Goldin v. Baker

This suit arose over a dispute regarding intergovernmental immunity. Harrison Goldin, the Comptroller of New York City (plaintiff), filed this suit seeking a ruling that Internal Revenue Code § 86 was unconstitutional and in violation of the intergovernmental-immunity doctrine and the Tenth Amendment of the US Constitution. Section 86 was enacted as a tax on Social Security benefits. The tax would not apply to all recipients but only those whose income exceeded a certain floor amount. That base amount was $32,000 for taxpayers filing jointly and $25,000 for most other taxpayers. To the extent all adjusted gross income and tax-exempt interest income plus one-half of the Social Security benefits received exceeded the threshold, then the tax was either one-half of the social-security benefits received or one-half of the overage of the threshold, whichever was less. Goldin argued that by including tax-exempt interest income in the calculus, the federal government was effectively taxing interest on municipal securities and that this would eventually end up impairing the city’s ability to borrow money. The government (defendant) countered by arguing that the government was not taxing those bonds but rather making that interest income a part of the calculus to determine whether the social-security benefits were taxable.