Supreme Court Lets The IRS Evade The Eighth Amendment, Only Gorsuch Dissents

The U.S. Supreme Court on Monday declined to hear the case of Monica Toth, an 82-year-old grandmother who was fined over $2 million by the IRS for failing to file a one-page form. Represented by the Institute for Justice, Monica fought back in court, arguing that the government violated her rights under the Eighth Amendment, which unequivocally bans the government from imposing “excessive fines.”

But to bypass the Excessive Fines Clause, the government argued it didn’t fine Monica, but instead, subjected her to a “civil penalty.” Incredibly, both a federal district court and the First U.S. Circuit Court of Appeals accepted this argument and ruled against Monica.

“Monica’s experience shows that civil penalties can have devastating consequences for real people,” said Sam Gedge, senior attorney at the Institute for Justice. “The Excessive Fines Clause should serve as a key check on economic sanctions.”

In a short dissent, Justice Neil Gorsuch had little patience for the government’s semantics. The “fundamental” safeguards offered by the Excessive Fines Clause, Justice Gorsuch wrote, “would mean little if the government could evade constitutional scrutiny under the Clause’s terms by the simple expedient of fixing a ‘civil’ label on the fines it imposes and declining to pursue any related ‘criminal’ case.” “Far from permitting that kind of maneuver,” he added, “this Court has warned the Constitution guards against it.”

For over three decades, the Supreme Court has held that the key question for deciding what is covered under the Excessive Fines Clause doesn’t depend on whether it’s “civil or criminal, but, rather whether it is punishment.” And even a fine that serves “in part to punish” is covered by the Excessive Fines Clause. For Monica’s case, “the government imposed its penalty to punish her and, in that way, deter others” and should clearly count as a fine. As a result, the First Circuit’s decision against Monica is “difficult to reconcile with our precedents,” Gorsuch wrote.

In fact, just as recently as 2019, the Supreme Court declared that the “protection against excessive punitive economic sanctions” is “deeply rooted in this nation’s history and tradition,” with the Excessive Fines Clause tracing its legacy all the way back to the English Bill of Rights and Magna Carta. “Taking up [Monica’s] case would have been well worth our time.”

After Monica’s father was assaulted in an anti-Semitic attack, he fled Nazi Germany in the 1930s for Buenos Aires, where he eventually became a successful businessman. Before he died in 1999, Monica’s father left her several million dollars in a Swiss bank account. “Perhaps owing to his early formative experiences,” Gorsuch noted,” Monica’s father “encouraged his daughter to keep the money there—just in case.”

However, Monica was unaware she had to file a Report of Foreign Bank and Financial Accounts (FBAR) with the federal government. When she found out about the reporting requirement, she fully paid the back taxes she owed. Nevertheless, despite her compliance, the government claimed Monica’s failure to report was “reckless.” Citing a statute for “willful” violations, the government then “civilly penalized” Monica over $2 million for her reporting failure.

“Justice Gorsuch understood what’s at stake,” said IJ Attorney Brian Morris. “Under the First Circuit’s decision, governments are incentivized to impose massive civil fines to raise revenue. And individuals, like Monica, are left helpless to the whims of the government—no matter the size of the penalty that it picks.”