TRENTON, N.J. – Citing Supreme Court decisions, Assemblyman Bob Auth argues a Democrat-sponsored bill imposing new taxes and fees on for-profit operators of federal immigration detention centers in New Jersey would never pass constitutional muster and could force facilities like Delaney Hall to close.
The bill (A4077) passed the Assembly Appropriations Committee on Tuesday along party lines. It imposes an 8% tax on a correctional services contract with a public entity, directs the Division of Taxation to annually set a cost-recovery assessment on the facility operator, and creates a 3% correctional services business surtax on top of the state’s corporate business tax.
“The principle that a state government may not tax the federal government was firmly established in 1819 through the Supreme Court’s unanimous decision in McCulloch v. Maryland, and it has been affirmed time and time again,” Auth (R-Bergen) said.
McCulloch v. Maryland fundamentally shaped U.S. constitutional law by establishing that states cannot tax federal institutions or otherwise impede the lawful exercise of federal powers. The Supreme Court held that Maryland's tax on the federally chartered Second Bank of the United States was unconstitutional because states may not interfere with legitimate federal operations.
“This bill levies an unconstitutional tax. It will inevitably be passed on to the federal government,” Auth explained. “It is illegal because it is a discriminatory tax.”
In Washington v. United States (1983), the court approved of a sales tax targeting government contractors because a tax already applied to private, nonfederal construction projects. It did not create a burden for the federal government not borne by other entities.
“This legislation creates an additional burden applied exclusively to contractors engaged in business with the federal government,” Auth said. “This burden presents an existential threat to federal law enforcement. New Jersey could destroy the prisons that house the overwhelming majority of illegal immigrants by making costs prohibitive.”
Quoting Chief Justice John Marshall’s conclusion in McCulloch v. Maryland, Auth said, “The power to tax involves the power to destroy."
