Republican leaders can’t buy off Sen. Lisa Murkowski’s vote this way.

The “Alaska Purchase” Is Probably Unconstitutional

The “Alaska Purchase” Is Probably Unconstitutional

The law, lawyers, and the court.
Sept. 22 2017 1:41 PM

The “Alaska Purchase” Is Probably Unconstitutional

Republican leaders can’t buy off Sen. Lisa Murkowski’s vote this way.

Sen. Lisa Murkowski (R-AK)
Sen. Lisa Murkowski speaks with reporters on Capitol Hill on Tuesday.

Aaron Bernstein/Reuters

As Republican leadership searches for the 50th vote in favor of Graham-Cassidy, their apparently randomly chosen vehicle for repealing the Affordable Care Act, rumors abound of a sweetheart deal aimed at securing Sen. Lisa Murkowski’s vote. The so-called Alaska Purchase would maintain existing premium federal tax credits for those purchasing health insurance on the individual market, but only in Alaska and Hawaii. Sen. Mike Lee’s office told the Daily Beast that he’s been assured there will be no “Alaska Purchase,” but that same report describes the “Alaska Purchase” as an “offer” that has been made that would create this tax carve-out for multiple smaller states. Can Congress do that?

Probably not. Article I, Section 8 of the Constitution says “all Duties, Imposts and Excises shall be uniform throughout the United States.” Former Supreme Court Justice Joseph Story, writing in 1834, thought that the point of that provision was to prevent coalitions of states from ganging up, in Congress, to benefit themselves at the expense of others. While the “uniformity clause” has been watered down over time, it should still be enough to swamp the “Alaska Purchase” proposal. Ironically, South Carolina Sen. Lindsey Graham—the Graham of “Graham-Cassidy”—recognized the potential constitutional problems inherent in such a scheme seven years ago during the Obamacare debates: In 2010, he reportedly asked his state’s attorney general to look into the constitutionality of a similar proposal known as the “Cornhusker Kickback” that would have benefited Nebraska.

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The leading recent authority on the Uniformity Clause is, coincidentally, also a case from Alaska, U.S. v. Ptasynski. In 1980, Congress imposed a “windfall profits” tax on domestically extracted oil but exempted some “Alaskan oil.” The court explained in its 1983 ruling that it had historically taken a pretty narrow view of the Uniformity Clause, allowing Congress to enact taxes that have disproportionately benefited specific states, as long as the taxes applied “at the same rate, in all portions of the United States where the subject of the tax is found.” That left open the question whether a tax that on its face imposed different rates on different states could survive.

That question, the court decided, would be subject to something that looks like elevated scrutiny. “Where Congress does choose to frame a tax in geographic terms, we will examine the classification closely to see if there is actual geographic discrimination,” the court ruled. To survive that scrutiny, Congress would have to show “neutral factors” that would justify the distinction. A purpose to “grant … an undue preference at the expense of other … states” would flunk the test.

Based on that standard, the court upheld that tax exemption for Alaskan oil. It observed that Congress “had before it ample evidence of the disproportionate costs and difficulties—the fragile ecology, the harsh environment, and the remote location—associated with extracting oil from this region.” And, also seemingly importantly, it noted that only about 20 percent of Alaska’s oil qualified for the exemption, so that the rule also disfavored many Alaskan extractors.

A more recent precedent challengers of any potential Alaska Purchase could point to would be the Supreme Court’s 2013 decision in Shelby County v. Holder. That was the case in which the court struck down the pre-clearance provisions of the Voting Rights Act of 1965. Those rules had required Southern states (and a handful of non-Southern counties) to obtain permission from federal authorities before adopting local laws affecting certain voting procedures. This “disparate geographic coverage,” Chief Justice John Roberts wrote, “must be sufficiently related to the problem it targets.” Since a majority of the justices concluded that pre-clearance no longer was needed to protect minority voting rights, they struck it down.

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It’s hard to know how broadly the court thinks Shelby County will apply. Probably just about every federal statute impacts one state more than another. As my old constitutional law professor Michael Dorf has explained, the key, as in Ptasynski, seems to be the fact that the VRA tied its treatment explicitly to geography—that states were burdened by name without a clear policy justification in the eyes of the court.

At the very least, by the Ptasynski criteria, the “Alaska Purchase” looks like it would be in trouble. Reportedly, the justification for retaining credits for Alaska and Hawaii is that they are high-cost health markets. But they aren’t the highest-cost; that’s D.C. Massachusetts and Delaware, meanwhile, are very close to Alaska. If we’re talking insurance costs, not health costs, Alaska has higher reported insurance premiums for marketplace plans, at least, than other states. But Hawaii is the middle of the pack, which makes the cost justification for the proposal just nonsensical. Some reports have also said that Montana, not Hawaii, might be the state tied together to Alaska, but Montana has lower 2017 insurance costs than eight other states, including its rural neighbor Wyoming. These kinds of failures of internal logic are often grounds for the court to find evidence of discriminatory intent.

Of course, the central premise of the Alaska Purchase is obvious to everyone. The point of the scheme is to ensure that Alaska is a net winner in the massive reshuffling of federal health dollars affected by the latest Trumpcare bill. Graham’s comments about taking money from “big blue states” is unlikely to be helpful on that front if there is ultimately a constitutional challenge.

The Uniformity Clause is rarely litigated, and it seems like a provision the court is reluctant to give much life to. There’s undoubtedly a fun Con Law I class discussion to be had about whether courts should make the kinds of judgments an expansive reading of the clause might call for. But, either way, the Alaska Purchase seems to fall inside the tiny circle of statutes prohibited by even the current minimalist reading of the clause.

Ultimately, the bigger lesson here is probably that Congress shouldn’t draft enormously complicated and deeply important legislation like sophomores clawing out a final paper at the last minute with a can of Red Bull in hand. Even if the Alaska Purchase were to eventually survive a legal challenge, the mere threat that a lower court might enjoin Alaska’s premium credits could well lead to crippling uncertainty in its health insurance markets. And there are probably a half-dozen other time bombs just as perilous lurking in the pile of cocktail napkins that is the bill’s current text. As the ACA’s original architects learned to their sorrow, it’s not always easy to go back and make even simple fixes with legislation this contentious.

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Brian Galle is a professor of law at the Georgetown University Law Center. He teaches and writes about tax law, federalism, and other subjects.