WASHINGTON -- The Supreme Court said yesterday that a state cannot impose a tax to punish or deter criminal behavior if the state already has imposed a criminal penalty for the same conduct.
In a 5-to-4 ruling against the state of Montana, the high court held that a tax imposed on Richard M. Kurth and his relatives for possession of illegal drugs violated the double jeopardy clause of the Constitution, which provides that "no person shall ... be subject for the same offense to be twice put in jeopardy of life or limb."
Writing for the majority in Montana Department of Revenue v. Kurth Ranch, Justice John Paul Stevens said that "a tax is not immune from double jeopardy scrutiny simply because it is a tax."
The Montana tax "must be imposed during the first prosecution or not at all. The proceeding Montana initiated to collect a tax on the possession of drugs was the functional equivalent of a successive criminal prosecution that placed the Kurths in jeopardy" for the same conduct, said Stevens, who was joined by justices Harry Blackmun, Anthony Kennedy, David Souter, and Ruth Bader Ginsburg.
The decision, which marks the first time the court has subjected a tax to a double jeopardy analysis, could affect more than half the states that tax possession or sale of drugs independently of criminal prosecutions. At least 27 states impose such taxes, according to Gary Maveal, associate professor at the University of Detroit Mercy School of Law.
Bruce McGinnis, senior tax counsel in Montana's department of revenue, said it is too early to say how the ruling will affect states, but he said it is clear the Montana statute "is seriously flawed."
In a dissent, Justice Sandra Day O'Connor said the decision "will seriously undermine the ability of the state and federal governments to collect recompense for the immense costs criminals impose on our society."
The case stems from Montana's enforcement of its 1987 Dangerous Drug Tax Act on the Kurth family, which was growing marijuana to save its ranch in central Montana from creditors. State police raided the ranch in 1987, confiscating and destroying more than 1,800 ounces of harvested marijuana.
The state law provides for a tax that is the greater of $100 per ounce of marijuana or 10% of market value of illegal drugs in possession or storage.
After the raid, two Kurth family members were sentenced to prison and four others received suspended or deferred sentences. The family also filed for bankruptcy.
The Montana revenue department tried to collect almost $900,000 in taxes on the drugs, but the U.S. Bankruptcy Court said only $181,000 on 1,811 ounces of harvested marijuana was authorized by the state law. However, the court also said the levy was unconstitutional because it was a form of double jeopardy.
The bankruptcy court ruling, which was later affirmed by a federal district court and the U.S. Court of Appeals for the 9th Circuit, rejected the state's argument that the assessment was intended to recover law enforcement costs because the state produced no evidence about the costs. But while the case was pending on appeal, the Montana Supreme Court held that the tax was a civil, not a criminal, penalty and was not subject to double jeopardy analysis.
The key issue before the U.S. Supreme Court was whether the Montana tax was punitive, which would subject it to double jeopardy constraints, Stevens said.
"As a general matter, the unlawfulness of an activity does not prevent its taxation," the majority held. "Montana no doubt could collect its tax on the possession of marijuana, for example, if it had not previously punished the taxpayer for the same offense, or, indeed, if it had assessed the tax in the same proceeding that resulted in his conviction."
Taxes are different from other sanctions such as fines and forfeitures because they typically are motivated by the desire to raise revenue, the court said.
The high rate and obvious deterrent purpose of the Montana tax suggest that it is punitive, but those two factors do not necessarily make it punitive, the court said, noting that taxes on cigarettes and alcohol "are also both high and motivated to some extent by an interest in deterrence."
But "other unusual features" of the Montana tax set it apart as punitive because it is "conditioned on the commission of a crime," and "it purports to be a species of property tax" that is levied on taxpayers whose property is confiscated and destroyed by the state, the court said.
Chief Justice William Rehnquist filed a separate dissent, saying the ruling "drastically alters existing law" by subjecting tax law to double jeopardy analysis.
Justice Antonin Scalia was joined by Justice Clarence Thomas in a third dissent that said the double jeopardy clause prohibits multiple prosecutions, not multiple punishments.
