In the Land of Lincoln, Is Money Property?

William Perry Pendley
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Posted: Mar 02, 2009 11:35 AM
In the Land of Lincoln, Is Money Property?

It has been a captivating few weeks for Illinois. First, Illinois’s governor—responsible for filling Barack Obama’s vacancy in the U.S. Senate—is accused of trying to sell the seat. Then, the governor—in an audacious game of one-upmanship—names an African American; demands that his appointee—who would become the Senate’s only Black—be seated, with which demand the Senate complies; but is impeached and removed from office anyway. Finally, the newly-minted Senator states for the first time—reportedly because he had never been asked—that he tried to raise money for the former governor. As Will Rogers once said, “There is no trick to being a humorist when you have the whole government working for you."

There is nothing funny, however, about another Illinois political shenanigan. Unlike the humorous high jinks of the former governor—all of which illustrate why Chicago is a clichéd pseudonym for corruption—but which affect few outside Illinois, this new issue could affect all citizens. Fortunately, it may be resolved, not contingent on political exigencies by those running the U.S. Senate, but in conformance with the Constitution by the U.S. Supreme Court.

In May 2006, Illinois’s General Assembly passed a law requiring nine riverboat casinos, operating pursuant to the Riverboat Gambling Act of 1990, to contribute “3 percent of their [daily] adjusted gross receipts” to a “Horse Racing Equity Trust Fund.” The General Assembly did so because on-track betting revenues at the five Illinois tracks with live horse racing had declined, purportedly due to the lure of riverboat gambling. Although, in 1999, the General Assembly had lowered the tracks’ tax burden by two-thirds, that did not satisfy them, hence the Trust Fund. Sixty percent of its proceeds is distributed to the tracks as purses and forty percent as an operating subsidy; ironically, the successful tracks receive the largest subsidies.

Days after the 2006 Act became law, four Chicago area casinos filed suit in Illinois state court asserting that the Act was an unconstitutional taking because it forced them to subsidize their competitors and did not serve a “public use.” Although the trial court struck down the Act on state law grounds, it required the casinos to continue their daily contribution to a protest fund which, by the time the litigation is completed, may exceed $100 million. Illinois and the casinos both appealed directly to the Illinois Supreme Court.

In June 2008, the court ruled for Illinois declaring it “well settled that the takings clause[] . . . appl[ies] only to the state’s exercise of eminent domain and not to the state’s power of taxation.” The court explained that, because the Act “is in no way tied to real property” or any other “identifiable property interest,” an analysis of the Constitution’s Takings Clause was not required. After the Illinois Supreme Court refused, in September 2008, to rehear the case, the casinos sought U.S. Supreme Court review in January 2009.

The Court should hear the case and—given the clear meaning of the Takings Clause of the Fifth Amendment (“[N]or shall private property be taken for public use without just compensation.”), which applies to States through the Fourteenth Amendment, and its own jurisprudence—hold for the casinos. There is no basis for the Illinois court’s rule that “money” is beyond the Takings Clause. Money is property; indeed, the Supreme Court has held that money involves the same set of rights the Constitution attaches to land or personal property, that is, the “right to possess, use and dispose of it.” Thus, a ruling reversing the Illinois court’s misreading of a 1998 Supreme Court decision (in fact, a miscounting of the votes) and its mistaken view that the Takings Clause does not apply to taxation (it does, of course, to require that the tax support the government) will be welcome news, not only in Illinois, but also throughout the land as federal officials search for new revenues.