Was Georgia's elimination of proposed Delta tax break unconstitutional?

The elimination last week by the state of Georgia of a $50 million sales tax exemption for Delta Air Lines, because of the carrier's removal of a flying discount for members of the National Rifle Association, raises a number of serious concerns ("Delta CEO: 'Our values are not for sale,' " March 3). One of the more notable ones is that the legislation is probably unconstitutional — due to litigation from Minnesota that made it all way to the U.S. Supreme Court 35 years ago this month.

The case was brought by this newspaper after the state Legislature in 1971 imposed a special "use" tax on commercial users of paper and ink. The measure was enacted four years after the state adopted its first sales tax in 1967, which had exempted ink and paper.

But the "use" tax enacted four years later aimed at large daily newspapers, and after a $100,000 exemption was added in 1974, fell on just 11 of the largest-circulated papers in the state. About two-thirds of the total tax was absorbed by the Cowles organization, long-time owner of the two Minneapolis daily newspapers, the morning-Sunday Tribune and the afternoon Star, before their consolidation about a decade later into the present-day Star Tribune.

It was widely felt at the time that the measure was enacted because of dissatisfaction in some quarters of the Legislature with news coverage and editorial opinions from the two newspapers critical of certain legislative actions and behavior — although there was insufficient legal proof of illicit motivation.

The newspaper dutifully paid the taxes each year and later sued for a refund, claiming that the assessment violated the freedom of press guarantee of the First Amendment to the U.S. Constitution. But the Minnesota Supreme Court rejected the challenge, precipitating an appeal to the U.S. Supreme Court.

At the end of March 1983, two months after oral arguments, the high court reversed the lower court ruling and invalidated Minnesota's tax on First Amendment grounds in a case titled Star & Tribune Co. vs. Commissioner of Revenue. The majority decision, by a vote of 8-1, was written by Sandra Day O'Connor, then a neophyte justice appointed by President Ronald Reagan, and joined by seven colleagues, including the so-called Minnesota Twins, Chief Justice Warren Burger and Harry Blackmun.

O'Connor's ruling condemned the tax because it targeted newspapers. Even without proof of improper intent to censor them, the effect of the tax on the state's largest newspapers created an unjustifiable "potential for abuse" of the rights of freedom of expression.

A somewhat sardonic dissent by Justice William Rehnquist, a few years before he succeeded the retiring Burger as chief justice, noted that the newspapers actually paid less in taxes under the "use" measure than they would have had they been subject to the general sales tax applicable to most other businesses. It didn't take a "modern day Euclid or Einstein," he reasoned, to calculate that the newspapers came out better financially under the arrangement that the other justices deemed so oppressive.

But Rehnquist's colleagues were unmoved by his mathematics, viewing the gravamen more as a matter of principle than pecuniary impact. Justice O'Connor's opinion for the majority deemed the measure impermissible because of the way it "singled out" the media for "differential treatment," which cast a shadow on their newsgathering and publishing practices.

The dissent notwithstanding, the ruling stands for the proposition that government may not take adverse action or impose penalties against a person or entity because of the expression of constitutionally protected speech or expression.

That Minnesota precedent could apply to a challenge to Georgia's exemption elimination against Delta, on grounds that the measure was enacted in retaliation for the airline's action in doing away with the NRA discount as an expression of disdain for the organization's position on gun safety concerns. The issue has particular interest and importance in Minnesota because Delta has a significant presence here due to its $2.6 billion acquisition of Northwest Airlines in 2008.

There are, to be sure, some differences between the two situations, but they favor Delta. Unlike the Minnesota case, where evidence was inconclusive that the tax was meant as retaliation against the newspapers because of the views they expressed, furor over Delta's stance against the NRA was the explicit reason that Georgia officials took away the company's tax break.

Moreover, unlike the lack of financial harm to the newspapers that Rehnquist noted, due to the state's unique "use" tax, Delta actually suffered economic harm by the deprivation of the $50 million tax exemption it was about to realize before it did away with the discount for NRA members.

So Delta can look north to a Minnesota controversy if the carrier chooses to challenge the Georgia tax exemption elimination. Or, better yet, Delta could simply consider relocating its headquarters to Minnesota.

Marshall H. Tanick is a Twin Cities constitutional law attorney.