Grave Constitutional Concerns about ND’s Proposed Tax on Out-of-State Political Money

The North Dakota legislative session is barely a month old, but a new proposal there is already generating grave constitutional concerns. 

In McCulloch v. Maryland, famous Founding Era jurist Chief Justice John Marshall recognized  “[t]hat the power to tax involves the power to destroy; that the power to destroy may defeat and render useless the power to create.” Yet HB 1452 would, if enacted, tax contributions for speech at 90% if the money merely came from non-North Dakotans. This would have been abhorrent to the Founders of our nation and violates the First Amendment. 

HB 1452 is a functional ban on speech—if a topic happens to be on the ballot, out-of-state speakers cannot spend money in North Dakota on education efforts, campaigning, or other means to support their point of view without being drained by 90%. Whether the topic is hotly debated or complex, national groups often help inform voters of the policy implications of state ballot questions.

James Madison, the “Father of the Constitution,” warned that “zeal for different opinions . . . concerning government, and many other points,” even about “the most frivolous and fanciful distinctions,” “have . . . divided mankind into parties, inflamed them with mutual animosity, and rendered them much more disposed to vex and oppress each other than to co-operate for their common good.” Federalist No. 10 (Madison)

In particular, at the Constitutional convention, both Madison and Edmund Randolph noted that the Constitution would have to create federal courts to protect against “local prejudices,” Mr. Randolph noting that they may “often place the General and local policy at variance,” and Mr. Madison noting instances where Virginia and Maryland had given “preference to their own citizens in cases where the Citizens of other states are entitled to equality of privileges.” Here, however, HB 1452 would give in to such preferences by allowing the state to pass laws affecting and even harming non-residents, while cutting off their ability to say anything about it.

Courts around the country recognize that non-residents might have something to say about new laws in a state–and that speech is protected by the First Amendment. The Fourth Circuit held that a law violating non-residents’ right to use a public forum failed strict scrutiny. The Tenth Circuit held that the “First Amendment protects [non-resident] Plaintiffs’ right, not only to advocate their cause but also to select what they believe to be the most effective means for so doing.” And the Ninth Circuit held that a state law imposing a residency requirement for circulators imposed “a severe burden on . . . out-of-state supporters’ speech, voting and associational rights.”

While the First Amendment, as applied to the states through the Fourteenth Amendment, directly protects the freedom of speech and association of non-residents, they are also protected from discrimination in withholding rights granted to residents through the Privileges and Immunities Clause of Article IV of the Constitution and through the Dormant Commerce Clause of Article I. In Baldwin v. Fish & Game Commission, the Supreme Court noted that, with respect to fundamental rights like access to the courts, the Privileges and Immunities Clause requires that “the States . . . treat residents and nonresidents without unnecessary distinctions.”

Even if the law were one involving mere commerce (like spending money on ads across state lines), the Constitution nonetheless does not permit states “to discriminate against interstate commerce either on its face or in practical effect,” without the state clearly demonstrating “that the statute serves a legitimate local purpose, and that this purpose could not be served as well by available nondiscriminatory means.” Maine v. Taylor, 477 U.S. 131, 138 (1986). That’s a very high hurdle for North Dakota to meet.  Even if a legitimate local purpose may be articulated by North Dakota, “then the question becomes one of degree . . . and on whether it could be promoted as well with a lesser impact on interstate activities.” Pike v. Bruce Church, 397 U.S. 137, 142 (1970). It’s doubtful that a new law will do much more than the more minimally-obstructive existing campaign finance disclosures in North Dakota. 

Former Senator Russell Long once quipped that tax reform means “Don’t tax you, don’t tax me, tax that man behind the tree.” But, choosing who gets taxed based on speech is problematic. In ballot campaigns, one person’s civic group is another’s faction or special interest. And many issues that we care about know no borders: the Sierra Club worries about threats to the environment, Planned Parenthood and the National Right to Life Committee concern themselves with abortion, the National Rifle Association combats gun control, and AARP worries about the rights of those who are aging, regardless of the location.

Many taxpayers, regardless of where they reside, would likely agree that any state should steer far from trying to regulate the speech of its citizens or citizens of other states, particularly through taxation. The U.S. Constitution and its framers provide ample evidence to confirm those beliefs.