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TAKE THAT, U.S. SUPREME COURT: IOWA SUPREME COURT STRIKES DOWN CASINO TAX

February 03, 2004

Apparently the Iowa Supreme Court doesn't like being bossed.

Even though the U.S. Supreme Court unanimously reversed their initial decision striking down Iowa's tax on racetrack casinos, the Iowa Supremes, under orders to arrive at a new decision "not inconsistent" with the Federal Court's decision, today struck down the casino tax again. The Iowa vote was 5-2. (RACING ASSOCIATION OF CENTRAL IOWA, 2/4/03.)

The Iowa Court used a new analysis to strike down the decision -- an analysis that might have saved the U.S. Court a lot of trouble if they had used it the first time. While the initial ruling said that the same "equal protection" analysis applies to the federal and Iowa constitutions - triggering the Supreme Court's review - today's decision takes a different tack:

"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."

Based on this analysis, today's decision holds that there is no "reasonable" basis to tax racetracks and riverboats differently; as a result, the different tax rates between the two are unconstitutional and the tracks are due $112 million in refunds, plus interest.

One of the dissenting Iowa justices had this to say:

"The 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."

Other than that, he liked the decision just fine.

We will leave it to real lawyers to discuss the wisdom of the decision; we will limit ourselves to noting that there is no reasonable basis to tax accounting fees differently from legal fees.

Links:

Today's decision.

The U.S. Supreme Court decision (pdf file)

The prior, reversed Iowa Supreme Court decision.

Our not very prescient analysis of the prior Iowa decision. For a more authoritative discussion of the U.S. Supreme Court Decision, go here and scroll down.

UPDATE: Iowa Attorney General may appeal the latest decision.

And a real lawyer (and professor) adds some thoughts. Here's another.

UPDATE II: Now even a layman can tell that the Iowa Supremes got it wrong, because The Des Moines Register editorial page says "Iowa court got it right."

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