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June 10, 2003

The U.S. Supreme Court yesterday unanimously reversed the Iowa Supreme Court in upholding Iowa's two-tier gambling tax. In short, the Supremes said the courts should avoid deciding whether legislation has a "rational basis."

The Des Moines Register's coverage says the case is "far from over" because the case is now back in the hands of the Iowa Supreme Court. The track's attorney gamely holds out hope for a victory there:

"We remain optimistic that the Iowa Supreme Court, which has the opportunity to interpret this law once more solely upon the Iowa Constitution, will again conclude there was and is no rational basis to tax racetracks at 36 percent and riverboats at 20 percent."

This may be unduly optimistic. It appears that the Iowa court would have to change its long-held position that the U.S. and Iowa constitutions use the same "equal protection" standards - the position that got this case to the U.S. Supreme Court in the first place. After a nine-judge slap by the Supremes, it seems unlikely that the Iowa court would stick its neck out to give victory to the track.

A Taxing Blog provides a smart and concise discussion of yesterday's decision. The article uses the term "Lochneresque"; I think this explains what that word means. If it means something else, we hope it's clean.

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