Section of Taxation Publications

VOL. 63
NO. 4

Contents | TTL Home


Note: The following is an excerpt from the introduction to the article as published in The Tax Lawyer. Author citations have been omitted for brevity. Tax Section members may read the article in its entirety in Adobe Acrobat format.


Protecting Peter When the Legislature Robs Peter to Pay Paul After Empress Casino v. Giannoulias

Chaim Gordon

A government that robs Peter to pay Paul can always depend on the support of Paul.
—George Bernard Shaw

In Empress Casino v. Giannoulias, the Illinois Supreme Court rejected several state and federal constitutional challenges to Illinois Public Act 94-804, which levied a three percent surcharge on the Adjusted Gross Receipts (AGRs) of four riverboat casinos (the Casinos) and transferred revenue generated by the surcharge to their competitors in the horse-racing industry. Alarmed by this extraordinary decision, other businesses expressed concern that “state and local governments . . . may well decide that they too can appropriate money from certain successful businesses in order to subsidize struggling but politically powerful competitors.”

Upholding Illinois Public Act 94-804, the Illinois Supreme Court held: (1) that the surcharge was not a taking because it was a tax that affected no identifiable property interest, and (2) that the Act clearly served a public purpose—to revitalize Illinois’ horse-racing industry—because the legislature had so declared its intention. The Casinos’ unsuccessful petition for certiorari to the Supreme Court of the United States challenged the first of these two holdings. This Note challenges the second of these holdings and argues that judicial deference to proffered legislative purpose is improper where, as here, legislative action is designed to frustrate political accountability. Indeed, the need for heightened scrutiny in such cases is underscored by the subsequent revelations of political corruption that likely led to the passage of Public Act 94-804. Thus, this Note proposes that when a legislature orders Peter to pay Paul, courts can and should presume that the order serves no public purpose.

Part II of this Note introduces Public Act 94-804 and briefly discusses the Casinos’ arguments before the trial court. Part III explains the Illinois Supreme Court’s reasoning in upholding the Act against each of the Casinos’ constitutional challenges. Part IV explains why the Casinos’ Takings Clause argument is so contentious and why the Illinois Supreme Court should have examined the public purpose of Public Act 94-804 under the Due Process Clause. Part V presents this Note’s two core propositions: (1) that because Public Act 94-804 subverted ordinary political accountability by ordering the Casinos to pay the racetracks directly, the Illinois Supreme Court should have applied heightened scrutiny to the Act, and (2) that the failure of litigation before experienced courts to detect corruption in Empress Casino and illicit favoritism in Kelo v. City of New London should lead courts to go further and adopt a presumption of invalidity, rather than relying on heightened scrutiny in such cases.


Published by the
American Bar Association Section of Taxation
in Collaboration with the
Georgetown University Law Center


If you are an ABA member, you can receive The Tax Lawyer and the Section NewsQuarterly, both quarterly publications, when you join the Section of Taxation. Anyone can subscribe to The Tax Lawyer by contacting the ABA Service Center.