06.18b. Midkiff, Takings Law, Rent-Seeking, Law Lunch. Our law-and-econ lunch had a good discussion today of Midkiff, 467 US 229 (1984) and a Heller article arguing for private takings. We also discussed soft budget constraints, and the profits of inframarginal firms, the Poletown Case, the Good Shepherd Church Goat Farm situation, takings doctrine, the effects good and bad of town subsidies to businesses, and whether such subsidies are unconstitutional. Quite invigorating. Midkiff is a remarkable case, as extreme in its own way as the 1930's Supreme Court decision that someone who grew wheat for his own consumption was engaging in interstate commerce and hence subject to federal regulation. The holding was that it is okay for a state to require someone to sell his property to someone else at a forced government price so long as the state claims the transfer has a public purpose. From Justice O'Connor's opinion in HAWAII HOUSING AUTHORITY ET AL v. MIDKIFF ET AL. 467 U.S. 229 (1984):

The legislature further found that 18 landholders, with tracts of 21,000 acres or more, owned more than 40% of this land and that on Oahu, the most urbanized of the islands, 22 landowners owned 72.5% of the fee simple titles. Id., at 32-33. The legislature concluded that concentrated land ownership was responsible for skewing the State's residential fee simple market, inflating land prices, and injuring the public tranquility and welfare.


...the Hawaii Legislature enacted the Land Reform Act of 1967 (Act), Haw. Rev. Stat., ch. 516, which created a mechanism for condemning residential tracts and for transferring ownership of the condemned fees simple to existing lessees. By condemning the land in question, the Hawaii Legislature intended to make the land sales involuntary, thereby making the federal tax consequences less severe while still facilitating the redistribution of fees simple.


The mere fact that property taken outright by eminent domain is transferred in the first instance to private beneficiaries does not condemn that taking as having only a private [*244] purpose. The Court long ago rejected any literal requirement that condemned property be put into use for the general public. "It is not essential that the entire community, nor even any considerable portion, . . . directly enjoy or participate in any improvement in order [for it] to constitute a public use." Rindge Co. v. Los Angeles, 262 U.S., at 707.


Judicial deference is required because, in our system of government, legislatures are better able to assess what public purposes should be advanced by an exercise of the taking power. State legislatures are as capable as Congress of making such determinations within their respective spheres of authority. See Berman v. Parker, 348 U.S., at 32. Thus, if a legislature, state or federal, determines there are substantial reasons for an exercise of the taking power, courts must defer to its determination that the taking will serve a public use.

Apparently another part of this case, hinted at by the opinion, is that the operation actually benefited many landholders, by making their land sale an involuntary transfer and hence not subject to capital gains taxes-- that is, the Hawaii law was designed to rip off the federal government by reducing the tax liability of Hawaiians.

The implication of this extreme deference to legislators is that if the Indiana legislature decides that my neighborhood would be improved by expelling me, it can force me to sell my house to someone else. Yet again, we see how thin a bulwark the Constitution is, if judges are prepared to ignore it.

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