Federalism and Hotel “Resort Fees”

The Wall Street Journal is reporting that there is a growing movement in government to regulate hotel fees that are often initially hidden from consumers (click here for the story). Scott McCartney writes states that

[r]esort fees, now more than 10 years old, started with hotels basically mimicking airline baggage fees. But they go a giant step further by making the add-on fee mandatory—and making it hard to find.

On their websites and third-party booking sites, hotels post a room rate for customers to consider, then add an extra charge labeled in a variety of obtuse ways. That could mean a resort fee, destination fee, urban destination fee, amenity fee or facility fee. One boutique hotel in New York calls its fee a NYC Mandatory Facility Hotel Fee, making it look like one more government tax on hotel guests. It isn’t.

In some cases the fees may increase the cost of staying at the hotel by two to three times the advertised price.

The added fees are not just a consumer issue. Local governments may also be missing out on revenue because of the way hotels collect taxes on the fees. Attorney Lauren Wolfe states that

resort fees in New York and other places are a bit of a tax dodge for hotels, too. Instead of collecting the 14.75% hotel tax on the fees, some hotels tax them at the 8.875% regular sales tax rate.

So far Nebraska and the District of Columbia have filed suit against the Hilton and Marriott hotel chains over the fees. However, this may be one case where state and local governments acting as “laboratories of democracy” may not be enough. It could take the federal government to step in and ban the fees nation-wide in order to address the issue. According to Wolfe, federal legislation might

have a chance of passing because the industry can’t find a way out of the resort fee cycle on its own and might look to Congress to force better behavior.



50th Anniversary of Publius: The Journal of Federalism

This year marks the 50th anniversary of Publius: The Journal of Federalism. The world’s top journal on federalism was launched by Daniel Elazar at Temple University’s Center for the Study of Federalism. To commemorate the anniversary, current Publius Editor John Dinan has written an introduction to the current issue that you can read here.

Double Jeopardy and SCOTUS Visions of Federalism

by J. Wesley Leckrone

This week the United States Supreme Court ruled that both the federal and state governments could prosecute a person for the same crime. The case, Gamble v. US, provided an opportunity for SCOTUS to rule that this constituted double jeopardy. However, a 7-2 majority upheld decades of precedent and reiterated the principle of the federal and state governments being “separate sovereigns”. If you’re interested in the facts of the case please read this article in the New York Times.

What I find most interesting is the internal debate between the majority (represented by Justice Alito’s opinion) and the dissenting opinions of Justices Ginsburg and Gorsuch on the meaning and purposes of American federalism. Below are edited excerpts related to this discussion from the opinions in Gamble v. US. Click here for the full text of the opinions.

Justice Alito:

It is true that the Republic is “‘ONE WHOLE,’”…(opinion of GINSBURG, J.) and …(opinion of GORSUCH, J.). But there is a difference between the whole and a single part, and that difference underlies decisions as foundational to our legal system as McCulloch v. Maryland, 4 Wheat. 316 (1819). There, in terms so directly relevant as to seem presciently tailored to answer this very objection, Chief Justice Marshall distinguished precisely between “the people of a State” and “[t]he people of all the States,”…; between the “sovereignty which the people of a single state possess” and the sovereign powers “conferred by the people of the United States on the government of the Union,”…; and thus between “the action of a part”…. In short, McCulloch’s famous holding that a State may not tax the national bank rested on a recognition that the States and the Nation have different “interests” and “right[s].”… One strains to imagine a clearer statement of the premises of our dual-sovereignty rule, or a more authoritative source. The United States is a federal republic; it is not, contrary to JUSTICE GORSUCH’s suggestion, post, at 10–11, a unitary state like the United Kingdom.

Gamble and the dissents lodge a second objection to this line of reasoning. They suggest that because the division of federal and state power was meant to promote liberty, it cannot support a rule that exposes Gamble to a second sentence…(opinion of GINSBURG, J.) and…(opinion of GORSUCH, J.). This argument fundamentally misunderstands the governmental structure established by our Constitution. Our federal system advances individual liberty in many ways. Among other things, it limits the powers of the Federal Government and protects certain basic liberties from infringement. But because the powers of the Federal Government and the States often overlap, allowing both to regulate often results in two layers of regulation. Taxation is an example that comes immediately to mind. It is also not at all uncommon for the Federal Government to permit activities that a State chooses to forbid or heavily restrict—for example, gambling and the sale of alcohol. And a State may choose to legalize an activity that federal law prohibits, such as the sale of marijuana. So while our system of federalism is fundamental to the protection of liberty, it does not always maximize individual liberty at the expense of other interests. And it is thus quite extraordinary to say that the venerable dual-sovereignty doctrine represents a “‘desecrat[ion]’” of federalism… (opinion of GORSUCH, J.).

Justice Ginsburg:

The United States and its constituent States, unlike foreign nations, are “kindred systems,” “parts of ONE WHOLE.”…. They compose one people, bound by an overriding Federal Constitution. Within that “WHOLE,” the Federal and State Governments should be disabled from accomplishing together “what neither government [could] do alone—prosecute an ordinary citizen twice for the same offence.”…. The notion that the Federal Government and the States are separate sovereigns overlooks a basic tenet of our federal system. The doctrine treats governments as sovereign, with state power to prosecute carried over from years predating the Constitution…. In the system established by the Federal Constitution, however, “ultimate sovereignty” resides in the governed…. Insofar as a crime offends the “peace and dignity” of a sovereign…that “sovereign” is the people, the “original fountain of all legitimate authority,”…. States may be separate, but their populations are part of the people composing the United States. In our “compound republic,” the division of authority between the United States and the States was meant to…operate as “a double security [for] the rights of the people.”…. The separate sovereigns doctrine, however, scarcely shores up people’s rights. Instead, it invokes federalism to withhold liberty.

Justice Gorsuch:

The Court seems to assume that sovereignty in this country belongs to the state and federal governments, much as it once belonged to the King of England. But as Chief Justice Marshall explained, “[t]he government of the Union . . . is emphatically, and truly, a government of the people,” and all sovereignty “emanates from them.” Alexander Hamilton put the point this way: “[T]he national and State systems are to be regarded” not as different sovereigns foreign to one another but “as ONE WHOLE.” Under our Constitution, the federal and state governments are but two expressions of a single and sovereign people.

And any remaining doubt about whether the dissenting States and the federal government are truly separate sovereigns was ultimately “resolved by war.”

From its mistaken premise, the Court continues to the flawed conclusion that the federal and state governments can successively prosecute the same person for the same offense. This turns the point of our federal experiment on its head. When the “ONE WHOLE” people of the United States assigned different aspects of their sovereign power to the federal and state governments, they sought not to multiply governmental power but to limit it. As this Court has explained, “[b]y denying any one government complete jurisdiction over all the concerns of public life, federalism protects the liberty of the individual from arbitrary power.” Yet today’s Court invokes federalism not to protect individual liberty but to threaten it, allowing two governments to achieve together an objective denied to each.

As Justice Black understood, the Court’s view today “misuse[s] and desecrat[es] . . . the concept” of federalism. For “it is just as much an affront to . . . human freedom for a man to be punished twice for the same offense” by two parts of the people’s government “as it would be for one . . . to throw him in prison twice for the offense.”

Vertical Federalism or Partisanship? New York, Double Jeopardy & President Trump

by J. Wesley Leckrone

Vertical federalism refers to when the federal government checks the actions (or inactions) of a state or states and vice versa. In the same way that separations of powers among the three branches of the federal government was designed to check power, the federal and state governments are designed to check each other. This can take place when one government violates fundamental rights or when governments are not taking action on important areas of public policy. The concept has gained attention in recent years as states have sued the federal government over policies like the Affordable Care Act and “sanctuary cities” have started to resist some forms of cooperation with federal immigration enforcement.

Legislators in New York are invoking the cause of vertical federalism as they debate eliminating a law related to double jeopardy. The New York Times reports that

The New York State Assembly passed a bill on Tuesday that would allow state prosecutors to pursue charges against any individual granted a presidential pardon for similar federal crimes, closing a loophole that lawmakers said could be exploited by President Trump in a bid to indemnify former associates.

The bill, which has already passed the State Senate and has the support of Gov. Andrew M. Cuomo, would exempt the state’s so-called double jeopardy law from cases involving presidential pardons, something supporters say is necessary to stave off a possible abuse of Mr. Trump’s pardon power.

The article goes on to say

Like about two dozen other states, New York has forbidden state prosecutions on similar charges after a federal pardon, something that the new bill will change, according to Senator Todd Kaminsky, a former federal prosecutor who is the sponsor in that chamber.

“Either in the past or in a continuing manner, the president has talked about using the pardon power in a corrupt way to undermine the rule of law,” Mr. Kaminsky said. “And I think New York doesn’t have to sit by and let the capricious use of the pardon power tie its hands.”

I watched comments that Assemblyman Joseph Lentol (D-Brooklyn) made on the floor on May 21 concerning his support for the bill. Here’s his take on vertical federalism:

We never thought we would ever have to worry about a state being involved in the review of presidential power in these United States of ours. However, its sort of ironic that we are learning again the importance of states rights. Some of you know that concept. When we see inaction at the federal level regarding the abuse of power we know we also see at the same time inaction at the federal level to deal with the abuse of that power. And so I think that the Attorney General acted properly when proposing a bill like this to be prepared to act where the federal government in its checks and balances has not yet acted already….

When the federal government stumbles and does nothing then the state of New York will fly into action.

Republicans felt it was more politics than a defense of federalism. According to the Times they saw it as a political ploy designed to attack President Trump:

“We’re asked to set aside that fundamental concept of fairness and equity, not because we’re faced with any actual situation, but a hypothetical situation,” said Assemblyman Andy Goodell, a Republican from Jamestown, N.Y.

That argument was echoed by the outgoing state Republican Party chairman, Edward F. Cox, who said that the State Legislature was suffering from “Trump derangement syndrome.”

State and Local Minimum Wage Podcast Transcript

It seems as though every few years the issue of raising the minimum wage is all over the news, with pundits on each side arguing about why it is either the best or worst idea they have ever heard. However this coverage rarely ventures deeper than partisan talking points meaning that the public often does not gain a deeper understanding of the issue. In this episode of the podcast we’ll take a deeper look at state and local minimum wages and try to not only understand the issue but also some of the controversies which surround it.

Before we can talk about the various opinions on the minimum wage we have to understand the policy which lies at the heart of the issue. In its most basic sense, state and local governments are allowed to set a minimum wage which all workers in their jurisdiction must receive. Generally these minimums will be higher in cities or states with higher costs of living, with the idea that setting a higher minimum compensates for the higher costs associated with living in that area. However, as the more observant among us will notice, there is also a national minimum wage within the US. This federal minimum was crafted with the same intent as its counterparts at the state and local level, aiming to ensure that everyone in the entire country receives reasonable compensation for the labor that they do. As a result, this federal minimum has become the de-facto minimum wage that everyone earns nationwide unless they happen to live in a state or municipality which has set a higher minimum.

The true issue of minimum wage policy arises when state and local governments move to increase whatever it may be in their area. But wait, if the federal government has already set a minimum for the country why should we still let state and local governments argue over what they think it should be? Unfortunately our lives cannot be this simple. Due to the nature of the our economy certain states and localities will have higher costs of living than others, which naturally leads many in these higher cost areas to also desire a higher minimum wage. As a result state and local governments are the levels with the greatest level of knowledge of the specific living costs of their areas. Therefore they are often the levels of government which propose increases to the minimum wage in order to respond to higher living costs in their areas and respond to the requests of their constituents.

The strongest supporters  of minimum wage increases are low wage workers and those involved with labor movements. This makes sense since these  groups  benefit the most from increases and are often workers who are clustered in cities where living costs are high and low income jobs are prevalent. These workers are not the only beneficiaries of a higher minimum wage, governments also benefit from wage hikes as it leads to low income workers getting more money from their employers and less money from government programs. This means that the government is able to spend less on these welfare programs which they would obviously be in favor of.

But if the workers and the government want a higher minimum wage, why then is there so much debate every time an increase to the minimum is proposed? Who are the people opposing these increases? These opposition members are of course the people who will bear the cost of the increase, the business owners. Business owners obviously do not want to see an increase in their labor costs as this will have a negative impact on their bottom line. These business owners are also often well connected which allows them to influence local politicians away from supporting an increase to the minimum wage which only prolongs the fights and debates over minimum wage increases at the state or local level.

So how can we decide which side is right? What are their arguments?

Pro/Con Debate

Our pro/con debate for this podcasts focuses on whether the legalization of prescription heroin would be a solution to the drug crisis. Here are two perspectives.

Pros of increasing the federal minimum wage

The minimum wage has not kept up with inflation in the United States. Purchasing power (the “bang people get for their buck” or the amount of goods they can purchase with their currency) peaked in 1968 and would be the equivalent to about a $11.16 minimum wage in today’s economy. Purchasing power has since been on a decline and has not been able to keep up with the inflation rate. A boost in the wages would be a potential boost in purchasing power and catching up a bit to inflation.

Raising the minimum wage could help boost the economy. Naturally, putting more money in people’s pockets would in turn put more money back into the economy through more consumer spending. For example, if someone made more they may not have to be as conservative with their spending.

An increase in minimum wage would potentially be able to reduce government welfare spending. Generally, those who are low-income workers will earn more money with this increase, decreasing the eligibility and dependence on benefits provided by the government. In 2014, the Center for American Progress reported that an increase in federal minimum wage would reduce the spending on the Supplemental Nutrition Assistance program by $4.6 billion . The Economic Policy Institute claims that  1.7 million Americans would no longer be dependent on government benefits, resulting in a decrease of $7.6 billion in spending by the government on income support programs.

Small business owners support a higher minimum wage. A national poll of small business owners conducted by the American Sustainable Business Council found that 60 percent of small business owners support increasing the federal minimum wage to $12 by 2020 and indexing it to inflation. More money means more money to spend and this is what small businesses thrive off of.

Cons of Increasing the Federal Minimum Wage

Raising the minimum wage will ultimately force businesses to compensate for the lost revenue, and this burden will not be placed upon wealthy CEOs. Companies will pass the cost of increased wages along to either their consumers or their employees. To pay for increased wages, some companies will raise their prices, while others may lower the quality of the goods or services that they provide. If companies choose to maintain their prices, they will compensate for the increased expense by laying off some of their workers and either increasing the responsibility of the remaining workers, or simply increasing their utilization of technology to complete basic tasks previously handled by minimum wage employees.

While major corporations will simply adjust to the new minimum wage by raising prices or laying off workers, small businesses will not acclimate so easily. Small businesses have less revenue than large corporations, and many cannot afford to pay their employees the increased wages while also paying their other expenses. This is further complicated when considering that small businesses have fewer employees to take on the responsibilities of those laid off, making it difficult for these businesses to function if an increased minimum wage forces them to downsize.

Poor areas of the country would suffer greatly from the increase of the federal minimum wage. Higher concentration of minimum wage workers reside in poorer areas, while the opposite is true for the workers in richer areas. A region is deemed poor or rich by examining the cost of living of that area. For example, in 2015 Mississippi had a cost of living at 83.5% of the country’s average, while Hawaii had a cost of living at 168.6% of the country’s average. Poorer areas would need to pay proportionally more than the richer areas and will struggle to provide the increased dues to the current employees. The increased minimum cannot be compensated with an increase of the price of consumer goods since people in the area would not be able to afford them. Thus, the minimum wage change would cripple poor areas.