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BANNER v. U.S.

March 11, 2004.

JAMES M. BANNER, Jr., et al., Plaintiffs
v.
UNITED STATES OF AMERICA, et al., Defendants



The opinion of the court was delivered by: ELLEN S. HUVELLE, District Judge

MEMORANDUM OPINION

This lawsuit presents yet another chapter in the District of Columbia's longstanding struggle to achieve self-government. The District, its Mayor, its Council and Council members, and eighteen of its residents challenge Congress' refusal to permit taxation of income earned by nonresidents who work within its borders. Plaintiffs contend that the ban constitutes unconstitutional discrimination against residents of the District, who lack the right to vote in Congress. Arguing that commuters in the District should be required to compensate the jurisdiction in which they are employed for the costs they impose, plaintiffs charge that the District's inability to tax nonresidents creates financial deficits not counterbalanced by its federal subsidies, forcing it to impose disproportionately high tax burdens upon its own residents. Amici for plaintiffs argue that the District is the only jurisdiction in the United States denied the benefit Page 2 of taxing income earned within its borders, and that even the federal government profits from the income earned by foreigners within the nation's borders.*fn1

Plaintiffs' grievances are serious, and their goal is a laudable one. The unfairness of the District's situation is obvious and regrettable. Since the establishment of the District, courts have, however, understood that its unique constitutional position results in unfairness. As early as 1805, then Chief Justice Marshall recognized the inequities compelled by the Constitution as he concluded that the Supreme Court could not grant the District the same benefits enjoyed by the states. See Hepburn & Dundas v. Ellzey, 6 U.S. (2 Cranch) 445, 453 (1805). Chief Justice Marshall's sentiments have been reiterated in subsequent Supreme Court decisions, as well as in rulings from courts in this jurisdiction, all of which have upheld the District's lack of congressional representation. See, e.g., Loughborough v. Blake, 18 U.S. (5 Wheat.) 317, 324-25 (1820) ("Although in theory it might be more congenial to the spirit of our institutions to admit a representative from the district, . . . certainly the constitution does not consider their want of a representative in Congress as exempting it from equal taxation."); United States v. Thompson, 452 F.2d 1333, 1341 (D.C. Cir. 1971) ("[F]or residents of the District, the right to vote in congressional elections is . . . totally denied. This regrettable situation is the product of historical and legal forces over which this court has no control."); Adams v. Clinton, 90 F. Supp.2d 35, 37 (D.D.C.), aff'd, 531 U.S. 941 (2000) ("[T]he dictates of the Constitution and the decisions of the Supreme Court bar us" from granting District residents the "right to elect representatives to the Congress of the United States."). Page 3

  This Court is likewise mindful of the unfairness of the situation plaintiffs seek to change. But longstanding judicial precedent compels the Court to conclude that plaintiffs do not enjoy the right they seek to obtain. As has been the case for over two hundred years, the residents of this jurisdiction "must plead their cause in other venues," for this Court has no authority to overturn Congress' ban on a commuter tax. Adams, 90 F. Supp. at 72.

  BACKGROUND

  The District of Columbia is "an exceptional community . . . established under the Constitution as the seat of the National Government." United States v. Murphy, 314 U.S. 441, 452 (1941).*fn2 The Constitution grants to Congress plenary legislative authority over the District: "The Congress shall have the power . . . [t]o exercise exclusive Legislation in all Cases whatsoever, over such District (not exceeding ten Miles square) as may, by Cession of particular States, and the Acceptance of Congress, become the Seat of the Government of the United States. . . ." U.S. Const. art. I, § 8, cl. 17 ("the District Clause").

  Until recently, Congress exercised its exclusive control over the District through direct legislation and the appointment of local governors, with only minimal input from residents. See Marijuana Policy Project v. United States, 304 F.3d 82, 83 (D.C. Cir. 2002). In 1871, when Washington City, Georgetown, and Washington County were combined to create the District of Columbia, the Organic Act provided for a presidentially-appointed District governor and a legislature with limited power. See Dist. of Columbia v. John R. Thompson Co., 346 U.S. 100, 105 (1953); An Act for the Government of the District of Columbia, ch. 62, 16 Stat. 419 (1871). This attempt to provide the District with territorial home rule lasted only a few years, for Page 4

  Congress revoked the self-government provisions of the Organic Act in 1878, and for almost a century the District was governed by a three-person commission appointed by the President. See Adams, 90 F. Supp.2d at 47 n.19; An Act for the Government of the District of Columbia, and for Other Purposes, ch. 337, 18 Stat. 116 (1874); An Act Providing a Permanent Form of Government for the District of Columbia, ch.180, 20 Stat. 102 (1878).

  Between 1948 and 1966, the Senate passed six different bills granting the District some form of home rule, but each time a similar bill died in the House Committee for the District of Columbia. The commissioner system was replaced in 1967 by a presidentially-appointed mayor and council form of government, see Adams, 90 F. Supp.2d at 47 n.19; see also Reorganization Plan of 1967, Pub.L. No. 90-623, 81 Stat. 948 (1967), and in 1973, Congress enacted the "Home Rule Act," providing for a mayor and council elected by the citizens of the District. See District of Columbia Self-Government and Governmental Reorganization Act, Pub.L. No. 93-198, 87 Stat. 774 (1973) (codified as amended at D.C. Code Ann. § 1-201.01 et seq.) ("the Act"). The existing local government provides the District with the most expanded form of self-government to date.

  The Home Rule Act delegates to the District of Columbia Council "certain legislative powers," "[s]ubject to the retention of Congress of the ultimate legislative authority over the nation's capital." D.C. Code Ann. § 1-201.02. The Act protects Congress' exclusive legislative authority over the District by providing that Council enactments become law only if Congress declines to pass a joint resolution of disapproval within thirty days (or sixty days in the case of criminal laws) and by reserving the power to repeal Council enactments at any time. See id. §§ 1-206.01, 1-206.02(c)(1)-(c)(2). Page 5

  The Act also specifically limits the Council's lawmaking powers, enumerating matters that are not "rightful subjects of [Council] legislation." Id. § 1-203.02. The District may not, for example, impose any tax on federal property; it may not regulate federal or local courts, or the Commission on Mental Health; and it may not permit the construction of buildings taller than certain height restrictions. See id. § 1-206.02(a)(1)-(a)(8). Plaintiffs' challenge in this case addresses the Act's commuter tax prohibition (the "Prohibition"), which is among these enumerated limitations: "The Council shall have no authority to . . . [i]mpose any tax on the whole or any portion of the personal income, either directly or at the source thereof, of any individual not a resident of the District. . . ." Id. § 1-206.02(a)(5).

  Congress passed the Home Rule Act as a compromise, granting "the people of the District of Columbia an opportunity in exercising their rights once more and yet with adequate safeguards for the Federal interest component." Home Rule for the District of Columbia, 1973-1974: Background and Legislative History of H.R. 9056, H.R. 9682, and Related Bills Culminating in the District of Columbia Self-Government and Governmental Reorganization Act, at 2106 (1974) (statement of Rep. Diggs, reprinted from the Cong. Rec., Oct. 9, 1973). The Chairman of the Committee on the District of Columbia viewed the legislation as "a reasonable and rational accommodation between the interests of all Americans in their Nation's Capital and the basic principle that government should be responsible to the people." Id. at 3052 (statement of Rep. Diggs, reprinted from the Cong. Rec., Dec. 17, 1973).

  The Act provided for an annual federal payment to be allotted to the District upon the Mayor's request. To formulate the fund petition, the Mayor was to "prepar[e] an annual budget for the government of the district, . . . identify[ing] elements of cost and benefits to the district which result from the unusual role of the district as the Nation's Capital," considering, among Page 6 other things, the "potential revenues that would be realized if exemptions from district taxes were eliminated," and the "relative tax burden on District residents compared to that of residents in other jurisdictions in the . . . metropolitan area and in other cities of comparable size." D.C. Code Ann. §§ 1-205.01(a), (b)(3), (b)(9) (repealed 1997). Thereafter, Congress authorized a maximum annual amount for the appropriation. The federal payment was not to exceed $230 million for the fiscal year ending June 30, 1975, $254 million for 1976, $280 million for 1977, and $300 million for 1978. Id. §§ 1-205.02 (repealed 1997). By the mid-1990s, the federal payment had increased to $660 million per year.

  By 1997, however, lawmakers concluded that the "financial constraints uniquely applicable to the District" required greater federal budgetary and management responsibility "for some very costly District operations which are either state-like functions which virtually no other city in the nation performs, or which are burdens which the federal government itself created and unfairly transferred to the District government as part of the home rule deal." Hearing before the Senate and House District of Columbia Subcommittees on the President's National Capital Revitalization and Self-Government Improvement Plan, 105th Cong. (1997) (statement of Charlene Drew Jarvis, District of Columbia Councilmember). Thus, through the National Capital Revitalization and Self-Government Improvement Act of 1997, Pub.L. 105-33, 111 Stat. 712 (§§ 11000-11723) (1997) ("the Revitalization Act"), Congress repealed the federal payment provision of the Home Rule Act, and began to subsidize some of the District's "state functions," including its transportation and infrastructure system development, pension liabilities, Medicaid program payments, and courts and prison system management.*fn3 Page 7

  Through the Revitalization Act, Congress attempted to financially compensate the District for costs associated with "the extraordinary Federal presence," including "crowd control, restrictions on revenue raising capacity because of tax exempt property, height restrictions, and restrictions on non-residence income taxes." Hearing before the House District of Columbia Subcommittee on the White House Plan to Revitalize D.C., 105th Cong. (1997) (statement of Andrew Brimmer, Chairman, District of Columbia Financial Responsibility and Assistance Authority) (emphasis added). The "forgone nonresident income taxes" were "estimated to be $1.2 billion annually," an amount only expected to increase "as more District residents migrate to neighboring jurisdictions — but continue to work in the city." Id. Congress was, therefore, directed to take into account the restrictions upon the overall size of the District's economy and the limitations upon its ability to tax income when determining "such amount as may be necessary" for the District's appropriation. See Revitalization Act, Pub.L. 105-33, 111 Stat. at 778 (§ 11601(c)(1), (c)(2)(B)). Thus, despite concerns surrounding the discontinuation of the District's federal payment, the Revitalization Act was touted as "`the most promising and certainly the most innovative approach yet to emerge for relieving the District government of costs it can no longer shoulder.'" David A. Vise, Clinton Proposes U.S. Run Many D.C. Services, Washington Post, Jan. 14, 1997, at Al (quoting Del. Eleanor Holmes Norton).

  While income tax from commuters would undeniably increase the District's revenues, Congress has chosen to address the District's financial situation through other means, and has rejected every proposed commuter tax since 1975. Bills introduced shortly after the passage of Page 8 the Home Rule Act sponsored by Representative McKinney (Amendment to the District of Columbia Income and Franchise Tax Act of 1947, H.R. 11579, 94th Cong. (1976)) and Representative Dellums (Amendment to the District of Columbia Self-Government and Governmental Reorganization Act, H.R. 11303, 95th Cong. (1978)) died in committee. More recent proposals introduced by District Delegates Walter Fauntroy (Amendment to the District of Columbia Self-Government and Governmental Reorganization Act, H.R. 2641, 99th Cong. (1985)) and Eleanor Holmes Norton (District of Columbia Fair Federal Compensation Act of 2002, H.R. 3923, 107th Cong. (2002)) have suffered similar fates. Former District Mayor Sharon Pratt Kelly launched a highly-publicized campaign in 1992 promoting a commuter tax, but gave up her efforts in response to political pressure. See Kent Jenkins, Jr., Kelly Drops Commuter Tax Effort, Washington Post, Dec. 6, 1992, at A1.

  Plaintiffs now challenge Congress' refusal to permit passage of a commuter tax. While plaintiffs cite to the Equal Protection, Uniformity, and Privileges and Immunities Clauses as the grounds for invalidating the Prohibition, these claims are premised on a series of Supreme Court tax cases that plaintiffs use to craft a legal principle outlawing discrimination in the imposition of taxes against unrepresented citizens in favor of represented ones. Applying this principle to Congress' ban on the District's use of a commuter tax, plaintiffs argue that the Prohibition must be invalidated.

  Defendants and the intervenors (the State of Maryland and the Commonwealth of Virginia) have moved to dismiss plaintiffs' claims.*fn4 As an initial matter, they challenge the Page 9 Court's subject matter jurisdiction arguing that plaintiffs lack standing to challenge the Prohibition and that the issue is nonjusticiable because it presents a political question. As to the merits, defendants and the intervenors seek dismissal on the grounds that since Congress' prohibition on a commuter tax is constitutionally permissible under its plenary power over the District, there is no legal basis for invalidating Congress' action. Having heard oral argument on the motions to dismiss on February 17, 2004, the Court will now turn to defendants' jurisdictional arguments, as well as their arguments regarding plaintiffs' constitutional claims.

  JURISDICTION

 I. STANDING

  Plaintiffs have standing if they have suffered an "injury in fact," are able to establish a causal connection between the injury and the offensive conduct, and demonstrate that the injury will be redressed by a favorable decision. See Lujan v. Defenders of Wildlife, 504 U.S. 555, 560-61 (1992).

  The complaint alleges that approximately 500,000 residents commute into the capital each workday, imposing significant uncompensated costs on the District. As a result of the District's inability to tax these commuters, the individual plaintiffs "bear substantially higher than normal tax burdens," while the District "perennially suffers revenue deficiencies," as well as "an inability to fund critical infrastructure improvements."*fn5 (Compl. ¶¶ 50-52.) These injuries Page 10 are not "conjectural or hypothetical," they are specifically alleged, and they are suffered only by the District and its residents. See Lujan, 504 U.S. at 560-61. Thus, contrary to defendants' contention, plaintiffs' challenge is not a generalized taxpayer grievance where the injury is undifferentiated and common to all members of the public. See id. at 575-76. Instead, the legislative act at issue allegedly unconstitutionally burdens a particular class of citizens, and "[t]he burden alone is sufficient to establish standing." Orr v. Orr, 440 U.S. 268, 273 (1979).*fn6

  The complaint also contains sufficient allegations to establish a causal connection between the injury and the District's inability to tax commuters, claiming that the inability to tax commuters "is the substantial cause of the District's structural deficit" that forces it to overtax its residents and to reduce necessary public services. (Compl. ¶ 38.) But for the commuter tax ban, plaintiffs contend, the Council could "tax non-resident income earned within its borders Page 11 [providing] hundreds of millions of dollars in needed revenue for the District [which would] ease the burden on overtaxed District residents [and] provide more and better services to residents and nonresidents." (Id. ¶ 53.*fn7

  Finally, defendants challenge the redressibility of plaintiffs' injury, pointing to the fact that, in the event that the Court were to strike down the Prohibition, relief would be obtained only if the Council were to enact a commuter tax and Congress were to abstain from exercising its veto power over such legislation, which, as defendants argue, would be highly unlikely given its consistently hosfile response to such legislation.*fn8 The complaint disposes of the first concern, by including a Council declaration stating that if it could, "the Council would enact a law to reduce income tax rates on its overtaxed residents and impose a fair and reasonable income tax on non-residents." (Mot. at 31 (citing Compl. ¶¶ 44, 53-55).) And, although the Act entitles Congress to veto or repeal laws enacted by the Council, if the Court were to hold the Prohibition Page 12 unconstitutional, its holding would prohibit Congress from exercising these powers on a commuter tax law passed by the Council. See Adams, 90 F. Supp.2d at 42 (citing Franklin v. Massachusetts, 505 U.S. 788, 803 (1992) (the Court may "assume that the President and the congressional officials would then follow the law as the Court articulated it")). Moreover, the possibility that a coordinate branch might subsequently negate or undermine the Court's relief does not necessarily destroy standing. See Swan v. Clinton. 100 F.3d 973, 980-81 (D.C. Cir. 1996). Plaintiffs therefore have standing to bring their challenge.

 II. POLITICAL QUESTION

  The political question doctrine arises from two constitutional principles: the separation of powers among the three coordinate branches of government and the inherent limits on judicial capabilities. United States ex rel. Joseph v. Cannon, 642 F.2d 1373, 1378-79 (D.C. Cir. 1981) (citing Baker v. Carr, 369 U.S. 186, 217 (1962)).*fn9 The doctrine prohibits a court from interfering in a political matter that is principally within the dominion of another branch of government. See Spence, 942 F. Supp. at 39.

  The issue here is whether the Court can review plaintiffs' constitutional challenge to the Prohibition by applying manageable standards without usurping Congress' authority over the Page 13 District. See Baker, 369 U.S. at 217. Defendants argue that because Congress' power over the District is "plenary in every respect," its decision to enjoin the imposition of a nonresident income tax is one for "legislative, not judicial, consideration." (Mot. at 12-13.) Moreover, because they contend that plaintiffs do not have the rights they claim, they argue that there are no appropriate standards to review plaintiffs' challenge. (Id. at 16.)

  That Congress' power is "plenary" is, as even defendants admit (see id. at 14 n.5), insufficient to insulate a law from judicial review. See, e.g., INS v. Chadha, 462 U.S. 919, 940-41 (1983) ("The plenary authority of Congress over aliens . . . is not open to question, but what is challenged here is whether Congress has chosen a constitutionally permissible means of implementing that power."); Delaware Tribal Bus. Comm. v. Weeks, 430 U.S. 73, 84 (1977) (quoting United States v. Alcea Band of Tillamooks, 329 U.S. 40, 54 (1946) ("The power of Congress over Indian affairs may be of a plenary nature; but it is not absolute.")). Congress can exercise its plenary power over the District only "so long as it does not contravene any provision of ...


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