives exist,
the court does well not to impose too rigorous a standard of scrutiny lest all
local fiscal schemes become subjects of criticism under [an equal protection
San Antonio Indep. Sch. Dist. v. Rodriquez, 411
U.S. 1, 40-41, 93 S. Ct. 1278, 1300-01, 36 L. Ed. 2d 16, 47-48 (1973)
(footnotes omitted) (quoting Madden, 309 U.S. at 87-88, 60 S. Ct. at
408, 84 L. Ed. at 593); see also Motor Club of Iowa, 265 N.W.2d at 154; Dickinson, 240 Iowa at 401, 35 N.W.2d at
72. Without question, an equal
protection challenge to a taxation statute is an extremely unlikely area of
conflict between courts in our modern day society.
both the Iowa and federal equal protection analysis, economic discrimination in
statutes is permissible, as long as a rational reason exists between the
purpose of the statute and the classification made by the statute. Thus, an equal protection analysis
essentially comes down to a judicial determination whether an identified reason
for the classification is rational.
Under the limited standard of review for taxation statutes, it is
difficult for two courts to reach different conclusions if each court
conscientiously follows the same governing principles. In other words, in most instances of
disagreement, one of the courts is failing to follow the proper analysis.
Our courts did not always follow this
rational basis test in the area of tax and economic legislation. In the decades following the Civil War, the
United States Supreme Court began to earnestly scrutinize allegations of
economic discrimination under a substantive due process approach. See 2
Ronald D. Rotunda & John E. Nowak, Treatise
on Constitutional Law §§ 15.2, .3, at 578-95 (1999)
[hereinafter Rotunda & Nowak] (discussing the development and entrenchment
of substantive due process analysis between 1865 and 1936). This
led to a nearly forty-year trend of judicial activism in the area of economic
legislation that allowed courts to scrutinize the wisdom of economic
statutes. The most widely recognized
symbol of this activism was Lochner v. New York, 198 U.S. 45, 25 S.
Ct. 539, 49 L. Ed. 937 (1905), a case which lends its name to this era. In Lochner, the Supreme Court held that a
state statute establishing maximum hours bakery employees could work interfered
with the freedom to contract for employment.
at 64, 25 S. Ct. at 546, 49 L. Ed. at 944-45. The Court engaged in its own evaluation of the merits of the
legislation and rejected the rationale offered by the state that the statute
was justified as a means to protect the health and welfare of bakers. See id.
at 56-63, 25 S. Ct. at 542-45, 49 L. Ed. at 941-44.
retreat from this period of unprincipled judicial control of social and
economic legislation began in the 1930s, and was complete by the end of that
decade. 2 Rotunda & Nowak § 15.4,
at 600; see,
States v. Carolene Prods. Co., 304 U.S. 144, 152, 58 S. Ct. 778,
783, 82 L. Ed. 1234, 1241 (1938) ([R]egulatory legislation affecting ordinary
commercial transactions is not to be pronounced unconstitutional unless . . .
it is of such a character as to preclude the assumption that it rests upon some
rational basis within the knowledge and experience of the legislators.
(Footnotes omitted.)). Some of our own
prior cases reflect the Lochner-era approach. See, e.g., State v. Logsdon, 215 Iowa 1297, 1300, 248 N.W. 4, 5 (1933)
(a license law that needlessly interferes with lawful occupations would be
unconstitutional); Bear v. City of Cedar Rapids, 147
Iowa 341, 344, 126 N.W. 324, 326 (1910) (ordinance requiring milk dealers to
apply to the city board of health for license challenged on substantive due
process grounds). Notwithstanding,
there is no question that our test today reflects the current federal equal protection
a rational basis test continues to be employed that accords a presumption of
constitutionality to economic legislation and a recognition of great deference
to the legislative judgment involved in such legislation. See
Sperfslage v. Ames City Bd. of Review, 480 N.W.2d 47, 49 (Iowa
1992); Dickinson, 240 Iowa at
398-99, 35 N.W.2d at 71; see also City of New
Orleans v. Dukes, 427 U.S. 297, 303-04, 96 S. Ct. 2513, 2516-17, 49
L. Ed. 2d 511, 516-17 (1976). It
requires the court to first resolve doubts in favor of the legislation, and to
respect the acceptable give-and-take and imperfect justice inherent in tax
legislation, as well as the fundamental legislative role in developing public
policy and tax strategies to accomplish that policy.
is accepted jurisprudence that
the judiciary may not
sit as a superlegislature to judge the wisdom or desirability of legislative
policy determinations made in areas that neither affect fundamental rights nor
proceed along suspect lines; in the local economic sphere, it is only the
invidious discrimination, the wholly arbitrary act, which cannot stand
consistently with [equal protection guarantees].
City of New Orleans, 427
U.S. at 303-04, 96 S. Ct. at 2517, 49 L. Ed. 2d at 517 (citations omitted); accord Sperfslage, 480 N.W.2d at 49; Motor Club of Iowa, 265 N.W.2d at 154; Dickinson, 240 Iowa at 398-99, 35 N.W.2d
at 71. The grave error committed by the
majority is that it steps back one hundred years into the long abandoned Lochner era and engages in a social and
economic debate over the objectives and purposes of the tax legislation that,
up until today, was securely within the realm of the legislative branch of
government. Moreover, it weighs in on a
political debate by concluding that the apparent legislative objective of
economic development of river communities is illogical. Clearly, the rational basis test was set up
to prevent courts from questioning the underlying policies of economic
legislation. This is for our elected
leaders to do, not judges. See Morton Salt Co. v. City of S. Hutchinson,
159 F.2d 897, 900 (10th Cir. 1947) (quoting Providence Bank v. Billings, 29 U.S. (4
Pet.) 514, 562, 7 L. Ed. 939, 957 (1830)) (In the words of Mr. Chief Justice
Marshall, The intent, wisdom, and justice of the representative body, and its
relations with its constituents, furnish the only security . . . against unjust
and excessive taxation . . . .); accord
Motor Club of Iowa, 265 N.W.2d at
154; Dickinson, 240 Iowa at 399,
35 N.W.2d at 71.
A review of cases from around the
country in other areas involving statutory classifications helps point out the
majoritys error. Of course, these
cases reveal the general proposition that courts defer to the legislature in
reviewing social and economic statutes.
I agree with the majority that this deference does not mean that a court
can never apply a rational basis test to find social or economic legislation in
violation of an equal protection clause.
Different conclusions can legitimately result, but courts must be sure
that the conflict is based on the law, not policy.
various decisions among states on the constitutionality of statutes that exempt
or favor certain trucking industries from complying with highway weight
restrictions serves as an example of how courts can legitimately reach
different results. See Lorrie M. Marcil, Note, State Statutes That Exempt Favored Industries From
Meeting Highway Weight Restrictions:
Constitutionality Under the Equal Protection Clause,1984 Duke L.J. 963 (1984). The conflict by courts in this particular
area has not occurred by judicial inquiry into and disagreement with the
legislative objectives at work behind the statute, but by an examination of the
relationship of the statutes objective and the resulting classification. See id. at 980-81. In other words, those courts that have found
statutes governing exceptions to highway weight restrictions to violate equal
protection accept the legislative objectives and purposes to be legitimate, but
conclude the pursuit of one purpose (highway safety) by the legislature under
the guise of another purpose (favoring a particular industry) is impermissible
because the discriminatory classification created between favored and unfavored
industries, within the context of the legislative decision to govern the weight
of vehicles, is wholly arbitrary. See id.;
State v. Amyot, 407 A.2d 812, 813-14 (N.H. 1979); Sterling H.
Nelson & Sons, Inc. v. Bender, 520 P.2d 860, 862-63 (Idaho
1974). Although economic legislation
remains a sensitive area for judicial interference, an inquiry into the
relationship between the objectives of the statute and the resulting
classification is the only area of analysis that can account for different
this case, the legislature uses a taxation statute to pursue the objective of
economic development by favoring riverboats over racetracks. Taxation is an area laden with social and
economic policy, which is a legislative function to develop. Moreover, it is entirely reasonable and
appropriate for a legislature to use taxation to create classifications that
favor one person or entity over another.
Where the public interest is served one business may be left untaxed
and another taxed, in order to promote the one, or to restrict or suppress the
other. Carmichael v. S. Coal & Coke Co.,
301 U.S. 495, 512, 57 S. Ct. 868, 873-74, 81 L. Ed. 2d 1245, 1255 (1937)
(citations omitted). Moreover,
it has repeatedly been
held and appears to be entirely settled that a statute which encourages the
location within the State of needed and useful industries by exempting them,
though not also others, from its taxes is not arbitrary and does not violate
[equal protection guarantees].
Allied Stores of Ohio, Inc. v. Bowers, 358
U.S. 522, 528, 79 S. Ct. 437, 441, 3 L. Ed. 2d 480, 485 (1959). This principle cannot be called into
question. It is applied all the time in
the legislative arena, and is the basis of much of the economic policy of our
state and our country. A contrary
approach would turn government on its head.
Courts are obligated to trust the legislative branch and the people who
elect our legislators to devise the economic policies that drive our economy.
courts view of economic policy must not trump the views of those elected to craft policy within the
legislative arena. [A] constitution is
not intended to embody a particular economic theory. . . . It is made for people of fundamentally
differing views. . . . Lochner,
198 U.S. at 75-76, 25 S. Ct. at 547, 49 L. Ed. at 949 (Holmes, J.,
dissenting). As Justice Holmes wisely
Courts should be
careful not to extend [the express prohibitions of the constitution] beyond
their obvious meaning by reading into them conceptions of public policy that
the particular Court may happen to entertain.
Tyson & BrotherU. Theatre Ticket Offices, Inc. v.
Banton, 273 U.S. 418, 446, 47 S. Ct. 426, 434, 71 L. Ed. 718,
729 (1927) (Holmes, J., dissenting).
From an analytical standpoint, the
only accepted means for a court to legitimately find a taxation case of this
nature violates equal protection is by considering the relationship between the
object of the taxation statute and the classification that results. Here, our legislature used the taxation
statute with an objective to foster economic development. The classification exists under the statute
to promote the riverboat industry and stimulate economic development. Both objectives are certainly legitimate and
compatible, and the favoritism granted to riverboats is done in a
straightforward manner under a statute that exists to accomplish the specific
goal, not under a statute that serves a different purpose. Thus, unlike the conflict among courts over
weight-restriction statutes, the basis for the classification in this case
relates directly to the object of the statute.
Consequently, the case ultimately comes down to whether the
discriminatory classification is too underinclusive. This is the only legitimate area of inquiry from which the
majority can strike down the statute.
majority, of course, claims riverboats and racetracks are the same enterprise,
which makes the different classification created by the legislation wholly
arbitrary. It acknowledges the
overinclusive-underinclusive dichotomy is normally applied only to a strict
scrutiny analysis, and is only helpful to a rational basis analysis when a
classification involves extreme degrees of overinclusion and underinclusion
in relationship to the legislative goal.
293 N.W.2d at 584. Clearly, this
approach has limited value in an equal protection analysis. Yet, the majority evades this limitation by
repeatedly claiming that there is no recognizable difference between riverboats
and racetracks. This claim has no basis
in fact, and accepting it as the foundation or premise that drives the analysis
leads to a pure and simple act of legislating.
Clearly, the law does not favor the position of the majority, so the
facts become unnecessarily circumscribed to conform to the very narrow window
available to render the statute unconstitutional under our equal protection
clause. Yet, the majoritys reasoning
imposes serious consequences upon the legislative branch, which has justifiably
relied upon its freedom granted under the law to create classifications in tax
statutes by imposing a greater tax burden on one of the two types of gambling
enterprises permitted in Iowa.
between the goal of the statute and the means selected by the legislature to
achieve that goal is not required. See Hughes v. Alexandria Scrap Corp., 426 U.S.
794, 814, 96 S. Ct. 2488, 2500, 49 L. Ed. 2d 220, 234 (1976) ([I]n the
[economic] area . . . the Equal Protection Clause does not demand a surveyors
precision in creating classifications.); Sperfslage,
480 N.W.2d at 49 (Taxation is not an exact science.). Instead, it has been widely recognized, for
perhaps as long as Iowa has been a state, that:
The problems of
government are practical ones and may justify, if they do not require, rough
accommodationsillogical, it may be, and unscientific. But even such criticism should not be
hastily expressed. What is best is not
always discernable; the wisdom of any choice may be disputed or condemned. Mere errors of government are not subject to
our judicial review. It is only its
palpably arbitrary exercises which can be declared void [pursuant to equal
protection guarantees] . . . .
Metropolis Theatre Co. v. City of Chicago, 228
U.S. 61, 69-70, 33 S. Ct. 441, 443, 57 L. Ed. 730, 734 (1913); accord Sperfslage,
480 N.W.2d at 49; Motor Club of Iowa,
265 N.W.2d at 154; Dickinson, 240
Iowa at 398-99, 35 N.W.2d at 71. Thus,
under the rational basis analysis, courts are compelled to accept the
legislatures generalizations even when there is an imperfect fit between means
and end and a classification is not unconstitutional because in practice it
results in some inequality. Heller v.
Doe by Doe, 509 U.S. 312, 321, 113 S. Ct. 2637, 2643, 125
L. Ed. 2d 257, 271 (1993) (citations omitted); accord Sperfslage,
480 N.W.2d at 49; Motor Club of Iowa,
265 N.W.2d at 154; Dickinson, 240
Iowa at 401, 35 N.W.2d at 72. A tax
classification simply requires some reasonable distinction, or difference in
state policy. Allied Stores of Ohio, Inc.,
358 U.S. at 528, 79 S. Ct. at 441, 3 L. Ed. 2d at 485; accord Motor
Club of Iowa, 265 N.W.2d at 154 (The differences on which the
classification is based need not be great or conspicuous.); Dickinson, 240 Iowa at 401, 35 N.W.2d at
Our legislature could have
realistically considered riverboats to be as different from racetracks as night
is from day. Yet, the majority
concludes that riverboats and racetracks are the same because both produce
revenue from gambling and both contribute to economic development. Although the two enterprises both produce
gambling revenues, they are very different in very legitimate ways. Not only do they operate with vastly
different approaches, they contribute to economic development in Iowa in very
different ways. The majority argues
that riverboats and racetracks are the same because they have the same
potential to contribute to the economic development of the communities in which
they are located. This may or may not
be true (our legislature may know, which helps explain why the decision is their
decision), but it simply misses the point and ignores the obvious reality of
the situation. It is not important that
both industries help the area economy in which they are located. Instead, what is important from the
perspective of using a taxation statute is that riverboats can be located in
many more communities than racetracks and can provide economic benefit for far
more Iowa communities than racetracks.
majority claims that this reality is not common knowledge that our legislature
could have contemplated, but such a statement ignores the world around us. It ignores that racetracks require a large
metropolitan area to operate and survive, or some other unique circumstances. Dog and horse racing is a specialized
industry that would quickly fold if not located in a unique area that is
capable of supporting it. Racetracks
are sparsely located, not only around Iowa, but around the country. This is common knowledge. See Federal Land Bank, 426 N.W.2d at 157 (In evaluating
the reasons for [a] classification . . . we are obliged to consider matters of
common knowledge and common report and the history of the times. (Citation omitted.)). Riverboats, on the other hand, are not
encumbered with the special industry needs of horse and dog racing. Consequently, they can go into smaller
communities in which racetracks cannot.
This distinction is clearly shown by the current location of riverboats
around Iowa, as well as the numerous proposed sites for additional riverboats
around the state.
the best test for the legitimacy of a classification made by a legislature is
to consider if it actually promotes the public welfare. As Justice Frankfurter observed:
the great divide in
[equal protection] decisions lies in the difference between emphasizing the
actualities or the abstractions of legislation. . . . Classification is inherent in legislation; the Equal Protection
Clause has not forbidden it. To
recognize marked differences that exist in fact is living law; to disregard
practical differences and concentrate on some abstract identities is lifeless
Morey v. Doud, 354
U.S. 457, 472, 77 S. Ct. 1344, 1354, 1 L. Ed. 2d 1485, 1495-96 (1957)
(Frankfurter, J., dissenting). Without
question, the current and proposed riverboats in Iowa show that many more Iowa
communities can benefit from riverboat gambling than racetrack gambling. It is entirely conceivable that our
legislature could have foreseen, in choosing the different tax structure, the
very circumstances occurring today. See generally Tim Jamison, The Boat Vote:
Stakes High Tuesday in Gambling Referendum, Waterloo-Cedar Falls Courier, Oct. 5,
2003, at A1 (Look at whats happening at the Quad Cities, Dubuque, Marquette,
Des Moines, Council Bluffs, Tama, everywhere there is gambling in the
state, said the man who spearheaded the drive for a Black Hawk County
riverboat. This will be good for the
community.). The tax break for
riverboats was not given as an impermissible preference for the riverboat
industry over the racetrack industry.
Instead, it was for the public who benefits far greater from riverboat
development. The expansion of riverboat
gambling in Iowa is something that could have been envisioned by our
legislature. The objective to help more
Iowa communitiesincluding those that might be considered a more typical Iowa
communitycertainly could have been a purpose our legislature sought to achieve
by favoring riverboats over racetracks.
Consequently, the superior economic advantage of riverboats to more Iowa
communities justifies a different taxation classification to promote riverboat
The majority tries to undercut this
reality by pointing out that two racetracks provide economic development to two
river communities and one riverboat is located near a nonriver community. Apparently, the majority believes this
establishes an extreme degree of overinclusion and underinclusion. Bierkamp, 293 N.W.2d at 584. If this is so, then the majority has
eviscerated the equal protection analysis in the area of taxation. The fact is that there are currently nine
riverboats located in five river communities in Iowa along the Mississippi
River and two river communities along the Missouri River. There is one riverboat located on a lake
near Osceola. There are three
racetracks in Iowa, two in river communities.
The fact that two racetracks provide economic benefit to two of the
seven river communities is far from extreme underinclusion. If this constitutes extreme underinclusion,
many of our tax laws are in serious jeopardy.
The majority uses Federal Land Bank to support
its logic, but this case is far from helpful to the majority, or even
comparable. See 426 N.W.2d 153.
Land Bank, we held that a statute that provided for a different
redemption period in foreclosure proceedings for purchasers who were lender
members of one of three federal lending oversight entities than for other
nonmember lenders violated equal protection.
See id. at 156-58. We noted that the purposes of the different redemption
periodsto encourage lenders who did not have a stake in a community to
nevertheless help financially strapped farmers retain their homesteads and to
pressure nonmember institutions to dispose of foreclosed farmland more
quicklywere permissible, but found the different classification was not
reasonably related to these purposes because nonmembers included individual
Iowans who held a mortgage, Iowa insurance companies, Iowa mortgage companies
who were not federally insured, and federal land bank associations, all of whom
had the same stake in the process and were just as likely as member
institutions to provide forbearance to farmers and dispose of land under
similar timing considerations. Id.
at 156-57. Thus, although the purpose
of the statute was legitimate, the different classifications included only
three groups of lenders and excluded five groups of lenders who could be
affected by the statute the same as the three lender groups.
I have no trouble concluding that the
underinclusion in Federal Land Bank constitutes an extreme degree to justify
court intervention on equal protection grounds. Moreover, there was no argument that the five excluded lender
groups would not be as likely to help the family farmer as the included Iowa lenders. See id. at
156-57. This case is vastly
different. The underinclusion is far
from extreme, and a clear realistic argument exists that the excluded industry
does not satisfy the legislative objective in the same manner as the included
industry. There are no cases, within or
outside of Iowa, that support the majoritys position in this case.
is also important to observe that the majority attempts to validate its
independent interpretation approach on the basis of Bierkamp. 293 N.W.2d 577. It uses Bierkamp as an example of an instance
where this court has rejected a rational basis conclusion of the Supreme
Court. This reliance, however, is
Any reliance on Bierkamp as authority of
this court to apply the equal protection analysis to reach a different
conclusion than the Supreme Court in this case fails to recognize that the
Supreme Court decision at issue, Silver v. Silver, 280 U.S. 117, 50 S. Ct.
57, 74 L. Ed. 221 (1929), was issued fifty-one years prior to Bierkamp. 293 N.W.2d at 579. It also fails to recognize that we had previously followed Silver. Id. at 581. It further fails to recognize that we observed a clear trend
among other states to depart from the Supreme Court decision because it no
longer represented the views of todays society. See id. at
580-82. It was, in short, simply an
outdated rationale that had lost support.
None of this is involved in this case.
In this case, the Supreme Court found
a rational basis in the very same case before us, with the very same facts and
reasons, as well as the same legal analysis.
In this light, it is difficult, if not impossible, to reconcile
conflicting court opinionsone finding a reason for the classification to be
rational and the other finding the reason to be totally arbitraryin an area
where the legislature is given its broadest authority possible to make
classifications. Our law requires that
every reasonable basis upon which [a] classification may be sustained to be
negated. Id.at 579-80. Instead, the majority negates the decision of the Supreme
Court. I know of no other court in the
country that has reached a conclusion in conflict with the Supreme Court on
remand of the very same case involving a rational basis examination of a tax
Finally, I am perhaps most troubled by the systemic values that
are trampled through the procedural process seized on by the majority in
exercising its judicial independence.
In the end, the majority decision nullifies the unanimous judgment of the Supreme Court
and effectively renders the Courts opinion in Fitzgerald
advisory and no more. See Richard W. Westling, Comment, Advisory Opinions and the Constitutionally Required
Adequate and Independent State Grounds Doctrine,63 Tul. L. Rev. 379, 381 n.6 (1988); see also Arizona v. Evans, 514 U.S. 1, 32,
115 S. Ct. 1185, 1202, 131 L. Ed. 2d 34, 58 (1995) (Ginsburg, J., dissenting)
(Even if [state courts] reinstatements [of prior judgments on remand] do not
render the Supreme Courts opinion technically advisory, they do suggest that
the Court unnecessarily spent its resources on cases better left . . . to
state-court solution. (Citation omitted.)).
This is an affront to the Supreme Court and the principles of federalism
that underlie the entire judicial system.
As acknowledged, one
of our courts primary and overarching purposes is to faithfully and carefully
serve as the final arbiter of our state constitution. The Supreme Court serves the same role in relation to the federal
constitution. Both courts have the duty
to be conscientious stewards of the federal or a state constitution when it is
invoked in the course of a case before it.
These dutieswhich create numerous potential conflicts caused by
differing interpretations of federal and state constitutional provisions by the
two courtsform one of the bedrock functions of our judicial system.
The Supreme Court has
wrestled with its role in relation to state courts of last resort and
articulated standards by which a state court can protect its right to be the final
arbiter of its states constitution. At
the same time, the Court has sought to protect its role as final arbiter of
federal constitutional principles. To
these ends, the Court has recognized:
This Court from the time of its foundation has adhered
to the principle that it will not review judgments of state courts that rest on
adequate and independent state grounds.
The reason is so obvious it has rarely been thought to warrant
statement. It is found in the
partitioning of power between the state and federal judicial systems and in the
limitations of our own jurisdiction.
Our only power over state judgments is to correct them to the extent
that they incorrectly adjudge federal rights.
And our power is to correct wrong judgments, not to revise opinions. We are not permitted to render an advisory
opinion, and if the same judgment would be rendered by the state court after we
corrected its view of federal laws, our review could amount to nothing more
than an advisory opinion.
Herb v. Pitcairn, 324
U.S. 117, 125-26, 65 S. Ct. 459, 463, 89 L. Ed. 789, 794-95 (1945) (citations
omitted); Westling, 63 Tul. L. Rev. at 403 (If the Supreme Court issues [an
advisory] opinion, notwithstanding the ban, its opinion falls into a
noncategory of judicial decisions . . . in conflict with the notions of limited
jurisdiction, stare decisis, and constitutionally required doctrines of
justiciability.). The Courts most
important recent pronouncement in this area came in Michigan v. Long, 463 U.S. 1032, 1037-42, 103 S. Ct. 3469,
3474-77, 77 L. Ed. 2d 1201, 1212-15 (1983).
There, the Court reexamined the adequate and independent state grounds
standard and, in effect, requested the cooperation of state courts of last
resort to help prevent the Court from infringing upon the state courts
application of state constitutional principles. Id. at 1041, 103 S.
Ct. at 3476-77, 77 L. Ed. 2d at 1214-15 (articulating the plain statement
standard, by which a state court can convey to the Court that any invocation of
federal principles in its disposition of a case was merely for the purpose of
supporting a judgment or opinion based on adequate and independent state
not state in RACI that our
opinion was based on adequate and independent state grounds nor did we even
indicate that might be the case. Long, 463 U.S. at 1042, 103 S. Ct. at
3477, 77 L. Ed. 2d at 1215; accord RACI,
648 N.W.2d 555. Instead, we observed
that Iowa courts are to apply the same analysis in considering the state
equal protection claims as . . . in considering the federal equal protection
claim. RACI, 648 N.W.2d at 558.
In the absence of a signal as to whether our decision was based
predominantly on state principles rather than federal principles, the Supreme
Court assumed we had intermixed those principles in our decision and assumed
jurisdiction of the case to exercise its duty to protect the federal
constitution from an errant interpretation by our court. See
Fitzgerald, 539 U.S. at ___, 123 S. Ct. at 2158-59, 156 L. Ed. 2d at
102 (We have previously held that, [in circumstances in which a state court
states that it applies the same equal protection analysis in considering
federal and state equal protection claims], we shall consider a state-court
decision as resting upon federal grounds sufficient to support this Courts
jurisdiction.); see also Westling,
63 Tul. L. Rev. at 389.
our apparent inadvertence in designating the basis for our decision in RACI is troubling, the effect of that
choice is compounded by the majority result reached in this case. In reaching its decision, the majority notes
that we have not always followed federal constitutional jurisprudence in
interpreting Iowas equal protection clause and determines that our analysis in
this case reaches a result different from that of the Supreme Court. Even if these were acceptable conclusions
standing alone, both simply serve at this point to effectively resurrect
adequate and independent state grounds on which RACI could have been based.
Long, 463 U.S. at 1042,
103 S. Ct. at 3477, 77 L. Ed. 2d at 1215.
Yet, these considerations are only revealed now on remand from the
Supreme Court, which assumed jurisdiction based on our statement that our
federal and state equal protection analyses are the same.
In the end, the
majority is taking a second bite at an apple that has long since dropped and
rolled away from our tree. While this
may be our prerogative, it does not make the exercise of this prerogative any
less injurious to the systemic values implicated in this case. The majority opinion in RACI I stated that our equal protection
analyses under both constitutions are the same. The majority opinion here, in RACI
II,reveals that our
equal protection analyses are different.
Not only is this reconsideration intellectually inconsistent, it is also
offensive to the Supreme Court, its important role in the judicial system, and
the principles of federalism on which our entire system operates. In the end, the parties to this appeal will
receive a final resolution of their controversy only after needlessly taking
the case before the Supreme Court.
Moreover, the Supreme Court will have needlessly considered an issue
that could have been resolved if the majority had discovered and emphasized the
supposed differences in our analyses during the course of our first
consideration of this case.
decision of the majority causes great harm to the law, to the concept of
federalism, to the doctrine of judicial economy, to the essential reliability
of legal principles, and to the balance of power within our government. Perhaps most troubling of all, it also
causes a great injustice to the people of Iowa. It is never an easy decision to dissent, but that decision has
never been easier than in this case.