Amdt1.7.10.2 Taxation of Media

First Amendment:

Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof; or abridging the freedom of speech, or of the press; or the right of the people peaceably to assemble, and to petition the Government for a redress of grievances.

The First Amendment often requires heightened scrutiny of restrictions that target or disfavor the media. For example, the Supreme Court has invalidated taxes that single out media organizations for payment. In Grosjean v. American Press Co., while recognizing that newspapers are not “immune from any of the ordinary forms of taxation for support of the government,” the Court voided a state 2% tax on the gross receipts of advertising in newspapers with a circulation exceeding 20,000 copies a week.1 In the Court’s view, the tax was analogous to the eighteent-century English practice of imposing advertising and stamp taxes on newspapers for the express purpose of pricing the opposition penny press beyond the means of the mass of the population.2 The tax at issue focused exclusively upon newspapers, it imposed a serious burden on the distribution of news to the public, and it appeared to be a discriminatorily selective tax aimed almost solely at the opposition to the state administration.3 Combined with the standard that government may not impose a tax as a prior restraint upon the exercise of a constitutional right itself,4 these tests seem to permit general business taxes upon receipts of businesses engaged in communicating protected expression without raising any First Amendment issues.5

Ordinarily, a tax singling out the press for differential treatment is highly suspect, and creates a heavy burden of justification on the state. This is so, the Court explained in 1983, in part because “differential treatment, unless justified by some special characteristic of the press, suggests that the goal of the regulation is not unrelated to suppression of expression.” 6 The Court said the state’s interest in raising revenue was not sufficient justification for differential treatment of the press, where the state had alternative means to achieve the same interest. Moreover, the Court refused to adopt a rule permitting analysis of the “effective burden” imposed by a differential tax; even if the current effective tax burden could be measured and upheld, the threat of increasing the burden on the press might have “censorial effects,” and “courts as institutions are poorly equipped to evaluate with precision the relative burdens of various methods of taxation.” 7

A tax that targets specific subgroups within a segment of the press for differential treatment can also trigger heightened constitutional scrutiny. An Arkansas sales tax exemption for newspapers and for “religious, professional, trade, and sports journals” published within the state was struck down as an invalid content-based regulation of the press.8 Entirely as a result of content, some magazines were treated less favorably than others. The measure was viewed as not narrowly tailored to achieve allegedly “compelling” state interests such as raising revenue, encouraging “fledgling” publishers, and fostering communications.9

In 1991, the Court upheld a state tax that discriminated among different components of the communications media on a content-neutral basis, proclaiming that “differential taxation of speakers, even members of the press, does not implicate the First Amendment unless the tax is directed at, or presents the danger of suppressing, particular ideas.” 10

The general principle that government may not impose a financial burden based on the content of speech underlay the Court’s invalidation of New York’s “Son of Sam” law, which provided that a criminal’s income from publications describing his crime was to be placed in escrow and made available to victims of the crime.11 Although the Court recognized a compelling state interest in ensuring that criminals do not profit from their crimes, and in compensating crime victims, it found that the statute was not narrowly tailored to those ends. The statute applied only to income derived from speech, not to income from other sources, and it was significantly overinclusive because it reached a wide range of literature (for example, the Confessions of Saint Augustine and Thoreau’s Civil Disobedience) “that did not enable a criminal to profit from his crime while a victim remains uncompensated.” 12

Grosjean v. American Press Co., 297 U.S. 233, 250 (1936). back
Id. at 245–48. back
Id. at 250–51. The Court distinguished Grosjean on this latter basis in Minneapolis Star & Tribune Co. v. Minnesota Comm’r of Revenue, 460 U.S. 575 (1983). back
Murdock v. Pennsylvania, 319 U.S. 105 (1943) (ruling license tax operating as a prior restraint on distribution of religious material unconstitutional); Follett v. McCormick, 321 U.S. 573 (1944) (same). For further discussion of these cases, see Amdt1.4.3.1 Laws Neutral to Religious Practice during the 1940s and 1950s. back
See Cammarano v. United States, 358 U.S. 498 (1959) (no First Amendment violation to deny business expense tax deduction for expenses incurred in lobbying about measure affecting one’s business); Leathers v. Medlock, 499 U.S. 439 (1991) (no First Amendment violation in applying general gross receipts tax to cable television services while exempting other communications media). back
Minneapolis Star, 460 U.S. 575, 585 (1983) (invalidating a Minnesota use tax on the cost of paper and ink products used in a publication, and exempting the first $100,000 of such costs each calendar year; Star & Tribune paid roughly two-thirds of all revenues the state raised by the tax). The Court seemed less concerned, however, when the affected group within the press was not so small, upholding application of a gross receipts tax to cable television services even though other segments of the communications media were exempted. Leathers v. Medlock, 499 U.S. 439 (1991). back
460 U.S. at 588, 589. back
Ark. Writers’ Project, Inc. v. Ragland, 481 U.S. 221 (1987). For a discussion of general First Amendment treatment of content-based speech regulation, see Amdt1.7.5.1 Overview of Categorical Approach to Restricting Speech. back
481 U.S. at 231–32. back
Leathers, 499 U.S. 439, 453 (1991) (tax applied to all cable television systems within the state, but not to other segments of the communications media). back
Simon & Schuster v. New York Crime Victims Bd., 502 U.S. 105 (1991). back
Id. at 122. back