This Day in Legal History: First US Income Tax
On July 1, 1862, President Abraham Lincoln signed the Tax Act of 1862 into law, marking a pivotal moment in American financial history. This legislation introduced a federal income tax to help fund the Civil War, imposing a 3% tax on incomes over $600 and a 5% tax on incomes above $10,000. Despite the pressing needs of the war, compliance with the act was notably poor, reflecting widespread resistance to the new tax.
The Tax Act of 1862 was significant as it represented the first instance of income taxation by the federal government, setting a precedent for future taxation policies. However, after the Civil War, the constitutionality of the income tax came into question. In 1872, the federal income tax was repealed, and in 1895, the Supreme Court declared it unconstitutional in the case of Pollock v. Farmers' Loan & Trust Co., arguing that direct taxes had to be apportioned among the states according to the Constitution.
This ruling effectively halted federal income taxation until the early 20th century. The financial demands of the country, particularly during times of war and economic expansion, underscored the need for a reliable source of revenue. Consequently, the ratification of the 16th Amendment in 1913 granted Congress the explicit authority to levy income taxes without apportionment, fundamentally reshaping the American tax system.
The Tax Act of 1862 laid the groundwork for this constitutional change and highlighted the ongoing challenges of implementing and enforcing income tax laws. Its passage and subsequent legal battles reflect the evolving relationship between the federal government and its citizens concerning taxation. Today, the income tax remains a cornerstone of federal revenue, illustrating the enduring impact of the Tax Act of 1862 on American fiscal policy.
Today, the Supreme Court issued a decision addressing the scope of presidential immunity in the case of former President Donald J. Trump, who was indicted on charges related to his conduct during his presidency following the 2020 election. The Court held that a former President is entitled to absolute immunity from criminal prosecution for actions within the "conclusive and preclusive" scope of their constitutional authority. For other official acts, the President enjoys at least presumptive immunity. However, the Court affirmed that no immunity exists for unofficial acts. The decision kicks the major questions back to the lower court for a determination consistent with the holding.Â
Trump v. United States - SCOTUS
The U.S. Supreme Court, in a significant ruling, has overturned the Chevron doctrine, fundamentally altering how courts review agency interpretations of ambiguous statutes. The decision, issued in the case of Loper Bright Enterprises v. Raimondo, dismantles a precedent that has been in place since the 1984 Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc. case.
The Chevron doctrine mandated that courts defer to reasonable agency interpretations of ambiguous laws, effectively allowing agencies to shape their regulatory authority. However, the Supreme Court, led by Chief Justice Roberts, concluded that this deference undermines the judiciary's role as defined by the Administrative Procedure Act (APA) and the Constitution.
Key Elements of the Decision:
Judicial Responsibility: The Court emphasized that Article III of the Constitution assigns the judiciary the responsibility to interpret laws, not agencies. The ruling reinstates the principle that courts must use their independent judgment to resolve legal ambiguities.
APA Compliance: The Administrative Procedure Act directs courts to "decide all relevant questions of law" and "interpret constitutional and statutory provisions." The Chevron doctrine's requirement for courts to defer to agency interpretations conflicted with this mandate.
Historical Perspective: The decision drew on historical judicial practices, noting that while courts have often given weight to executive interpretations, ultimate interpretive authority has always rested with the judiciary.
Inconsistencies and Ambiguity: The ruling criticized Chevron for its inherent inconsistencies and the difficulties it posed in defining statutory ambiguities. The Court argued that statutory interpretation is a core judicial function that does not change simply because an agency is involved.
Separation of Powers: The Court's opinion underscored the importance of maintaining clear boundaries between legislative, executive, and judicial functions, rejecting the notion that agencies should have final interpretive authority over ambiguous statutes.
Impact on Agencies: The decision suggests that agencies must now operate under increased judicial scrutiny and cannot rely on broad statutory interpretations to justify their actions.
This landmark decision is expected to lead to more litigation as businesses and industry groups challenge government regulations without the deference previously afforded to agency interpretations under Chevron. It will fundamentally alter the landscape of regulatory law and may very well be the most impactful Supreme Court decision this term.Â
22-451 Loper Bright Enterprises v. Raimondo (06/28/2024)
Chevron Doctrine’s Demise Would Mean Big Changes for Tax Law
The U.S. Justice Department plans to criminally charge Boeing with fraud over two fatal crashes and will offer a plea deal that includes a financial penalty and an independent monitor for three years. The Justice Department's decision follows a finding that Boeing violated a 2021 agreement shielding it from prosecution. The proposed plea deal, which Boeing must respond to by the end of the week, would require Boeing to plead guilty to conspiring to defraud the Federal Aviation Administration. The plea deal includes a $487.2 million penalty, three years of probation, and meetings between Boeing's board and victims' families. If Boeing rejects the deal, the case will go to trial. Victims' families, unhappy with the proposed plea deal, plan to oppose it in court, seeking more significant accountability and financial consequences for Boeing. This decision intensifies Boeing's ongoing crisis, affecting its financial standing and government contract eligibility.
US to criminally charge Boeing, seek guilty plea, sources say | Reuters
DOJ readying criminal charges against Boeing for prior deadly 737 MAX crashes - POLITICO
Steve Bannon, a prominent ally of former President Donald Trump, is set to report to prison on Monday to serve a four-month sentence for defying a congressional subpoena related to the January 6th Capitol attack investigation. Bannon will serve his time at a low-security federal prison in Danbury, Connecticut. His prison term could extend almost to Election Day, complicating his communication with followers of his "War Room" podcast due to the lack of internet access for inmates.
Bannon's attempt to delay his sentence while appealing his conviction was denied by the Supreme Court. He was convicted in 2022 on two misdemeanor counts of contempt of Congress for refusing to provide documents or testify before the House committee investigating the Capitol riot. Previously, Bannon had been a key figure in Trump's 2016 campaign and served as his chief strategist in the White House in 2017.
Bannon is not the first former Trump official to face prison for non-cooperation with the January 6th committee; former trade adviser Peter Navarro also received a four-month sentence. Additionally, Bannon was pardoned by Trump in 2021 on separate federal charges of fraud related to a border wall fundraising campaign. He still faces state charges for the same issue and awaits trial.
Trump ally Steve Bannon to report to prison following contempt conviction | Reuters
A federal judge has ruled that most of the U.S. Securities and Exchange Commission's (SEC) lawsuit against Binance, the largest cryptocurrency exchange globally, can proceed. The lawsuit accuses Binance and its founder, Changpeng Zhao, of violating securities laws by inflating trading volumes, diverting customer funds, failing to restrict U.S. users, and misleading investors about market surveillance controls. The SEC also claims Binance unlawfully facilitated trading of unregistered securities.Â
Judge Amy Berman Jackson's decision is a setback for Binance, which sought to dismiss the case. However, the ruling partially favors the cryptocurrency industry, as it supports a previous judgment that secondary sales of Binance's tokens by other sellers on exchanges are not securities. This legal challenge follows Binance's agreement in November to pay $4.3 billion to settle illicit finance breaches with the Department of Justice and the Commodity Futures Trading Commission.
Binance must face bulk of US SEC crypto lawsuit, judge rules | Reuters
Legal News for Mon 7/1 - Trump Immunity, Primer on Chevron Overturning, Boeing to be Charged Criminally, Bannon to Prison and Binance SEC charges