United States v. Hatter

2001-05-21

Headline: Court allows general Medicare payroll tax on federal judges but blocks 1983 Social Security rules that singled out sitting judges, enabling affected judges to pursue relief despite later salary increases.

Holding: The Court held that Congress may impose a general, nondiscriminatory Medicare tax on federal judges, but the 1983 Social Security rules singled out then‑sitting judges and violated the Compensation Clause, and later pay raises did not cure it.

Real World Impact:

Allows Medicare payroll tax to apply to federal judges
Blocks 1983 Social Security rules as applied to then‑sitting judges
Remands to lower courts to determine damages and relief for affected judges

Topics: judicial pay, Medicare payroll tax, Social Security rules, Compensation Clause, constitutional protections

Summary

Background

A small group of federal judges who were already in office before the early 1980s sued the Government after Congress extended Medicare and Social Security taxes to federal employees. The judges argued that the Constitution’s Compensation Clause — the rule that a judge’s pay cannot be diminished while they serve — forbids imposing these taxes on sitting judges. Lower courts issued conflicting rulings, and the case reached this Court for final decision.

Reasoning

The Court first reconsidered older precedent and decided that a generally applicable, nondiscriminatory tax does not violate the Compensation Clause. Applying that principle, the Court concluded Congress may apply the Medicare payroll tax to federal judges. The Court then examined the 1983 Social Security rules and found they operated differently: they effectively forced then‑sitting judges to take on a new financial burden while allowing most other current federal employees ways to avoid added deductions. Those features together singled out judges for unfavorable treatment and therefore violated the Compensation Clause. The Court also held that later across‑the‑board salary increases did not erase the earlier constitutional violation.

Real world impact

Medicare payroll deductions can lawfully be taken from judges’ salaries going forward, but the Court invalidated the application of the 1983 Social Security rules to those judges who were serving at the time. The case is sent back to lower courts to fashion remedies and determine damages or exemptions consistent with the opinion.

Dissents or concurrances

Several Justices agreed the Social Security extension was unconstitutional but disagreed about Medicare. Justice Scalia would have struck down the Medicare tax too, arguing tax exemptions formed part of judicial compensation; Justice Thomas would have affirmed the older rule protecting judges from any tax that reduces net pay.