POLAR TANKERS, INC. v. CITY OF VALDEZ
In 1999, the city of Valdez, Alaska imposed a property tax on large vessels that used its port. Vessels subject to taxation elsewhere were held to an apportionment formula based on the number of days spent there. In response, Polar Tankers Inc. filed suit in an Alaska trial court arguing that the apportionment provision was unconstitutional. The trial court in part agreed, ruling that the apportionment method violated the Due Process and Commerce Clauses, but did not violate the Tonnage Clause of the Constitution.
On appeal, the Supreme Court of Alaska reversed in part. The court held that the tax apportionment formula used by the city of Alaska was fair and non- duplicative. Therefore, it did not violate the Due Process, Commerce, or Tonnage Clauses in the Constitution.
1) Does a municipal property tax that falls exclusively on large vessels and uses an apportionment method for out of state vessels violate the Due Process Clause of the Constitution?
2) Does it violate the Commerce Clause of the Constitution?
3) Does it violate the Tonnage Clause of the Constitution?
Legal provision: Tonnage Clause
Not answered, not answered, yes. The Supreme Court held that the Valdez, Alaska property tax that fell exclusively on large vessels and that used an apportionment method for out of state vessels violated the Tonnage Clause of the Constitution. With Justice Stephen G. Breyer writing for the majority and joined in part by Justices Antonin G. Scalia, Anthony M. Kennedy, Ruth Bader Ginsburg, and Samuel A. Alito, the Court reiterated that the Tonnage Clause need be interpreted in light of its purpose of restraining states from enacting taxes that injure the interests of other states. Here, the Court reasoned that the Valdez tax that targeted ships not residing in Alaska did just this, and therefore was unconstitutional. Moreover, the Court acknowledged that the Tonnage Clause would not have applied to the City of Valdez had it imposed similar taxes upon other businesses. However, the Court found little evidence that Valdez did so, and therefore the tax was not excluded from the scope of the Tonnage Clause.
Chief Justice John G. Roberts, joined by Justice Clarence Thomas, concurred in part and concurred in the judgment. He agreed that the City of Valdez's tax was unconstitutional, but disagreed with the majority that an unconstitutional tax could become permissible when bundled with other similar taxes on other businesses and properties. Justice Alito also wrote separately, concurring in part and concurring in the judgment. Justice John Paul Stevens, joined by Justice David H. Souter, dissented. He argued that the Tonnage Clause merely limits states from charging ships for "the privilege of arriving and departing from a port." He reasoned that the City of Valdez tax did not do so and therefore the tax was not unconstitutional.
ORAL ARGUMENT OF CHARLES A. ROTHFELD ON BEHALF OF THE PETITIONER
Chief Justice Roberts: We will hear argument this morning in Case 08-310, Polar Tankers v. City of Valdez.
Mr. Rothfeld: Thank you, Mr. Chief Justice, and may it please the Court: The Valdez vessel tax violates the Constitution's Tonnage Clause because it operates as a charge on a privilege of trading in Port Valdez, and that tax is apportioned in a way that is guaranteed to tax extraterritorial values and values that do not have a connection to the city.
That violates the Due Process and Commerce Clauses.
Justice Kennedy: It's not often that we have disagreements as to the basic facts.
The red brief says that the tax in question constitutes 11 percent of the tax base, and you talk about that in the reply brief.
Can you spend just a little bit of time at the outset telling us your views of this tax?
And although it's the Respondent's statement, not yours, do you think 11 percent of the tax base means 11 percent of what's collected under this tax or under all taxes imposed by City of Valdez?
Mr. Rothfeld: Well, I think that it means all taxes that are imposed not only by the City of Valdez, but they are including taxes imposed by the State of Alaska that are collected by the City of Valdez.
Justice Kennedy: In which case, that seems really quite irrelevant.
Mr. Rothfeld: --That is our position.
We think that's absolutely right.
I think it's useful to focus on the nature of this tax.
It is a tax that is directed exclusively at vessels and not at all vessels.
It's -- by exempting small boats and all boats that are engaged in commercial fishing and all boats that dock exclusively at city-owned harbors.
This was a tax, a property -- it's calls a property tax, but it's a tax that falls only on vessels and is directed at those vessels that--
Justice Souter: Well, some -- some of those vessels, I take it, are taxed under other statutes.
Is that correct?
Mr. Rothfeld: --I think -- I think not.
I think that the -- so far as Valdez is concerned, the vessels we are talking about are subject simply to this property tax.
Justice Souter: Well, do you -- do you take the position -- let's say that if the State of Alaska taxed all the other property you had mentioned except for the tankers and the city taxed the tankers, that that would by definition be a discriminatory tax and/or on some other basis violate the Tonnage Clause?
Mr. Rothfeld: Well, that -- that would be quite a different situation than what we have here.
Here, the city--
Justice Souter: Well, the reason I raised it was that -- that in -- in your response to my first question, you said, well, you didn't think the city was taxing these other -- these other pieces of property, and I'm -- I'm not sure why that is significant.
Mr. Rothfeld: --Well, there are -- there's a huge universe of personal property that could be taxed in the City of Valdez.
Valdez has the authority to tax all of this property except for a discrete category of oil and gas property that is subject to taxation by the State.
So Valdez can tax all the ordinary kinds of personal property -- movable property, personalty -- that any jurisdiction can tax.
They can tax cars and trucks and moving vans and refrigerators and jewelry.
Of all those innumerable things that they could tax, they have chosen to tax a single item.
They have chosen to tax vessels and, as I said, not all vessels.
Justice Scalia: Yes, but you -- you want us to ignore the -- the State tax.
Do you really want us to do that?
I mean, it would be the easiest thing in the world for the State of Alaska, instead of imposing it at the State level, to authorize the municipality to do it.
I don't want to have this case to come back here for a second time.
Mr. Rothfeld: But--
Justice Scalia: Now -- now that the municipality is imposing the taxes that the State used to impose, don't you think you have to count both of them?
Mr. Rothfeld: --I -- I don't think so.
I think the State of Alaska treats oil and gas property as--
Justice Scalia: You are going to get a fragile judgment if -- if we go on those grounds.
All it takes is a modification of the -- of the legislation.
Mr. Rothfeld: --Not so, Your Honor, because State of Alaska takes very seriously its stewardship of oil and gas property.
That is something of tremendous fiscal importance to the State of Alaska.
I think that there is little practical risk that the State is going to assign the right to tax that property.
Justice Souter: How about the risk in the other direction, that the State will simply take over this tax and remit the proceeds to the city?
Would the result on your view be the same if it did that?
Mr. Rothfeld: The -- the result in my view would be the same, but that would be a different and more difficult case.
Here, focus on what Valdez is doing: It is -- it has the authority, as I said, to tax the entire universe of personalty in the City of Valdez.
It has chosen to tax only particular types of vessels that are used in the export of oil.
Justice Ginsburg: There are some other vessels, too.
It's the -- it's the oil tankers, and there are a few other vessels that were included?
Justice Scalia: Including a -- a cruise ship is covered.
Mr. Rothfeld: --There is -- there is one cruise ship, Your Honor, that was caught up in the net in the first year the tax was imposed.
Otherwise, the tax falls exclusively on what vessels that are involved in the export of oil -- principally tankers, also service vessels.
Chief Justice Roberts: Why does that -- why does that matter?
I mean, do you -- do you concede that if this tax were in some sense nondiscriminatory, you would lose?
Mr. Rothfeld: No, I think that--
Chief Justice Roberts: Why are we having all this talk about -- in other words, you think if there was a tonnage tax applicable to everything -- you know, your pickup truck holds two tons; it has got to pay a certain amount or whatever.
Then do you lose or win?
Mr. Rothfeld: --If a -- if a tonnage tax -- look at what the tonnage tax was initially designed to do.
The Framers chose the term 18th century, tonnage was the ordinary way of valuing the value of a ship and the ordinary way of imposing tax on a ship.
If -- if the City of Valdez were to impose a property tax measured by tonnage on everything -- on vans and trucks and refrigerators and ships -- that would be a difficult case for us.
But, obviously, it hasn't done that.
It has not imposed a tonnage tax or and it has not imposed a property tax on any other type of property except particular types of vessels.
I think you apply the duck test: It looks like a duck--
Chief Justice Roberts: I think you're--
Mr. Rothfeld: --it quacks like a duck--
Chief Justice Roberts: --Yes.
I think you're giving up an awful lot.
I mean, what if the Framers -- couldn't they be have been more concerned about making sure that there is a free flow of commerce, that ships go, and the fact that everything is taxed would be less of a concern to them?
But you're -- you're willing to say that if it's nondiscriminatory, even if you would call it a "tonnage tax", you lose?
Mr. Rothfeld: --Well, I -- I was using -- in response to the previous question, imagining that they were imposing a property tax and they were measuring it in an unusual sort of way.
And the Court has said that if there's a generally applicable property tax which happens to fall on vessels, the reality of that tax is that it is a tax on property and not a tax on vessels.
But here we have quite the opposite.
Here we have a tax that falls only on vessels as cargo vessels.
And you're quite right: The Framers were concerned with the free movement of commerce.
The Tonnage Clause was designed to close the loophole that was thought to be left by the Import-Export Clause, which bars the taxation of imports and exports.
Taxing vessels would be a way of circumventing that.
Justice Souter: Let's -- let's assume that you're -- that a given tanker came into the harbor at Valdez on one occasion and one occasion only.
Would the City of Valdez, under its own statutes, by the terms of its own ordinance, tax that ship?
Mr. Rothfeld: It would, indeed, because the city in its code creating the tax preclusively presumes that a vessel is subject to the tax so long as it takes on cargo worth a million dollars over the course of a year.
Justice Souter: Well, let me -- let me just change the question then.
If -- if it came in and sort of took half a tankful that didn't reach the point of a million dollars' value, there would be no tax then.
Is that correct?
Mr. Rothfeld: --Well, it would have to take a lot less than half a tankful.
Justice Souter: Whatever it would take to get it under the minimum.
Mr. Rothfeld: --Yes.
If -- if it were not -- if it visited the port of Valdez once and took on less than a million dollars and never came back to the port of Valdez--
Justice Souter: Okay.
Under the old tonnage laws, wouldn't that ship in the 18th century have been taxed?
Mr. Rothfeld: --I think that they -- jurisdictions impose all kinds of different variations of tonnage duties.
And as the Court--
Justice Souter: Well, the -- the point that I am getting to is -- and I'd -- I'd like you to address this: One of the arguments on the other side is that one reason this should not be treated as a tonnage tax is that it relies upon the concept of a tax situs.
And the -- the implication is that not every ship that comes into the harbor is going to be subject to the tax; whereas, under the old tonnage laws, any ship that came in would be.
And what is -- what is your response to that argument?
Mr. Rothfeld: --Well, two responses.
First, I think it is not the case that under the old tonnage laws necessarily every ship was subject to tax.
Ships could be subject depending upon how -- how large they were, and some ships could be exempted.
So I think it's not implicit in -- in the nature of a tonnage duty that it applies to every ship that -- that enters the harbor, but--
Justice Souter: Where do we -- where do we look to find this out?
Mr. Rothfeld: --One would have to look at the practice in the 18th and 19th centuries.
And some of the Court's decisions--
Justice Souter: Do you know of any source that we could look at to support the proposition that you just made?
Mr. Rothfeld: --I -- I can't point you to any authority directly addressing that point, but I can point you to the general treatment of what a tonnage duty is.
I mean, it's a duty which is imposed on vessels on the basis of tonnage.
It -- it does not have to be imposed on every vessel that enters the harbor.
But I think probably the more important response to your question is the reality of this tax.
Valdez knew what it was doing.
It wanted to target -- it was commendably candid in saying what it was doing.
It wanted to target the vessels that were engaged in the transport of oil.
It knows how big oil tankers are.
It knows that the tankers are always full.
When they come in, they take a full load of oil.
That's -- that is the whole point of--
Chief Justice Roberts: But you don't -- you don't suggest that it matters, right?
You -- you have talked to some extent in the briefs about the bad -- evil motive.
Mr. Rothfeld: --No, I--
Chief Justice Roberts: But you are not going to suggest that the same tax could be valid or invalid depending on why it was enacted.
Mr. Rothfeld: --No, I -- I don't, but I--
Justice Breyer: May I ask one other question before you leave this, which is where Justice Kennedy started?
Suppose a State says: In our State, we want to tax all oil and gas property, and here's how we do it.
We assess the value of all oil and gas property, ships and everything else included.
Then we impose a tax of 20 mills per dollar of assessed value, something like that, on all of it.
Now, the State will collect all of it, and we make one exception.
We define which property the State will directly get the money from, and then the city can do the rest, if it wants.
Now, here's what we do with the State money.
We give it to the city.
So if the city wants to, it can put the same tax on that little bit of property left over, which is a subcategory of oil and gas property.
And by the way, the name of that little bit of property left over is called "a ship".
Now, is that a tonnage tax, and is that what Alaska has done here?
Mr. Rothfeld: --If I understand the example, that -- that might be a tonnage tax, depending upon the--
Justice Breyer: I described to you the entire tax.
We know no more about it.
Mr. Rothfeld: --Well, if -- if it's a tax on oil and gas property, and that is the definition of the tax and it happens to fall on vessels as part of the--
Justice Breyer: The way it does is just as I said.
And maybe I was -- it was too much for you to take in.
So the point is that it's a tax on oil and gas property.
That's Code section 1.
Code section 2 is defined subcategories -- (a), (b), (c), (d, (e), (f) -- all of that.
Code section 3 says (a), (b), (c), (d), and (e).
The -- the State government collects and remits it to the city.
(G), the city can assess the same tax if it wishes.
It doesn't have to -- and keep the money.
(G) is ships.
And the reason I have asked that question is I read something from -- Alaska Department of Economic and Community Development which suggested to me that that is Alaska's tax.
I might have that wrong.
I just read a sentence or two, and maybe I am wrong that that's Alaska's tax, and--
Mr. Rothfeld: --Yes, and--
Justice Breyer: --But if it's Alaska's tax--
Mr. Rothfeld: --That's--
Justice Breyer: --what's wrong with it?
It's a -- it's a tax on all oil and gas property, and all they do is they let the city collect some of that if they want, and they collect the rest of it and give it to the city.
Mr. Rothfeld: --Well, what's -- what's wrong with what's going on here and -- and I think this is in answer to your question -- the City of Valdez has the authority to tax an entire -- as I said, the entire universe of personalty.
And -- and as -- as you described it, the City of Valdez also can impose a tax, although it doesn't have to, on -- on vessels.
And the city has chosen to single out vessels out of all the types of property that it could tax, and it imposed a tax on them called a property tax.
The reality of it is that it's a tax on vessels.
Justice Breyer: What I'd like to know is: Do you think what I said was a misdescription?
What's worrying me about this aspect of this case is a possible need to send it back to find out what Alaska's tax system is.
Now -- now, if what I just said is a -- is a correct description approximately and if the other side thinks it is, too, then at least I -- I know how to go about deciding it.
And if I don't, I don't know quite what to do.
Mr. Rothfeld: My -- my understanding of how the tax system works is that this -- this is a State level tax.
Alaska determines what are subject to tax, determines the items of property that are subject to tax.
It determines which of these vessels are subject to -- to the Alaska tax.
It then allows the City of Valdez to collect the tax and to use the tax, but it is a tax imposed by law by the State of Alaska.
Valdez has no discretion to tax things that are not oil and gas property, that are not taxed by the -- by -- subject to the tax at the State level by the State.
Justice Kennedy: As you understand it, with reference to the tax base referred to in the red brief at page 14 where it says it's 11 percent of the tax base, is that tax base all city-imposed?
Mr. Rothfeld: No.
My -- my understanding of what they are referring to is that this includes Alaska-taxed oil and gas property, including the Alaska oil pipeline and the oil terminal in the City of Valdez, which are enormously valuable pieces of property.
So I think that -- that we are sort of talking apples and oranges here.
Justice Scalia: --Was your answer to the Chief Justice that if there is a tonnage tax imposed on everything including -- including ships, it would still violate the Tonnage Clause.
Is that right?
Mr. Rothfeld: If it's a -- a literal duty of tonnage on the cubic capacity of the ship, it -- it's difficult to see how that could really be imposed in terms on every other item of property.
I suppose if the -- if the--
Justice Scalia: It's my -- it's my hypothetical.
I made it up.
Mr. Rothfeld: --Well, if the city were -- were to say that every transportation -- device of transportation was going to be -- be taxed on the basis of its cubic capacity, you know, vans and railroads--
Justice Scalia: And you think it would be okay?
Mr. Rothfeld: --I think that would be--
Justice Scalia: It's only discrimination that counts?
Mr. Rothfeld: --Well, we focus on -- well, no.
I would say -- I would not say it's necessarily okay.
That would be a different kind of situation than we have here.
Here we have the purest case of what's -- of -- of a tax which is focused exclusively on vessels.
Justice Scalia: Well, there's some -- there's some fight about that, obviously.
There -- there is no fight about the fact that this tax is based upon how long the ship remains in port, right?
Mr. Rothfeld: Well--
Justice Ginsburg: How many days.
Justice Scalia: Right.
How many days it remains in port.
Mr. Rothfeld: --Well, there are two--
Justice Scalia: Which means, the argument could go that this is obviously a -- a tax for the use of the port.
And that's exactly what the Tonnage Clause was directed against, preventing Philadelphia and New York from taxing the consumers in New Jersey by imposing taxes on ships that bring in goods.
Mr. Rothfeld: --I -- I agree entirely with that.
The -- the effect of this tax is to tax essentially the charge for trading in the Port of Valdez, and that is exactly what the Framers--
Justice Ginsburg: And you don't dispute that in light of the benefits provided by Valdez to the shipowners, that there could be a legitimate tax on these vessels?
Mr. Rothfeld: --That is -- that is absolutely right.
There -- there--
Justice Ginsburg: So could you describe what tax authority you think Valdez has?
Mr. Rothfeld: --There are two ways that Valdez could go about taxing these vessels.
It could impose a user fee, and the Court has recognized in its Tonnage Clause decisions that even a -- a tax on cubic capacity, a tax on weight, would be fine if that is a user fee which is designed to provide -- pay for services that are provided specifically to vessels roughly equivalent to the value of the services provided.
So that is one way Valdez could do it.
A second way they could do it is to impose a nondiscriminatory property tax.
If they imposed a tax on the citizenry of Valdez affecting some broad array of personal property, that would impose the kind of political constraints that would discourage, you know, abusive export of the city's tax burden, which is just what the Framers--
Justice Ginsburg: How much property -- you said if they -- if they taxed all moveables, that would be okay.
Could they have some exemptions and still--
Mr. Rothfeld: --It -- it may -- I -- I suppose the test would be if it's predominantly focused on vessels, that would be unconstitutional.
This case doesn't provide an opportunity to -- to explore exactly how far that goes because this is, as I say, the purest case of a tax, property tax, all the property tax, which applies only to vessels.
Justice Scalia: But you don't think a daily -- a daily charge on vessels for remaining in port violates the Tonnage Clause?
Mr. Rothfeld: --It would violate the Tonnage Clause.
Justice Scalia: Is this anything else than that?
Mr. Rothfeld: I -- I agree with you, Justice Scalia, that however ports, States, or cities go about trying to impose a tax on vessels for the -- I'm calling it the privilege of trading in the port, as distinct from the user fee I discussed with Justice Ginsburg, that would be an unconstitutional tonnage duty.
That's what the Court has said--
Justice Souter: What about a--
Chief Justice Roberts: I was going to say, even if it's a flat fee?
Mr. Rothfeld: --According--
Chief Justice Roberts: Every vessel has to pay, you know, $1,000.
Mr. Rothfeld: --The Court has so held on several occasions that a flat fee violates the Tonnage Clause.
Justice Stevens: Mr. Rothfeld, can I ask you a question, just focusing on the Tonnage Clause, not the elements of discrimination?
If you assume that the Tonnage Clause was designed to protect New Jersey from being exploited by New York and perhaps other States because they don't have their own ports, why does that rationale have any application to this case, because the only State that ships oil out of Alaska is Alaska?
So there is no other State like New Jersey who could be harmed by the Tonnage Clause.
Mr. Rothfeld: Well, the recipients of the property are being harmed.
Valdez is taking it -- this is really--
Justice Stevens: But who -- what State is being discriminated against in the scenario we have before us today?
Mr. Rothfeld: --All of the States that are using the oil shipped through Valdez are paying -- ultimately paying this tax.
I mean, this is what the Framers were concerned about.
The -- the danger that--
Justice Stevens: But you are saying it's an unduly onerous burden on the oil companies and their tankers, and they only ship oil out of Alaska.
Mr. Rothfeld: --Well, the concern that the Framers had in putting the Tonnage Clause in the Constitution, as with the Import-Export Clause, was that States with favorable port facilities were going to be imposing burdens by taking advantage of their favorable geography to impose burdens that are going to be felt by the other States.
That is exactly what Valdez has done.
Justice Scalia: Not felt by the other States, felt by the consumers in other States.
Ultimately, it's not going to be the oil companies that pay this tax; it's going to be purchasers of oil.
Mr. Rothfeld: That -- that's right.
Justice Scalia: All of whom are going to be outside of Alaska, since this oil is leaving Alaska, right?
Mr. Rothfeld: That -- that is exactly right.
Justice Scalia: It's a neat tax, you know, get somebody else to pay your taxes.
Mr. Rothfeld: That -- that is precisely right, and that's just what the Framers were concerned with, with the Tonnage Clause in the Constitution.
If -- if I may, I will move to the apportionment issue in the case.
I don't want -- I don't want to -- to leave behind -- the Court had questioned on the Tonnage Clause.
Chief Justice Roberts: Well, but just on a -- maybe this doesn't matter.
I have seen the capacity of cargo planes described in terms of tonnage.
Does this clause apply to those?
Mr. Rothfeld: That -- that is an interesting question.
It -- it was written to apply to ships simply because in the late 18th century, the only way of moving substantial amounts of cargo was by -- was by vessel.
And I imagine that if the Framers had in mind airplanes and railroads--
Chief Justice Roberts: It is -- we have an evolving Constitution, after all.
Mr. Rothfeld: --I will leave that one alone, Your Honor.
Chief Justice Roberts: Well, then, do you know -- it's not an entirely frivolous point.
I mean, do you know if States, localities where airports are located charge things that might be viewed as Tonnage Clauses on airplanes?
Mr. Rothfeld: I don't know a definitive answer to that.
Generally speaking, airplanes and other types of property are -- are subjected to property taxes on the value, and not on capacity.
Although, as I said, the Framers I don't think cared about capacity as such.
They just cared about charges that were being imposed upon vessels that were going to be passed through, as Justice Scalia said, to the ultimate purchasers or sellers of the imports and exports that were -- that were in the vessel.
Justice Souter: --I thought you said earlier or implied earlier that we couldn't draw a distinction, really, between capacity and value because tonnage in the 18th century was simply a proxy for the -- for the value of the ship?
Mr. Rothfeld: That -- that's right.
And I don't -- I hope I didn't--
Justice Souter: So a value tax is going to run into the same problem--
Mr. Rothfeld: --That's right.
Justice Souter: --as a tonnage tax.
Mr. Rothfeld: That's right.
And as for the Chief Justice's question, application to moving vans or cargo planes, the Court did not consider that because this is the purest case.
It is within the plain terms of the Tonnage Clause, the historical application of the Tonnage Clause.
It's the clear intent of the Framers in writing the Tonnage Clause.
Justice Alito: If the amount of the tax were measured by the number of sailors who were going to come ashore and the number of days they would be ashore, and a small port city wanted to recover the costs that they impose on municipal services, would that be -- would that be subject to the same flaw that you see here?
Mr. Rothfeld: It -- it would, although it might be possible for the city to impose some type of user fee calibrated in that direction.
The Court's cases refer to -- the tonnage principle applies to the number of passengers that the ship may carry or the number of crew members on the ship.
If -- if it's not a proxy for particular expenses that are imposed on the jurisdiction, as this concededly is not, that was not what the -- Valdez intent in passing this tax, then it would be problematic under the Tonnage Clause.
But I say again we have here the clearest, easiest case under the Tonnage Clause.
It's a -- it is a tax that is designed exclusively at vessels that trade in the harbor.
On the apportionment question -- and I don't want to give short shrift to that, because the Valdez tax is apportioned in a way that is guaranteed to impose a tax on values that are not present in the jurisdiction -- Polar's tankers spend only a small part of the year in Valdez.
They spend the rest of the time on the high seas or in other ports either unloading oil or in dry dock.
And, therefore, everybody agrees the tax has to be apportioned.
The ordinary way and the way that this Court has approved the apportionment of a tax on physical property -- particular physical property -- is straightforward.
You would put in the numerator of the tax the number of days with the number of miles they spent in or number of miles traveled in the taxing jurisdiction; you put in the denominator 365, the total number of miles traveled everywhere.
You multiply that fraction times the value of the property.
And so, for example, if I had a transcontinental passenger train moving from New York to California that spends 20 percent of its time in New York, New York could tax 20 percent of the value of the train.
That is not how Valdez does it.
Justice Ginsburg: --But that's -- the train is going to be some place throughout its trip, unlike the ship that's going to be on the high seas.
Mr. Rothfeld: That's right.
But the -- the Valdez theory does not depend upon the taxation, the taxability of a ship somewhere else.
Valdez is simply saying that we are entitled to tax, you know, not on the basis of physical presence in this jurisdiction at all.
We are entitled to tax on some concept of where productive commercial activity takes place.
And so it does not apportion on the basis of amount of time spent in the jurisdiction over the course of the year, which is -- which is the approach that the Court ordinarily has used.
The Valdez approach is precisely the equivalent of New York saying, in my transcontinental train example, we are going to take into account only time spent in New York and Los Angeles loading and unloading passengers, and we are going to discount all of the rest of the year, all the rest of the time that the train has spent moving the passengers from place to place.
Justice Ginsburg: Who can tax for the time on the high seas?
Mr. Rothfeld: This Court has held in the Central Railroad case that the taxing authority goes to the domicile.
That for time--
Justice Ginsburg: And the domicile here is Texas.
Is that right?
Mr. Rothfeld: --The commercial domicile is Texas.
The -- the corporation was incorporated in Delaware.
Justice Ginsburg: In either case, no ships berth in either Delaware or Texas.
Is that right?
Mr. Rothfeld: These ships do not -- the ships berth in Texas.
The ships do not--
Justice Ginsburg: So the home port might have had in the old days the notion that's really where the vessel is berthed.
But, nowadays, Delaware has very little to do with where the vessels are berthing and where they are being serviced?
Mr. Rothfeld: --If I may, Your Honor, I'll -- I'll answer that question and sit down to reserve a little bit of time.
You are right as to the physical location of the ship, but the -- the jurisdiction, the authority of a non-domicile to tax has always been constrained by -- under the Due Process Clause -- by the physical location of the property.
And so, the fact that the property may or may not be subject to tax somewhere else does not give Valdez additional authority to tax property that's not present there.
Now, the Court has said that the domicile, whether or not the property is present, is providing benefits to the owner of the property, and it's those benefits that justify the imposition of the tax for periods when it is not in any tax situs subject to tax by anybody else.
And if I may, Your Honor, I will reserve.
Chief Justice Roberts: Thank you, counsel.
ORAL ARGUMENT OF THEODORE B. OLSON ON BEHALF OF THE RESPONDENT
Mr. Olson: Mr. Chief Justice, and may it please the Court: In the Wheeling case, this Court said it is too well settled to question that taxes upon vessels based upon their value as property do not violate the Tonnage Clause.
In fact, no ad valorem property tax has ever been held to violate the Tonnage Clause.
Justice Kennedy: Well, it says vessels of all kinds are liable to taxation as property
"in the same manner as other personal property. "
Mr. Olson: Yes, Justice Kennedy, precisely in the same manner as other ad valorem property taxes.
Now let me answer the question that both you and Justice Breyer particularly addressed, which was the oil and -- and gas tax imposed with respect to much of the property in Valdez.
Valdez taxes homes, it taxes oil and gas property, it taxes barges, it taxes cruises, it taxes all sorts of things just like every other jurisdiction does.
The oil and gas tax that you ask about, Justice Kennedy, and you did, too, Justice Breyer, is imposed -- and there's no need to remand back this case to address this.
It's in Section 43.56 of the Alaska Code.
The State of Alaska imposes an oil and gas tax on property used in the oil and gas extraction, transportation, et cetera, business, but it also authorizes a city under Section 43.56 and 29.45 -- the City of Valdez may impose that tax as well.
It's two mills, it's just like every other tax that's imposed in Valdez.
These are taxes imposed on the same basis.
If the city imposes the tax, which the City of Valdez does, then the tax by the State -- that tax paid to Valdez is a direct credit, dollar-for-dollar credit, for the tax that would otherwise have to go to the State.
So, in the first place, I think would it make no difference as suggested by your question, Justice Breyer, whether it was the State or the city that imposed the tax.
The constitutional provision refers to States.
States divide up their taxing authorities in various different ways.
The fact is that the State of Alaska through the City of Valdez imposes a tax on lots of different things.
This oil and gas tax that we are talking about consists of 60 to 70 percent of the revenue base of taxation for the City of Valdez.
The -- the ship tax, the tax on the -- that actually applies to vessels which include the tankers, include barges, include a cruise ship, includes just Alaska ships and -- and ships--
Justice Scalia: Not fishing ships, right?
Mr. Olson: --The fishing--
Justice Scalia: None of -- none of Valdez's fishermen have to pay this tax at all?
Mr. Olson: --They don't have to pay this tax, Justice Scalia, but they pay other taxes.
There's tax on -- on the weight of fish, and there's tax on the value of fish, and there's tax -- there's -- fees.
They use a different dock, and they pay taxes there, too.
Justice Kennedy: But -- but your answer it -- it seems to me does put the issue squarely before us in the terms that the Petitioner has presented, that is to say, sure, suppose you tax the vessel and you tax trailers and small vessels and a lot of other things, but as to all of the latter category, you have -- you have an exemption.
So the -- the only people that effectively pay the tax are the tankers.
Mr. Olson: No.
Justice Kennedy: And I thought that that was the way the case was presented to us.
Mr. Olson: No.
Well, that is not correct, if I understood your -- your statement correctly.
This oil and gas property, cranes, heavy equipment, fire engines, motor vehicles, everything else, including the people's homes in Valdez get taxed.
Justice Ginsburg: But the people's homes only if they are affixed to the property and they--
Mr. Olson: Now, that's with respect to mobile homes.
Justice Ginsburg: --Yes.
Mr. Olson: They are taxed as real property when they are affixed in that way.
Justice Scalia: And nonmobile homes are not taxed as real property?
Mr. Olson: The tax -- cities may impose taxes as real property or -- or personal property, Justice Scalia.
Some States will tax mobile homes.
Justice Kennedy: Now, the question is, what's imposed here?
My understanding from the yellow book -- do you agree that the yellow brief is accurate in its factual descriptions, perhaps not in its conclusions that it draws?
Mr. Olson: No, Justice Kennedy.
I have -- I've given you--
Justice Kennedy: See, we have a problem with the facts here.
My understanding of the case, and please correct me if I am wrong, is that, sure, Valdez has tax authority and tax statutes which would cover a considerable amount of personal property on an ad valorem basis.
But because of exemptions, only the tankers pay this tax.
Mr. Olson: --The -- there are various taxes imposed by Valdez on personal property and real property.
Justice Kennedy: Was my statement correct?
Mr. Olson: Your statement is correct only with respect to the ordinance that -- that eliminated the exception.
These -- these big ships that impose enormous burdens on the municipality -- you can only imagine what 300-400--
Justice Breyer: That's a different argument.
Mr. Olson: --Yes, I know.
Justice Breyer: Can we just get to--
Mr. Olson: I know.
But these ships were exempt from taxation in Valdez until the year 1999 when that ordinance that you are referring to, Justice Kennedy, was adopted.
Justice Scalia: So was all other personal property exempt from taxation.
They didn't have a personal property tax, right?
Mr. Olson: --Except -- except, under the -- to the extent that personal property was covered by the oil and gas tax, the provisions that I have referred to -- Valdez had been imposing that tax--
Justice Scalia: That's nicely targeted as well.
But there is no constitutional impediment to -- to targeting the people of New Jersey through taxing the oil equipment.
Mr. Olson: --If the Wheeling case is correct and the other cases that have repeatedly said this, there is no constitutional impediment for a city or a State to impose a property tax on property being used in--
Justice Ginsburg: But Wheeling -- Wheeling was -- it was a general property tax, and as I read the case, it said if you are going to tax property, you can include vessels.
This statute -- and I think the Alaska Supreme Court treated it discretely -- is a tax on one kind of property only, these vessels.
I don't know of any other property tax that is confined to just one type of property.
Is there another?
Is there a comparable tax that is focused on a single category of property?
Mr. Olson: --There -- well, I -- I think what my point here with respect to this, Justice Ginsburg, is I don't know the answer specifically to that question, but we are looking at what the bundle of taxes that a community or a State imposes on property used that imposes a burden on the community.
Property is taxed for the purpose so that the property owner will bear the burden of the governmental services that a city has to impose.
It -- there's no constitutional provision that I am aware of that says that you have to have it all in one statute, collected -- and there is no discrimination--
Justice Scalia: But you can't -- you can't make vessels bear the overall burden of municipal governance.
You can make them bear the burden of the services provided to them in harbor.
But you cannot make them the instrument of funding all other municipal services.
That's what the Tonnage Clause means.
Mr. Olson: --Well, I disagree in part with what you said, with respect, Justice Scalia; these vessels pay 11 percent of the revenue base for the city; 11 percent.
This is a city of 4,500 people.
Justice Kennedy: How do you define revenue base?
Mr. Olson: This is the amount of tax collected by the City of Valdez with respect to ad valorem taxes in the city, including ships, mobile homes, cranes, barges, appliances, real property, and so forth.
Justice Scalia: You are counting the State tax as well, right?
Mr. Olson: Pardon me.
Justice Scalia: You are counting the State tax on oil equipment?
Mr. Olson: I am -- I am saying to you that the State imposes a tax but the State specifically allows Valdez to impose that very tax.
Justice Breyer: --That makes matters worse.
Mr. Olson: Valdez imposes that tax as a part of its total taxation package.
Justice Breyer: Let's -- let's suppose I accept just what Justice Ginsburg said, and said that it's a hopeless morass if we look at all taxes.
Let's look at this tax.
This tax you call an ad valorem tax on personal property levied by Valdez, and then on page 11 of your brief you say that's not just on ships; it's also on mobile homes, trailers, recreational vehicles, and various types of personal property defined under State law as oil and gas property, motor vehicles, machinery, supplies and maintenance equipment.
They come back and they say, as to your mobile homes, trailers, and recreational vehicles, all that's happening there is either you have exempted them or they are fixed in place, and they are like real property, and that's what you are doing.
As to the other things, you do not impose a tax on those other things.
Rather, the State imposes a tax on those other things.
And it may be that you help the State do it by providing them with the assessment, and it may be even that you could do it, but you haven't.
And, therefore, the only thing you have imposed this tax on are the ships.
Now, I think I have that argument right.
If I do, what's the answer to it?
Mr. Olson: The answer is--
Justice Breyer: If I don't, what's the right argument?
Mr. Olson: --The answer is section 43.56 that allowed -- the State statute may impose that tax you just described.
And it -- and section 29.
Justice Breyer: "May impose" doesn't help if you don't do it.
Mr. Olson: Yes, it does impose it, and then, Justice Breyer--
Justice Breyer: The state imposes it or--
Mr. Olson: --section 29.45.080 says -- I am going to read it exactly; this seems to be an important point.
It doesn't seem to me that it ought to make any difference from the Tonnage Clause standpoint whether it's a tax imposed by the State or a subdivision of the State, but this provision specifically says a municipality may levy and collect taxes on taxable property, taxable under AS 43.
That's the one.
The State does impose this tax, but it also allows the city to impose it.
This city does impose it.
And when it is paid, that is a credit against what might otherwise be owed to the State.
So the city does impose that tax, it does collect that tax, and that tax is not--
Justice Scalia: Wait a minute, owed to the State for what?
What would be owed to the State?
It's still a State tax, and they are the collection agent, and it's a -- a credit against what they owe for their collections, right?
Mr. Olson: --A municipality may levy and collect taxes on property under this section.
The city levies and collects those taxes.
Justice Scalia: What -- what's it a credit against?
I don't understand what it's a credit against.
Mr. Olson: --The State also imposes the liability.
Any individual community in Alaska may impose that tax itself.
If it does -- Valdez does -- then you don't have to pay it to the State; you pay it to the city.
So it's a city tax.
Justice Scalia: What does the city get a credit against?
Mr. Olson: --The--
Justice Scalia: --as referred to in the--
Mr. Olson: --The taxpayer, once he pays $10 to the city under this tax, doesn't have to pay $10 to the State under this tax because he gets a credit for--
Justice Scalia: --Oh, I thought it was the city that got the credit--
Mr. Olson: --No, it is the taxpayer that gets the credit.
The city levies the tax.
The city collects the tax.
And then the taxpayer doesn't have to pay the State.
Justice Breyer: --And that happens with all these other properties?
That is, in Valdez, you pay the city -- you pay the city -- for the -- for the taxes on that oil and gas property that isn't shipped?
Mr. Olson: Yes, Justice Breyer.
Justice Breyer: And you write the check to the city.
Mr. Olson: --What?
Justice Breyer: All the things you listed on page 11--
Mr. Olson: Yes.
Justice Breyer: --The -- the oil and gas, motor vehicles, machinery, appliances, supplies, and maintenance equipment.
Mr. Olson: Those are money paid to the city.
Justice Breyer: So they write a check to the city.
Mr. Olson: Yes.
Now, it shouldn't matter.
The Tonnage Clause prohibits States from imposing a tonnage tax.
Justice Stevens: Well, that's exactly the question I wanted to ask you.
Supposing the city did not impose any taxes on anybody except the people who pay this tax, and that's all.
Would it -- would it be constitutional or unconstitutional?
Mr. Olson: No, it would not be.
In the first place--
Justice Stevens: It would not be constitutional?
Mr. Olson: --It would not be -- it would not be unconstitutional, Justice Stevens.
Justice Stevens: Oh, but then why is the -- what other people pay on other taxes even relevant?
Mr. Olson: I don't think it is relevant.
The -- the nondiscrimination issue has been introduced by the Petitioner in this case.
It is not in the Tonnage Clause.
It is not in any of the cases decided by this Court having to do with the Tonnage Clause, having to do with wharfage fees, pilotage fees, other things having to do with commercial activity in a--
Justice Stevens: So we can take as a -- as a given, for the purpose of analyzing the issue, that this tax is either the only tax that's relevant to our analysis or that it's so much higher than all the other taxes, it should be treated as the functional equivalent, as the only tax we have to look at?
Mr. Olson: --I'm saying that it would not make any difference if this was the only tax that the city imposed unless it was a tonnage tax, and the tonnage tax -- this Court has repeatedly--
Justice Kennedy: But the answer to Justice Stevens's question is we can take this case as presenting to us the fact that the ships pay more than other property?
Mr. Olson: --No.
Justice Kennedy: And you say that doesn't make any difference.
Mr. Olson: No, the ships do not pay more.
I don't think it would make any difference if -- if the city decided to impose a different rate of tax on motor vehicles than it did on homes or -- or vessels, as long as it was an ad valorem property tax, and this one is.
The vessels are not based -- the tax is assessed every year on the replacement value of the vessels.
A big ship that is worth less money because it would cost less to replace it, because it doesn't have a double hull or a double bottom, will be taxed -- it will be taxed greater in proportion to its value.
The value imposed is assessed every year.
There's no challenge here -- it's very important to understand that there is no challenge by the Petitioners with respect to the valuations placed on these ships.
There's no contention that the value placed upon these ships by this ad valorem property tax is based upon cubic capacity.
Justice Ginsburg: But is it -- do you -- do you contest the point that was made in the reply brief that, back at the end of the 18th century, tonnage was considered a proxy for value, that it was the customary mode of measuring the value of a ship?
Mr. Olson: --I do contest that, Justice Ginsburg.
The only citation for that is Justice Miller.
Justice Miller is cited for that in a lecture that he gave after he left the Court.
He was on the court from 1862 to 1890.
He joined the Court in the -- in the Inman case, the Wheeling case, the Parkersburg case, and here's the quote from the Inman -- from the Clyde Mallory case in 1935, which is quoting the Inman case from during that period of time.
"At the time the Constitution was adopted, "tonnage" was a well-understood commercial term signifying the internal capacity of the vessel. "
This Court has said that over and over again.
In the Wheeling case, when it said--
Justice Scalia: --Which is -- for a commercial vessel, is a rough calculation of how much it's worth.
Mr. Olson: --It is not--
Justice Scalia: The more cargo you can carry, the more valuable the commercial ship.
Mr. Olson: --That is not correct, Justice Scalia, and it's -- and it's not correct in this case.
Experts put an assessment on these ships based upon their replacement value.
It may have -- one factor may be how -- how the ship is constructed, whether it has a double hull.
These have to be Jones Act-compliant ships.
The newer ones are more valuable.
If they move faster, they're more valuable.
If they're more efficient, they have more value.
One of these ships in this case is valued 10 times more as -- higher value -- than a ship that carries more capacity because it's newer.
Justice Souter: But all you're saying--
Mr. Olson: And--
Justice Souter: --All you're saying is that there are other factors that -- that preclude using tonnage simply as a single crude measure.
But isn't it fair to say that, other things being equal -- the engine capacity, the hull construction, et cetera -- the tonnage is a rough measurement of the value of the ship, for just the reason that Justice Scalia gave?
It determines the amount of cargo the ship can carry, and what it can charge for it, and that is capitalized into the value of the ship.
Isn't that true?
Mr. Olson: --Well, if -- if everything else was equal, the bigger, the more capacity, the more valuable the vessel might be, that's true.
But that -- that is not the case.
Different ships are different sizes.
They are made out of different materials.
They have different structural capabilities--
Justice Ginsburg: So as long as you are taxing on the basis of the value of the ship, then you have no Tonnage Clause problem.
Is that your -- the Tonnage Clause was a specific type of measure, and if you're taxing based on the assessed value of the property, it isn't a Tonnage Clause.
Is that your--
Mr. Olson: --That is what this Court has said.
In the Wheeling case, where we were talking about steamships, the Court said that same statement that you just made about an ad valorem tax property tax 10 times.
Justice Breyer: What about a porthole tax?
Mr. Olson: Pardon me?
Justice Breyer: Is a porthole tax in your view okay?
Mr. Olson: A what?
Justice Breyer: A porthole tax.
They charge for portholes.
Anyone who has a porthole who comes into our city pays the tax.
That's not a tonnage tax.
Mr. Olson: That's not a tonnage tax.
Justice Breyer: So, in your view, a masked tax.
Mr. Olson: To the extent that the tax is on a vessel as an instrument of commercial conveyance, what this Court has said--
Justice Breyer: Oh, but the porthole tax applies, by the way, to that ship's captain who has retired, who has built his house with portholes instead of windows.
Mr. Olson: --I have--
Justice Breyer: So there are 2 or 3 percent of the -- I mean, it's only 99.9 percent on ships.
Mr. Olson: --Let's start with -- with the basics.
Justice Breyer: Yes.
Mr. Olson: When the Constitution was written, the Constitution did not intend to take away the power from the States to impose taxes.
The provision on the import-export prohibition on States and Tonnage Clause was an instrument to protect commerce.
It wasn't an instrument to reduce the power of States to impose taxes.
The baseline is States have the power to impose taxes unless there's an explicit -- and the court has said narrow -- limitation on that tax power in the Constitution.
Now, what this Court has said over and over again, Justice Breyer -- it hasn't had a chance to deal with portholes, but it has had a chance to deal with -- most of these various earlier cases in the -- in the 1860s and '70s had to do with tax on tonnage.
And there was one case where New Orleans levied a tax just for the entry and departure of the ship, and the Court said, well, that's -- that's a tax on the ship as a -- as a commercial instrument of commerce, and that would be covered also.
But nothing else has been covered.
And the Court has gone out of its way to say that communities, States, are entitled to tax people that possess property within their jurisdiction because of--
Chief Justice Roberts: Counsel, if you -- if you are right that any type of ad valorem tax is okay, well, then why in the world would the Framers have adopted a -- a prohibition on a tonnage tax, if you could just say it's a tax on value, which is going to have the same impact on commerce?
Mr. Olson: --Because -- because, if you are taxing -- I think that the Court had reasons for the conclusion it came to.
What I'm saying is not what I've invented; it's what the Court has said repeatedly, that because property may be taxed as property because the users and owners of property are the source of revenue for the communities--
Chief Justice Roberts: Well, putting aside what the Court has said, I'm looking at what the Framers have said.
What good does a tonnage tax prohibition do--
Mr. Olson: --It does--
Chief Justice Roberts: --if you are right?
Mr. Olson: --It -- if it's -- if it's a State using a tax on a vessel qua vessel as an -- as an instrument to limit commerce, that is something that the Framers did not want to do.
They -- they prohibited taxes--
Justice Scalia: It offended them aesthetically?
Mr. Olson: --No, because -- for--
Justice Scalia: So all the State has to say is we are not -- we're not taxing you qua vessel.
Mr. Olson: --No, Justice Scalia--
Justice Scalia: I mean, what--
Mr. Olson: --What the Framers were concerned about and what I was trying to say in response to the Chief Justice's question is that there was a limitation on the States' power to tax imports or exports because of the fact that that would put the States on the coast at an advantage, and they would pass those burdens on to the inland States.
The Tonnage Clause was put there as a specific provision to implement and -- to prevent circumvention of the export-import prohibition.
Justice Scalia: --Mr. Olson--
Justice Stevens: But suppose you could--
Justice Scalia: --let me ask you something about -- about discrimination.
Let's assume that I think it is relevant whether the tax is a discriminatory tax, a property tax just levied on -- on ships or not.
If that is my position, why should I count as establishing nondiscrimination the fact that Alaska or Valdez is also taxing -- most of its other property tax revenue comes from taxing oil equipment, right?
And the burden of all of that tax, just like the burden of this vessel tax, is paid by people in New Jersey.
I mean, you know, that--
Mr. Olson: You can--
Justice Scalia: --It's getting somebody else to bear the burden of your taxation.
Mr. Olson: --If you do, it would be--
Justice Scalia: Taxing that equipment raises the price of oil, almost all of which the oil goes out of Alaska and is paid for by people in other States.
Why should I count that property tax as proving that either the State of Alaska or Valdez is not being discriminatory?
Just because it -- it can't possibly violate the -- the Tonnage Clause doesn't mean that it isn't as much discriminatory against other States.
Mr. Olson: --That then might -- that might be a Due Process Clause problem--
Justice Scalia: No--
Mr. Olson: --but it wouldn't be a Tonnage Clause problem.
I would submit, Justice Scalia, you would be very upset at the -- at Silicon Valley because the -- the property tax imposed on Silicon Valley gets all put on those chips that we used in all of these computers, and everybody else in the country is using those computers, so the property that is taxed in that community is the property that creates the value of that community.
Justice Scalia: --And if -- if California taxed vessels, I would not allow California to come in and say, oh, we are just subjecting them to the same tax that our own citizens are subjected to.
Mr. Olson: And Justice Scalia--
Justice Scalia: I wouldn't let them point to the Silicon Valley tax.
Mr. Olson: --You would -- you would, I submit, then, say that vessels are exempt from property tax.
Justice Souter: That may be the only way they can accomplish what they want to.
Because as the Chief Justice's question suggested a moment ago, if in the 18th century the port of Boston said, we are not going to charge tonnage anymore, we are simply going to tax on the value of the ship, that is going to have exactly the same effect that a tonnage tax would have.
So maybe exemption is the only way it can be done.
Mr. Olson: Well, it's going to require an amendment to the Constitution because what the Framers talked about was a Tonnage Clause, and they were talking about--
Justice Ginsburg: --But we have said--
Mr. Olson: --and they did not exempt--
Justice Ginsburg: --Mr. Olson, we -- we have said it's not just tonnage.
It said that the clause bars States, we said, from imposing a charge even if not measured by a vessel's tonnage, for the privilege of entering, trading in, or lying in a port.
So we have ruled out the position that it's got to be an old-fashioned tonnage charge and can't be based on the assessed value of the property.
Mr. Olson: --Well, I guess I have to resort to the fact that every time this Court has considered it, or at least in almost every case, the Court has gone out of its way to say: They were not intending to prohibit States from taxing the value of property, if it's an ad valorem tax.
Justice Ginsburg: But -- but in all of those cases, the vessels were being taxed as one item of property in a general moveable property, personal property tax.
I asked you before, I think, is there any other tax like this, that -- an ad valorem tax that is applied to one single category of property?
Mr. Olson: If this -- this is an ad valorem tax, it has various different statutes and ordinances that it comes from, but there's ad valorem taxes in Valdez across the board for all kinds of property.
Justice Ginsburg: This statute deals with one category of property.
Is there another statute like this one?
Mr. Olson: Well, there's -- no.
This statute is -- every other statute in the same manner imposes taxes on property based upon their value.
This was a separate ordinance that decided to remove an exemption that had existed for 27 years--
Justice Ginsburg: That was the other -- the State taxes were no part of the Alaska Supreme Court's decision in this case.
Mr. Olson: --Well, I think what we are talking about is whether or not this -- this community can impose a tax on the people that own property in this community.
There's no denial that there's a property tax situs here.
The average length of the time in port of these ships was 45 days.
The entire fleet has a tax situs in Valdez.
So this property, like other property in the same manner, is being taxed by the City of Valdez.
The Wheeling case was a case a little bit like this in the sense that it was West Virginia that passed a statute that allowed Wheeling to impose the tax on steamships.
Justice Ginsburg: And on what else?
In that -- in that tax that was before the Court, what else did Wheeling tax?
Mr. Olson: The only thing that the Court talked about because it was -- like this, it was an as-applied case.
The taxpayer was wanting a refund from the taxes and the taxpayer owned steamships that -- that went back and forth from Wheeling.
And the Court talked about the fact that this wasn't a Tonnage Clause; this was a state-authorized municipal--
Justice Breyer: What about the -- Grier -- you haven't mentioned that -- Grier in Norris v. City of Boston, where he says the tonnage -- you know what he says; it's on the front page of their brief.
That seemed to me to say, don't interpret the Tonnage Clause to apply to tonnage.
Interpret it as the same thing as if it's mass, it's mariners, power of the steam engine, number of passengers, the master or owner of the vessel -- all those fall within the Tonnage Clause.
That's what the paragraph seems to say.
Mr. Olson: --And what -- what the thrust of the overall bulk of the cases including the language by this Court repeatedly is that property taxation based upon the value of property, not imposing a value -- not imposing a tax on the ship.
There are various ways I suppose one could say that every time a ship enters a harbor without developing a tax situs -- I think Justice Alito's question focused on that -- this is not--
Justice Stevens: --May I ask a--
Mr. Olson: --You don't get charged a fee for entering the port.
Or one of those cases when -- imposed a tax because -- it called it a wharfage tax, but you didn't have to touch the wharf in order to pay the tax.
Justice Stevens: --May I ask you a question that I don't think has come up, but I just wondered if anybody has argued this?
The duty of tonnage, it seems to me, might refer to the cargo rather than the ship.
So that if the ship made 10 voyages it might have 10 times the tonnage of another vessel of exactly the same value.
Has anybody argued that that's what the Tonnage Clause refers to?
Mr. Olson: I think -- I think you're correct, Justice Stevens, that what the Framers were concerned about was a substitute for an export or import tax by taxing what was in the ship, and that "tonnage" referred to that, but it wasn't the value of the vessel itself because the Court -- the Framers wouldn't have wanted to take away the power of the States to tax commercial activity using property in their communities in the same manner that they taxed other property.
Justice Scalia: If that's all it applied to, then the wharfage tax would have been perfectly okay.
Mr. Olson: The wharfage tax--
Justice Scalia: You can't say that was--
Mr. Olson: --The wharfage tax has been upheld by this Court frequently.
The only reason why it was struck down in that case is that you didn't have to put into a wharf.
So the Court knew, well, it wasn't really a wharfage tax, but if it was really a wharfage tax, the Court has upheld it.
Chief Justice Roberts: Thank you, counsel.
Mr. Rothfeld, you have 3 minutes remaining.
REBUTTAL ARGUMENT OF CHARLES A. ROTHFELD ON BEHALF OF THE PETITIONER
Mr. Rothfeld: Thank you, Your Honor.
A couple of quick points.
First on this confusing question of what the State of Alaska does in the nature of its tax.
Mr. Olson began by -- by saying the State of Alaska imposes this tax through the City of Valdez.
That is right.
It is a tax imposed by the State of Alaska that is collected by the City of Valdez.
If the city did not collect the tax, it would go directly to the State of Alaska.
It is an Alaska tax.
Chief Justice Roberts: Where -- where does the money go?
If the City of Valdez collects it, where does it go?
Mr. Rothfeld: If the city collects it, it keeps it, but it has been authorized to do that by the State.
Chief Justice Roberts: Well, then I think we ought to regard it as a city tax, not a State tax.
They collect it; they keep it.
That sounds like a city tax.
Mr. Rothfeld: But it -- it's imposed by the State.
The State decides what is subject to tax.
It identifies the property that--
Chief Justice Roberts: Well, I suppose the State can regulate what cities and municipalities and counties can do throughout the State.
That doesn't make everything those cities and counties do the actions of the State.
Mr. Rothfeld: --That -- that's true, but this particular tax is a tax that is imposed by the State at the State level.
It -- it's notable that Valdez has never before, until we reached this Court, said that this is a -- that it is taxing oil and gas property.
The property is subject to tax by the State.
The State authorizes Valdez to collect the tax, but it is imposed by the tax -- the city -- the State determines which items are subject to tax.
So this is out of Valdez's discretion.
Valdez chose to tax only particular types of personal property, and that is vessels.
Second, on the question of what the Tonnage Clause was designed to do and -- and the Wheeling case, Wheeling says that a property tax is okay when the tax is imposed on vessels the same as other property owned by its citizens.
That is not what is going on here.
Contemporaneous understanding of the rule at the time was that taxes that singled out vessels were unconstitutional.
We cite authority for this proposition in our reply brief.
To -- to address Justice Ginsburg's question as to whether there were other taxes like this, we have not found any other tax anywhere that has been imposed singling out vessels as -- for -- for property taxation.
Either now or in the past, we have not found any case addressing that, not only not in this Court, but in any other court.
And then finally--
Justice Souter: What about the -- the broader tax situation at the -- at the -- in -- in 1789?
Did -- did ports have sources of -- or exercise the authority at that time to tax property generally, e.g., real estate in the city to support the activities of the ports, or were they dependent solely upon things like import-export taxes, et cetera?
Mr. Rothfeld: --My -- my understanding is that real estate certainly was subject to tax and that ports would have the authority to tax other types of property.
Vessels were set aside as a particular item by the Tonnage Clause.
Justice Souter: So -- so that the argument they are taxing other things, therefore it's okay to tax this, would have been an argument just as potent in the 18th century or impotent, as the case may be, as it is now?
Mr. Rothfeld: That's right.
Justice Souter: Okay.
Mr. Rothfeld: And so setting aside vessels in a -- in a unique category when other things could be taxed would have been problematic--
Chief Justice Roberts: How -- under your view, how is a city supposed to impose a property tax on a vessel?
Mr. Rothfeld: --It -- it should impose a tax by imposing a tax on personal property generally.
And if it does, it would fall on vessels as items of personal property.
It -- it is significant -- well, if I may, Your Honor, just to finish, what Valdez has done -- it could have taxed all of the types of -- or it could have taxed particular types of it.
But it has seized on only one particular type of personal property to be subject to taxation.
Chief Justice Roberts: So -- so you think we should resolve the tax by seeing how generally applicable property taxes are in Valdez?
Mr. Rothfeld: I -- I think it's an easy case when, as in this situation, there is only one item of property that is taxed, and that's a vessel.
Chief Justice Roberts: Well, but your -- your brother suggests that other items of property are taxed under other provisions of the tax ordinance.
Mr. Rothfeld: Again, Valdez does not.
The State does.
Valdez does not.
And so I think that there is no need for the Court to go beyond and decide how broadly applicable -- as I suggested earlier, our test would be predominantly on vessels it is unconstitutional, and that clearly is the case here.
Chief Justice Roberts: Thank you, counsel.
The case is submitted.
Mr. Rothfeld: Thank you, Your Honor.