United States v. Hatter

PETITIONER: United States
LOCATION: Travis County Jail

DOCKET NO.: 99-1978
DECIDED BY: Rehnquist Court (1986-2005)
LOWER COURT: United States Court of Appeals for the Federal Circuit

CITATION: 532 US 557 (2001)
ARGUED: Feb 20, 2001
DECIDED: May 21, 2001

Paul R. Q. Wolfson - Department of Justice, argued the cause for the petitioner
Steven S. Rosenthal - Argued the cause for the respondents

Facts of the case

In 1982, when Congress extended Medicare to federal employees, then-sitting federal judges began to have Medicare taxes withheld from their salaries. In 1983, Congress then required federal judges to participate in Social Security, except for those who contributed to a "covered" retirement program. A "covered" program was defined to include any retirement system to which an employee had to contribute, which did not encompass the noncontributory pension system for federal judges, whose financial obligations and payroll deductions therefore had to increase. A group of federal judges, who were appointed before 1983, filed suit arguing that the 1983 law violated the Constitution's Compensation Clause, which guarantees federal judges a "Compensation, which shall not be diminished during their Continuance in Office." Ultimately, the Court of Federal Claims ruled that a 1984 judicial salary increase cured any violation. In reversing, the Federal Circuit held that the Compensation Clause prevented the government from collecting Medicare and Social Security taxes from the judges and that the violation was not cured by the 1984 pay increase.


Did Congress violate the Compensation Clause when it extended the Medicare and Social Security taxes to the salaries of sitting federal judges? If so, was the violation cured when Congress increased the salaries of all federal judges by an amount greater than the new taxes?

Media for United States v. Hatter

Audio Transcription for Oral Argument - February 20, 2001 in United States v. Hatter

Audio Transcription for Opinion Announcement - May 21, 2001 in United States v. Hatter

The opinions of the Court in two cases will be announced by Justice Breyer.

Stephen G. Breyer:

The first case United Sates versus Hatter.

The Federal Constitution’s Compensation Clause guarantees federal judges a compensation, which shall not be diminished during their continuance in office.

The Court of Appeals held that this clause prevents the government from collecting Medicare and Social Security taxes from a small number of judges who held office about 20 years ago before Congress extended the taxes to federal employees.

We believe that the Court of Appeals was wrong about the Medicare taxes.

The Court of Appeals struck down the Medicare tax on the authority of a case called Evans versus Gore, a 1920's case, which held that Congress could not include sitting judges within the scope of what was then a brand new federal income tax law.

Although the Court of Appeals could not overrule that case because it is a Supreme Court case, we believe that subsequent developments of undermine the case to the point where it is no longer good law, we consequently overrule Evans, and we hold that the Compensation Clause does not forbid Congress from enacting a law that imposes a nondiscriminatory tax, which includes an increase in rates or a change in conditions upon judges like everybody else whether those judges were appointed before or after the tax law, in question, was enacted or took affect.

Because the extension of the Medicare tax to the judges in this case was nondiscriminatory, we uphold its validity.

Congress' extension of the Social Security tax to the judges is a different matter.

As if the time of extension the early 1980's, all federal employees had remained outside the Social Security system for nearly 50 years.

When in the law that we are here considering, Congress extended the Social Security tax to Judges, It exempted all the federal employees who were then federal employees from the new system with an exception, and the exception was people who were then federal employees if they fell into the category of members of Congress, high-level Executive Branch employees, judges, and a handful of others.

But then looking at those people within the exemption, it made an exemption from the exemption, and except for judges it offset the new Social Security tax by reducing other pension payment obligations to the point where individual employee payroll deductions remained about the same that is they got the same sized pay check.

The result was a significant adverse financial impact not upon everybody else in the class, but upon judges and upon judges virtually alone in this respect,

That is because they were in the exception to the exception.

Upon close examination, we find that the justification the government advances for that differential in our view is not sound.

We explain why this is so in our opinion.

We conclude that the special way in which Congress applied the Social Security tax to judges compared to all other federal employees discriminated against the judges and in our view the Compensation Clause forbids that kind of discrimination.

Our holding does not apply to later appointed judges I might add such as ourselves who do have to pay the tax.

We also hold that Congress did not cure the problem when later it raised the judges’ nominal pay.

Those later nominal pay increases partly offset, partly offset, the erosion of real pay levels due to inflation.

They were not meant to help those few pre 1980 judges overcome the problem that we just described.

In sum, we hold that the Compensation Clause does not prevent Congress from imposing a nondiscriminatory tax laid generally upon judges and other citizens, but it does prohibit taxation that singles out judges for especially unfavorable treatment.

We reverse the Court of Appeals in part and affirm in part.

Justice Scalia has filed an opinion concurring in part and dissenting in part; Justice Thomas has filed an opinion concurring in the judgment in part and dissenting in part.

Justice Stevens and Justice O'Connor took no part in the consideration or decision of this case.