Government Power as a Tool for Redistributing Wealth in Twentieth-Century New York

Government Power as a Tool for Redistributing Wealth in Twentieth-Century New York

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In the 1843 case of Taylor v. Porter, a New York judge quoted language that would be reiterated interminably in nineteenth-century American case law. He knew, he declared, “‘of no case in which a legislative act to transfer the property of A. to B. without his consent, ha[d] ever been held a constitutional exercise of power in any state in the union.’” On the contrary, the use of legislative power to redistribute wealth from one individual or group of individuals in the community to another had “’been constantly resisted as inconsistent with just principles.’” Much of this judicial hostility to redistributive legislation continued to affect decisionmaking by the New York Court of Appeals and the lower New York courts as late as the decade of the 1920s. As early as 1920, however, New York judges were whittling away at the anti-redistribution principle by sustaining the constitutionality of broad exercises of legislative power. In a pattern sharply different from that in the Supreme Court of the United States, which routinely struck down redistributive legislation prior to 1937 and almost invariably approved it thereafter, the New York Court of Appeals slowly but inexorably gave its approval to the broadening of legislative power. It decided cases upholding an enhanced power of redistribution in every decade under analysis in this essay, from the 1920s through the 1970s, with no one year or decade marking a decisive turning point. The result was that state and municipal legislatures through most of the century possessed immense power to redistribute wealth. But the power was not untrammeled. Unlike the federal Supreme Court, New York courts throughout the decades under study in this essay occasionally invalidated regulatory legislation. New York judges never displayed the extreme pattern of deference to state and local legislative bodies that federal judges gave to Congress after 1937. Nonetheless, change did occur in patterns of judicial response to regulatory legislation in New York. This essay will analyze the change. Section I begins by focusing on areas of New York law which, during the 1920s and into the 1930s, continued to pay heed to the anti-redistributional values of the nineteenth century. Section II then traces the pattern of liberalization that began to emerge in the 1920s and 1930s, as the legislature during the administrations of Alfred E. Smith, Franklin D. Roosevelt, and Herbert H. Lehman from 1923 to 1942 expanded the scope of regulation, and the judiciary sustained the expansion. Finally, the essay turns in Section III to the impact of federal developments during the New Deal and World War II on state-court attitudes toward regulation. In conclusion, the essay comments on the fulsomeness of government regulatory powers in New York as early as the 1930s. In tracing the expansion of government power to redistribute wealth, it is necessary to examine three different areas of legal doctrine—the law of taxation, of eminent domain, and of regulation. Tax law has an obvious potential for redistribution, in that citizens who receive special tax exemptions or monetary handouts from government will gain wealth at the expense of those who pay their full tax share and receive no fiscal benefits. The power of eminent domain can also become a mechanism of redistribution if government can use it to obtain property at less than the price a purchaser would have to pay on the open market and especially if government can resell the property to a private citizen at less than the price that citizen would have paid on the market. Finally, regulatory schemes can prove redistributive when they impose added costs on regulated enterprises and then confer benefits on either the customers or the competitors of those enterprises. New York is an appropriate state for which to study twentieth-century developments in the law of taxation, eminent domain, and regulation since so many of the leading cases on all three subjects arose there. By focusing on this one state, which through most of the period under study was the most populous state and the economic and cultural pacesetter for the nation, it becomes possible, in addition, to analyze not only these leading cases but also the thousands of mundane cases that applied their holdings on a day-to-day basis. Most importantly, New York, especially during the 1920s and 1930s, was a trend-setter: it was the state where the ideas that later came to fruition nationally during the New Deal originated.

Source Publication

Law as Culture and Culture as Law: Essays in Honor of John Phillip Reid

Source Editors/Authors

Hendrik Hartog, William E. Nelson, Barbara Wilcie Kern

Publication Date

2000

Government Power as a Tool for Redistributing Wealth in Twentieth-Century New York

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