City of Pittsburgh v. Alco Parking Corp.
417 U.S. 369, 41 L. Ed. 2d 132, 1974 U.S. LEXIS 69 (1974)
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Rule of Law:
A state or local tax is not an unconstitutional taking of property under the Due Process Clause merely because it is so high that it renders a business unprofitable or destroys it, even when the taxing authority directly competes with the taxed entity.
Facts:
- The City of Pittsburgh enacted Ordinance No. 704, which imposed a 20% tax on the gross receipts of all nonresidential parking facilities.
- A group of twelve private operators of offstreet parking facilities were subject to this tax.
- These private operators competed directly with the Public Parking Authority of Pittsburgh, a city agency that also operated parking facilities.
- The Public Parking Authority enjoyed tax-exempt status and other advantages, which allowed it to offer parking at significantly lower rates than private operators.
- The combination of the 20% tax and competition from the public authority caused a majority of the private parking operators to operate their businesses at a loss.
Procedural Posture:
- Twelve operators of offstreet parking facilities sued the City of Pittsburgh in the Court of Common Pleas of Allegheny County, Pennsylvania (the trial court), seeking to enjoin the enforcement of the ordinance.
- The Court of Common Pleas sustained the ordinance, finding it valid.
- The parking operators appealed to the Commonwealth Court of Pennsylvania (an intermediate appellate court), which affirmed the trial court's decision.
- The parking operators then appealed to the Supreme Court of Pennsylvania (the state's highest court).
- The Supreme Court of Pennsylvania reversed, holding that the ordinance was an unconstitutional taking of property in violation of the Fourteenth Amendment's Due Process Clause.
- The City of Pittsburgh petitioned the Supreme Court of the United States for a writ of certiorari, which was granted.
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Issue:
Does a city ordinance imposing a 20% tax on the gross receipts of private parking facilities violate the Due Process Clause of the Fourteenth Amendment as an unconstitutional taking of property, when the tax is allegedly so high as to be destructive and the operators face competition from a tax-exempt public authority?
Opinions:
Majority - Mr. Justice White
No. The city ordinance does not violate the Due Process Clause of the Fourteenth Amendment. The Court has consistently held that a tax within the lawful power of a state is not unconstitutional simply because its enforcement may restrict or even destroy a particular business. The judiciary's role is not to assess the 'reasonableness' of a tax rate or to infer a forbidden purpose from the fact that a tax is burdensome. Citing precedents like Magnano Co. v. Hamilton and Alaska Fish Co. v. Smith, the Court affirmed that businesses take the risk of discouraging tax rates. Furthermore, the fact that the taxing authority competes with the taxpayer does not invalidate the tax, as established in Puget Sound Co. v. Seattle. The ordinance is a valid revenue-raising measure, and the city is entitled to make those using nonresidential parking pay for the municipal services and problems they create.
Concurring - Mr. Justice Powell
No. While agreeing with the Court's resolution, this opinion emphasizes that the decision does not foreclose the possibility that some future combination of unreasonably burdensome taxation and direct, unfair government competition could amount to an unconstitutional taking of property. Such a situation, where punitive taxation and public competition effectively expropriate a private business for public profit, would be the functional equivalent of a taking requiring just compensation. However, such extreme circumstances were not present in this case.
Analysis:
This decision strongly reaffirms the broad deference courts grant to the legislative power of taxation under the Due Process Clause. It solidifies the principle that economic hardship, even to the point of business failure, is not a sufficient basis to invalidate an otherwise lawful tax. The case closes the door on arguments that a tax becomes a 'taking' when the government also acts as a market competitor, thus preventing courts from having to engage in judicial oversight of the fairness of such competition. This ruling makes it exceedingly difficult for businesses to challenge a tax based on its economic impact alone, as long as the tax has a rational revenue-raising purpose.
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