By: Joseph Murgida
Protecting federal tax dollars from paying another state’s taxes is one of the most fundamental constitutional protections that our federal judiciary has enshrined over the past two hundred years. As early as 1819, Chief Justice John Marshall explained in the unanimous, landmark decision of McCulloch v. Maryland that “the power to tax involves the power to destroy.” If states had the power to tax the federal government, they could unilaterally undermine any legitimate federal spending, such as a new Customs and Border Protection facility, by confiscating all money spent on the project through taxation. Worse, they could take money from citizens of different states to fund pet projects in their own.
The Washington Court of Appeals undermined basic constitutional law in ruling that Assurance Wireless was required to tax the Universal Service Administrative Company (USAC). USAC is an instrument of the Federal Communications Commission that has the responsibility of administering four programs to “increase access to high-speed Internet in the nation’s schools, libraries and rural health care facilities.” One of these federal programs is Lifeline, which provides “a discount on phone service for qualifying low-income consumers to ensure that all Americans have the opportunities and security that phone service brings.” The FCC’s own website describes USAC as acting “under the direction of the FCC.” An entity that works under the direction of a federal agency is an instrument of that agency.
The Court chose to ignore these clear facts. Contrary to all available evidence, they ruled that Assurance was obligated to tax USAC for purchases made as a part of the Lifeline program. In taxing USAC, however, Washington essentially thanks the federal government for helping their lowest income citizens attain access to high-quality internet by charging more for the FCC to do so.
As anyone can tell, a tax on the federal government is essentially a tax on United States citizens, who are now on the hook for this additional expense. Thus, when we pay taxes in April, our money is not just going to fund federal efforts to keep us safe, but also to pay Washington state taxes.
This is the modern-day example of taxation without representation. Citizens in New York have no control over the elected officials that decide the Washington State tax code. However, the decisions of those state politicians will affect the pocketbooks of citizens in other states.
This problem will be exacerbated once other states attempt to similarly undermine constitutional protections on Americans’ pocketbooks. Imagine if every state in the union expected the federal government to pay taxes on every federally funded infrastructure project.
If this pattern continues, it could mark the beginning of a growing expense sheet and calls to raise taxes. Americans should demand that their elected officials fight back against these egregious efforts by state governments to take money from citizens of other states.