Table of Contents
- Civil Forfeiture, Taxation, and Prohibition
- Civil Forfeiture and the Nonoptimality of Law Enforcement
- The Legal Pedigree of Civil Forfeiture
Miguel Alvarez was arrested in October 1985 on a criminal drug charge. His bond was set at $50,000. American Bankers Insurance Company loaned Alvarez the bail money, taking a mortgage for $50,000 as security and thus gaining an ownership interest in Alvarezs house. Several months later (but before Alvarezs criminal trial), the U.S. government brought a civil proceeding against Alvarezs house, alleging probable cause for suspecting that illegal drugs had once been harbored there. The government claimed title to the house, relying on the federal Comprehensive Drug Abuse Prevention and Control Act (Drug Act), which forfeits to the government [a]ll real property...which is used, or intended to be used, in any manner or part, to commit, or to facilitate the commission of, a violation of [federal drug laws] punishable by more than one years imprisonment.
When Alvarez failed to appear at his June 1986 trial, American Bankers paid the $50,000 bond to the government. The company then sought to exercise its ownership interest in the house (which under commercial law now belonged to American Bankers because Alvarez was a no-show at his trial). However, the government claimed to own the house under the Drug Acts forfeiture provisions. In response, American Bankers advanced the Drug Acts innocent-owner defense, which is intended to protect unwitting property owners from having their assets seized by government agents fighting the war on drugs. This innocent-owner defense says that no property shall be forfeited...by reason of any act or omission established by that owner to have been committed or omitted without the knowledge or consent of that owner. Because the alleged illegal acts took place prior to American Bankers obtaining the mortgageand because the government had not alleged any subsequent illegal actsthe company urged the court to find that the government had no right to take title to the house. American Bankers argued that title to the house vested in the company when Alvarez defaulted on his bond by not showing up for trial.
The court ruled in favor of the government, holding that because the statute places the burden on the owner to prove his innocence or lack of knowledge of wrongdoing, American Bankers failed to show that it did not know that the house once (allegedly) contained contraband drugs. Consequently, American Bankers lost both the $50,000 it paid when Alvarez skipped bail and its $50,000 security interest in the forfeited house. The government pocketed the $50,000 as well as the entire value of the house.
American Bankers experience demonstrates three frightening features of modern civil-forfeiture law. First, owners who have never even been charged with wrongdoingmuch less tried and convicted of a crime by a jurycan lose sizable property interests through government seizures. Second, although the Drug Act provides a defense for innocent property owners, the owners themselves bear the burdens of proving that they are innocent of any wrongdoing and lack knowledge of wrongdoing; that is, if law-enforcement agencies have probable cause for believing that felonious drug activity occurred on a piece of property, the government can immediately seize the property. The law then presumes that the propertys owner is guilty unless and until the owner proves otherwise. Third, the government keeps the proceeds from the liquidation of forfeited properties. In practice, the various law-enforcement agencies participating in drug arrests share in the proceeds from selling forfeited properties.
Civil forfeiture may not appear threatening to those committed to eradicating illegal drug use. After all, civil forfeiture acts as a sin tax on undesirable behavior, raising drug dealers costs as well as increasing the incentives of law-enforcement agencies to hunt down and destroy illegal drugs. But such rosy first impressions about civil forfeiture prove illusory upon closer examination of the details of this crime-fighting tool. Though very much a sin tax, civil forfeiture does not promote more efficient law enforcement; it does the opposite. And in the process of clearing the way for more extensive use of civil forfeitures, courts have freed the government from the constitutional tethers created by Americas founders to harness Leviathan.
In this report, we analyze civil forfeiture from the perspective of both economics and legal history. First, we argue that civil forfeiture creates an inefficient bias in favor of prohibition. Second, we show that permitting enforcement agents to retain proceeds from civil forfeiture promotes inefficient law-enforcement decisions. Third, we review the history of civil-forfeiture law as well as constitutional issues posed by the modern practice of civil forfeiture. Finally, we argue that the use of civil forfeiture as a sin tax has had the unintended and unfortunate consequence of reducing one of the few genuinely desirable sin taxes around: the Bill of Rights. The Bill of Rights acts as a tax on the propensity of government agents to violate citizens liberties and confiscate their wealth. The Bill of Rights should be retained; repealing this particular sin taxthe Bill of Rightswould repeal the liberty of the people.
Consider a politicians choice between prohibition and taxation. Why would politicians ever prohibit the possession of goods demanded by large numbers of people? The economic answer, of course, is that influential interest groups demand such statutes. If prohibition is effective (i.e., if commerce in the prohibited commodity is reduced or stopped altogether), politicians gain votes by removing from the streets goods intensely disliked by a sufficiently large bloc of voters. But even if prohibition is ineffective, voters may still be swayed by the posturing of politicians, who often stumble over each other in their efforts to get tough on crime. Prohibition creates an instant crime problem, as market participants attempt to evade the prohibition. Politicians can milk votes and contributions by purporting to be solving the problem.
Political benefits from prohibition, however, are never free. When prohibition is effective, it carries a real cost to politicians: outlawed goods yield no tax revenues. Thus, legislators have fewer resources to (re)distribute in ways that enhance their re-election prospects. Ineffective prohibition also imposes costs on politicians. It may not be politically feasible to explicitly tax a good whose possession and sale have been made formally illegal, even though underground transactions in the prohibited commodity continue. In short, legislators feel the pain of for-gone tax revenues when they consider banning certain substances. Thus, prohibition is not a generally preferred strategy. Only those commodities intensely disliked by large numbers of voters will be outlawed, for only with such commodities will the political benefits of prohibition outweigh the forgone revenues.
Civil forfeiture loosens this political constraint on the use of prohibition. Forfeiture surreptitiously imposes taxes on substances that have been formally prohibited. It permits seizure of contraband, and more importantly, it permits the seizure of valuable items used as instrumentalities in the commission of crimes (many of which are perfectly legal goods, such as automobiles used to transport marijuana). The government retains the proceeds when seized items are liquidated. By varying the intensity of its enforcement efforts, government can control the amount of revenues extracted through civil forfeiture. A government staffed by self-interested politicians will choose the level of enforcement that yields the highest net revenues. In this way, government can extract revenues from black-market transactions in the prohibited substances. Thus, civil forfeiture reduces the political cost of voting for outright prohibition. Politicians receive kudos for voting in favor of prohibition, while avoiding the complete sacrifice of tax revenues ordinarily extracted from legal markets. When government can rely on civil-forfeiture laws, politicians can more readily vote to prohibit those substances that will give rise to forfeiture opportunities. Accordingly, in legal regimes that can readily use civil forfeiture, there will be more formal prohibitions than in regimes where the use of civil forfeiture is narrowly confined.
Legislators benefit from civil forfeiture in two distinct ways: (1) civil forfeiture provides additional revenues, and (2) civil forfeiture increases the cost of prohibited substances, hence fostering more violence in the outlawed industry, which politicians can exploit to gain votes. They do so by adopting ever more draconian criminal sanctions that are peddled to voters as solutions to the problem of increased crime, notwithstanding politicians role in fostering the increased amount of criminal activity.
Civil forfeiture poses other problems as a form of taxation. These problems stem from the interplay of the particular methods used to collect these taxes and the political effects on the government agencies that receive them. Specifically, additional problems with civil forfeiture emerge from the following facts:
- law-enforcement agencies keep part of the proceeds from civil forfeitures;
- civil-forfeiture proceeds are collected from only a small and politically unorganized subgroup of the population;
- constitutional protections against government abuses are too often ignored in the civil-forfeiture context.
As a consequence of allowing law-enforcement agencies to retain proceeds extracted via civil forfeiture, members of these agencies coalesce into an interest group favoring, and lobbying for, civil-forfeiture statutes (as well as their attendant prohibitions). Empirical studies of the effect of civil forfeiture upon the size of enforcement agencies budgets indicate that forfeitures have a significant positive impact on non-capital expenditures by police agenciesthat is, participation in civil-forfeiture actions increases the discretionary budgets of law-enforcement bureaus. Law-enforcement officials thus campaign to expand the reach of prohibition, and fight to minimize constitutional and statutory restraints on the use of the forfeiture power.
Moreover, civil forfeiture is a grossly inequitable form of taxation. It may initially appear to be a useful revenue source in that it imposes a larger share of the fiscal burden on criminals. But appearances here are deceiving. Because of their civil nature, civil-forfeiture laws permit government to confiscate and liquidate assets without abiding by constitutional restrictions designed to protect innocent citizens from overly vigorous government execution of laws. Civil forfeiture would impose a greater burden on criminals if the owners of property were in fact proved to have engaged in criminal conduct, but the procedures used afford no such assurance. For example, law-enforcement agencies need only have probable cause to believe that the property has been used unlawfully in order to seize it; once seizure has occurred, the burden falls on the property owner to prove his or her innocence. The burdens placed on the government to prove its case are slight indeed relative to the burden imposed on the government in criminal prosecutions. In a criminal case, the accused enjoys a presumption of innocence, and can be convicted and punished only if the government proves beyond a reasonable doubtto the satisfaction of a jurythat he or she has committed a crime.
Thus, the government has a much easier time confiscating and liquidating properties under civil-forfeiture statutes than it has convicting people of criminal offenses. Minimal procedures inevitably lead to many erroneous determinations. Civil forfeiture, by eliminating these procedural safeguards, creates a situation in which too many innocent people will be burdened by taxes not shared by their fellow citizens. The procedural safe-guards afforded citizens accused of crimes exist not to make life easier for criminals, but to reduce to tolerable levels government error and overexuberance in arresting, prosecuting, convicting, and punishing noncriminals. In consequence, civil forfeiture results in too many innocent people having their properties seized, liquidated, and transformed into government revenues, while similarly situated (i.e., equally innocent) people escape this tax.
The random manner in which civil-forfeiture taxes are levied hides from taxpayers a part of the cost of governments operations. A disproportionate share of these costs are foisted upon owners whose properties law-enforcement agencies only suspect were used in the commission of drug offenses. This group is politically unorganized and, hence, generally cannot adequately defend itself against more cohesively organized lobbiessuch as law-enforcement agencieswho clamor for liberalized civil-forfeiture powers. Property owners at risk of forfeiture remain unorganized because they do not know who they are before having their properties confiscated under civil-forfeiture statutes. The potential loss of property due to forfeiture is typically a one-time, low-probability event for each property owner. Thus, they have little incentive to form or to join lobbying groups pressing for repeal or reform of civil-forfeiture statutes.
The proceeds from civil-forfeiture actions thus relieve the general body of taxpayers from some of the burden of paying collectively for the public good of law enforcement. Because the general population of taxpayers does not feel the full cost of government as readily as it would if government were financed entirely by direct tax payments, the result is excessively large government in general, and overly aggressive drug-law enforcement in particular.
In the previous section, we showed the biases civil forfeiture creates in the legislature; these biases result from exploitation of a revenue source that is at least partially hidden from general taxpayers. In this section, we explore the consequences of civil forfeiture for decisions made in the executive branch, where law-enforcement agencies get to keep all or part of the proceeds from such seizures.
As a preliminary step, however, we must first review some basic economics of law enforcement. Law enforcement, like other goods, is scarce. Resources used to enforce laws have alternative valuable uses, such as building more bridges and highways, providing more education, staffing larger social-service agencies, or keeping taxes lower so that private citizens can individually make their own resource allocation decisions. After some point, the gains from using additional resources to police against crimeeven heinous crimes such as murder and rapebecome smaller than the gains available from using these same resources elsewhere. Thus, completely wiping out all criminal activity would not be socially desirable.
As with all economic choices, the optimal amount of law enforcement occurs when the marginal benefit from an additional unit of enforcement just equals the marginal cost of the resources used to produce that additional enforcement. And what is true for law enforcement in general holds also for choices among alternative areas of law-enforcement activity. Each type of crime fighting entails costs. Devoting more crime-fighting resources to vice offenses means that fewer resources are available to police against murder and other illegal activities.
Figure 1 depicts the costs and benefits of enforcing drug prohibition. In the top panel, the horizontal axis measures the quantity of drug-law enforcement, while the vertical axis shows the dollar value of the costs and benefits of such enforcement. The marginal-benefit curve (MB) shows the gains to society of each additional unit of drug-crime enforcement; the marginal-cost curve (MC) shows the costs of the additional units of enforcement. Enforcement beyond E* is excessive because the benefits from further reductions in drug crime are worth less to society than are all the goods and services sacrificed to generate these further reductions. Similarly, enforcement less than E* is suboptimal because the gains from additional enforcement then exceed the costs. Therefore, any institutional arrangement affecting law enforcement should be assessed by how likely it is to encourage the optimal amount of enforcement.
Civil forfeiture works against achieving the optimal amount of law enforcement. The reason is that civil forfeiture reduces the incentives law-enforcement officials have to attain E* by giving law-enforcement agents a disproportionate stake in the enforcement of drug prohibitions.
The lower part of Figure 1 shows the totals of civil-forfeiture revenues that law-enforcement agents retain as funds for their agencies. These revenues can be depicted using the familiar Laffer curve, which shows the relationship between tax rates and tax receipts. If the agency engages in no drug-crime enforcement, it will gain no revenues from drug-related civil-forfeiture actions.
This result is shown at point O. At the other extreme, if the agency enforces drug laws with such vigor as to eliminate illegal drug operations totally, the amount of civil-forfeiture revenues will also be zero. With no drug crime, there is no opportunity for drug-related civil forfeitures. This result is shown at point B. Between points 0 and B, however, civil-forfeiture revenues are positive. Civil-forfeiture revenues increase as drug-law enforcement is expanded from point 0 (no enforcement) toward greater enforcement. After some point, however, a greater intensity of enforcement reduces the number of drug offenses to such an extent that the dollar amounts available from seizures will also be reduced.
Revenues from seizures are maximized at EF, the optimal level of enforcement for law-enforcement agencies allowed to keep proceeds from civil-forfeiture seizures. Law-enforcement agencies will determine the intensity of their drug-enforcement effortsand, by implication, the intensity of their efforts to enforce laws against nondrug crimesby how such efforts affect their civil-forfeiture revenues. The revenue effects, rather than social-welfare consequences, of drug-crime enforcement determine the extent of police efforts in attacking various kinds of criminal behaviors.
No necessary correlation exists between EF (revenue-maximizing enforcement) and E* (socially optimal enforcement). EF could be to the right or to the left of E*; only by chance will EF be at the same level of enforcement as E*. Allowing law-enforcement agencies to retain proceeds from civil forfeitures affords agencies discretion over their budgets. As a consequence, agencies supply either sub or supraoptimal amounts of drug enforcement, thus leaving society worse off.
An alternative to giving government agencies discretion over their budgets is to place budget decisions solely in the hands of legislatures. When legislatures determine the entire budgets for law-enforcement agencies, legislatures in effect choose a quantity of law enforcement. With their budgets set by legislatures, law-enforcement agencies then allocate their monies among different types of activities, for example, drug-law enforcement versus policing against burglaries. In this scenario, no one type of activity has a revenue advantage over others in attracting law-enforcement resources. The heads of law-enforcement agencies will thus make more rational enforcement decisions.
The legislature is the most appropriate branch of government for selecting the budget for law-enforcement agencies. The legislature confronts a large number of constituencies vying for public funds. Therefore, legislatures are better positioned than any of the specialized bureaucracies to determine if an additional dollar of public revenue should be used for law enforcement or for schooling or for social-welfare programs or for any other of the multitude of items on which governments spend money. The economics of public choice make clear that legislatures are hardly likely to tax, spend, and regulate in ways that maximize societys well-being. Even so, legislatures are better placed to rationally allocate resources extracted from civil-forfeiture proceeds than are individual enforcement agencies.
Can we be more precise and say whether the current civil-forfeiture regime causes over or underenforcement? We believe that overenforcement of drug laws is the more likely result. Overenforcement is more likely because of the victimless nature of drug use. While all but a small handful of sociopaths prefer effective enforcement of laws curbing violent or fraudulent behaviors aimed at nonconsenting parties, it is much less obvious that a large number of Americans approve of the war on drugs. In 1990, in the midst of drug-war hysteria, the Drug Policy Foundation discovered that more than one in three Americans (36 percent) support legalization. And more recently, in January 1994, NBC Nightly News conducted a telephone call-in poll asking callers if drugs should be legalized. A majority (52.2 percent) favored legalization.
As popular support for a particular law decreases, it is plausible to assume that the social benefits of enforcing the law also decrease, especially in the case of victimless crimes. In Figure 1, this fall is shown by a marginal-benefit curve (MB') closer to the origin than MB. The socially optimal level of enforcement falls as well (to E*'). Naturally, EF is more likely to be to the right of E* the further to the left is E*; that is, the weaker the consensus for outlawing a particular behavior, the more likely it is that legal prohibitions will be excessively enforced if enforcement agents derive personal benefits from their enforcement efforts. If no consensus exists for drug prohibition, then civil forfeiture probably leads to overenforcement of drug laws.
The constitutionality of modern civil-forfeiture statutes does not depend on their efficiency. Many ill-thought statutes remain on the books with no one questioning their constitutionality. Nevertheless, there are solid arguments tending to show that most civil forfeitures under the Drug Act are unconstitutional. In this section, we briefly review the history of civil forfeiture, emphasizing germane Supreme Court decisions. After many years of deference to legislative choices in the realm of civil forfeiture, the Court now seems to be coming around, albeit slowly, to the view that civil forfeiture poses a grave and unconstitutional threat to American liberties.
The roots of American forfeiture law are found in England. The predominant kind of forfeiture in England was not civil forfeiture at all; it was criminal forfeiture (which remains on the statute books). Criminal forfeiture occurs only after a person has been convicted of a criminal offense. The convicts property is seized and liquidated by government, following a criminal conviction, as part of the punishment visited upon those proven guilty.
The strict procedural requirements of the criminal law (e.g., trial by jury, a presumption of innocence, the privilege against self-incrimination, and protection against double jeopardy) help thwart unjustified seizures by government. With a criminal conviction as a necessary prerequisite to forfeiture, criminal forfeiture affords greater assurance that people paying fines or restitution to government are actually guilty of antisocial behaviors. Moreover, the Eighth Amendments protection against excessive fines helps keep property loss under criminal forfeiture from growing out of proportion to the seriousness of the crime.
When government prosecutes someone for a crime, the suit is said to be in personam, which is legal jargon for a suit against an identifiable person. The individual accused of criminal wrongdoing can be punished only after government wins a conviction in court. Criminal forfeitures are always in personam prosecutions.
Contrast criminal forfeiture with civil forfeiture. In civil forfeiture, the government sues the offending items rather than any human being. In legal jargon, the government proceeds in rem; that is, the government sues the thing (rather than the things owner). All civil-forfeiture suits are in rem suits. For example, if Mr. Smiths house at 159 Elm Street is thought by the police to have been the site of a cocaine sale, then the government will sue the house at 159 Elm Street, charging it with wrongdoing. Because criminal-law protections are available only to people, the defendant in this hypothetical civil caseformally, the house at 159 Elm Streetcan be found liable for wrongdoing and confiscated and liquidated by government without the usual constitutional formalities. If Mr. Smith complains that he has been deprived of his property without ever having been charged with a crime, the government resorts to the legal fiction that the house was punished, not Mr. Smith, so that Mr. Smith has no cause to complain.
Understanding the origin of civil forfeiture (i.e., of in rem legal proceedings) will shed light on contemporary practice. In pre-Civil War America, as under English common law, in rem forfeiture proceedings were used in only two related contexts: (1) to enforce customs law (customs duties being the main source of federal revenue), and (2) to enforce admiralty laws (such as laws against piracy). If the government found smuggled goods, it could seize and liquidate them for revenue. The government was not obliged to criminally convict the owner of the goods prior to forfeiture. Likewise, a seized pirate ship was forfeitable without securing a criminal conviction of the vessels owner. Practical concerns justified dropping the requirement of criminal conviction of property owners in these cases. Owners were likely to be in foreign lands, beyond the jurisdiction of domestic courts. Rather than let these defendants break the law without penalty, the government cleverly devised the legal fiction of in rem civil suits to govern those classes of cases in which defendants were not likely to be within the jurisdiction of domestic courts.
Historically, in England and in the United States until the second half of the 19th century, civil-forfeiture suits were limited to the narrow class of cases (having to do with customs or admiralty law) in which the overwhelming impracticality of gaining in personam jurisdiction over property owners dictated an alternative means of penalizing wrongdoers. Augmenting government revenues with confiscated valuable properties was not the rationale for the civil (in rem) proceedings in these special cases; rather, even-handed enforcement of the customs and admiralty laws required proceeding without the owners consent or participation. Under common law, real property was subject to forfeiture only after a criminal conviction of the ownerand the first U.S. Congress, by statute, abolished criminal forfeiture altogether. With the Civil War, however, came the beginning of government efforts to use civil-forfeiture proceedings as a general method of avoiding the procedural requirements of the Constitution. Rather than limit civil forfeiture to those instances when it was practically impossible to gain jurisdiction over an owner, civil forfeiture came to be used as a device by which the government sought to evade constitutional restrictions.
Beginning in August 1861, Congress enacted the Confiscation Acts authorizing the seizure of property owned by Confederates and those aiding the rebellion. These Acts permitted in rem proceedings for the confiscation of both personal and real property. The Acts coverage of real property is particularly noteworthy. Until the Civil War, civil forfeiture was limited to personal property (mainly ships or contraband goods); it did not extend to real property. The reason it did not is a straightforward one: real property (unlike personal property) cannot be contraband. Moreover, the owners of real properties used in unlawful ways are more likely to be within the jurisdiction of domestic courts than are the owners of the personal properties traditionally subject to civil forfeiture. Unlike personal property, real property cannot flee during the time it takes to find and establish jurisdiction over the owner.
But wartime exigencies notoriously serve as pretexts for expansion of government power. The Supreme Court upheld the Confiscation Acts as a legitimate exercise of the war power, rejecting the argument that the Acts violated the Fifth and Sixth Amendments. The Court also dismissed the contention that due process requires a criminal conviction before forfeiture. By labeling such punishments civil, despite their obviously punitive nature, the government succeeded in nullifying constitutional protections against criminal punishment. The war power served as the excuse for doing so.
The upholding of the Confiscation Acts encouraged Congress to expand in rem forfeiture further beyond its traditional domaincustoms and the admiralty jurisdictionto enforce revenue provisions unrelated to the maritime trade or to the war power. In Dobbinss Distillery v. United States, the Court upheld the civil forfeiture of a distillery, and the real property upon which it stood, for liquortax violations. The tenant on the property was accused of defrauding the government of the excise taxes due on the liquor distilled there. The Court held that it was not necessary that the owner of the property should have knowledge that the tenant was committing fraud on the public revenue, in order that the information of forfeiture should be maintained.
The Court reasoned that the proceeding was civil in nature, and that any conviction of the wrong-doer must be obtained, if at all, in another and wholly independent proceeding. But no precedent is cited for the proposition that a forfeiture of real property, as opposed to the personal property traditionally subject to forfeiture in in rem proceedings, can be accomplished without a prior criminal conviction; indeed, the opinion nowhere indicates that the Court even considered that real property might be distinguished from personal property. The Court affirmed the judgment of forfeiture, despite the absence of wrongdoing by the owner, because the offence...is attached primarily to the distillery, and the real and personal property used in connection with the same, without any regard whatsoever to the personal misconduct or responsibility of the owner.
The Confiscation Acts cases, along with Dobbinss Distillery, thus mark a watershed in the Courts treatment of civil-forfeiture statutes. The Court has opened the door so that any kind of property is subject to civil forfeiture as long as the government labels its enforcement actions civil. The initial limited rationale for allowing forfeitures in civil rather than criminal proceedings was ignored or forgotten. Civil forfeiture became a generally available weapon for use by government against wrongdoers, and the Constitutions guarantee of certain rights and privileges to the criminally accused would not block governments way if the legislature took care to label a particular forfeiture action civil rather than criminal.
During the next century, the Court never seemed quite sure what to do with civil-forfeiture statutes. Although the genie of civil forfeiture was out of the bottle, every now and then the Court would declare a specific application of this or that civil-forfeiture statute unconstitutional. But such declarations never amounted to any wholesale scaling back of the use of civil forfeiture. For example, in Coffey v. United States, the Court held that a prior acquittal of the crime of violating internal-revenue laws barred a subsequent civil-forfeiture suit based on actions for which the defendant was earlier found innocent; that is, civil-forfeiture defendants were thus extended the constitutional protection against double jeopardy. And later in the same term, the Court held in Boyd v. United States that both the Fourth and Fifth Amendments protected the defendant against compulsory production of his private books and papers in a civil-forfeiture proceeding. The Court declared the proceedings to be quasi-criminal, reasoning that proceedings instituted for the purpose of declaring the forfeiture of a mans property by reasons of offences committed by him, though they may be civil in form, are in their nature criminal. Boyd thus promised that the Court would no longer be duped into treating the forfeiture of property as a civil matter simply because the legislature labeled it civil.
Boyds promise was quickly abandoned. Subsequent decisions served to limit Boyds reach to the narrow Fourth and Fifth Amendment grounds on which it was decided. The Constitutions other protections of the criminally accused were held not to apply in civil-forfeiture actions because these actions are civil and not criminal. For example, in United States v. Zucker, the Court held that the right of a criminal defendant to confront his accusers does not apply to civil forfeiture. Also, proof beyond a reasonable doubt was found by the Court not to be required in civil-forfeiture proceedings. Finally, the Court declared that there is no constitutional requirement that the jury find the defendant guilty in civil-forfeiture proceedings; judges are free to direct verdicts in favor of government.
Ominously, Coffeys protection against double jeopardy in the civil-forfeiture context is no longer good law. In 1984, the Court declared that the double-jeopardy clause does not bar a civil, remedial forfeiture proceeding initiated following an acquittal on related criminal charges. To the extent that Coffey v. United States suggests otherwise, it is hereby overruled. And Boyd has been all but overruled. In United States v. Ward, the Court accurately noted that it has declined...to give full scope to the reasoning and dicta in Boyd.
The most notable recent refusal of the Court to restrain civil forfeiture is the 1974 case of Calero-Toledo v. Pearson Yacht Leasing Co. In Calero-Toledo, a yacht worth $20,000 was leased by Pearson Yacht Leasing to a party who subsequently smoked or transported marijuana on the yacht. Upon the discovery of two marijuana cigarettes on the vessel, local authoritiesunder a Puerto Rican civil-forfeiture statuteseized the yacht without a prior judicial hearing or without notice being given to Pearson. All parties admitted that Pearson had no knowledge that marijuana was used or carried on the vessel. However, the Supreme Court upheld the forfeiture on the grounds that Pearson had failed to prove that it had done all that reasonably could be expected to prevent the proscribed use of [its] property. The Court ruled that Pearsons right to due process had not been violated.
In effect, Calero-Toledo reversed the presumption of innocence that is the Constitutional right of persons subject to criminal prosecution. The government was presumed to have behaved properly, and the burden of proving that the government overstepped its authority by seizing a vessel whose owner had done no wrong was foisted upon the owner. If the Puerto Rican statute had been labeled criminal rather than civil, of course, this reversal of the presumption of innocence would have been held unconstitutional. But, as it had so often in the past, the Court simply trusted the legislature to choose the correct labels for its actions: the Puerto Rican legislature said that this action was civil, so it must be civil, and thus, constitutional protections available to the criminally accused are inapplicable.
Fortunately, a trend against unchecked use of civil forfeiture is just now emerging in the Court. During two recent terms (199293 and 199394), the Court heard four civil-forfeiture cases to which the United States government was a party. The government lost all four. Each of these cases exhibits intensified judicial skepticism of the use of civil forfeiture in fighting the war on drugs. We focus here on the last two of these cases, Austin and James Daniel Good.
In Austin, the government sought the civil forfeiture of Richard Austins mobile home and auto-body shop after he was convicted of distributing two ounces of cocaine from the shop, having brought the cocaine from his mobile home to consummate a prearranged sale. Both the trial court and the appellate court rejected Austins argument that the forfeiture would violate his Eighth Amendment right to be protected from excessive fines. Austin appealed to the Supreme Court.
The government urged that civil forfeiture of real property is not a criminal punishment and, therefore, the government can-not be held to the strict requirements of criminal procedure when it confiscates real property. The Court rejected this argument, unanimously reversing the lower court. The Court found that forfeiture generally and statutory in rem forfeiture in particular historically have been understood, at least in part, as punishment, thus repudiating the governments assertion that the Drug Acts forfeiture provisions are not punitive. The Court concluded that the forfeiture was a payment to a sovereign as punishment for some offense...subject to the limitations of the Eighth Amendments Excessive Fines Clause.
The case of James Daniel Good also represents a step forward in restoring liberties trampled underfoot by a government motivated by civil-forfeiture revenues. Four years after James Daniel Good was convicted, sentenced, and fined in a Hawaii state court for growing marijuana, the United States government seized his house and the four acres of land upon which it sits. Good received no prior notice of the seizure. Although the trial court upheld the seizure, the court of appeals reversed it, finding that the government violated Mr. Goods right to due process of law by not affording him notice and a hearing prior to the seizure.
Arguing before the Supreme Court, the government insisted that the due-process clause does not apply when the government seizes property for law-enforcement purposes. The Court did not buy this claim. In James Daniel Good, the Court reasoned that the governments asserted interests in seizing propertyobtaining jurisdiction and preventing the loss or destruction of the propertywere slight in the case of real property. The Court ruled that due process requires the government to give notice and a hearing to owners of real property before seizures because of (1) the high risk of error created by allowing government to seize property without adhering to the requirements of due process of law, and (2) the substantial interests citizens have in being secure in their homes.
Thus, in just two terms of the Court, substantial constitutional constraints have been placed on governments exercise of civil-forfeiture authority. Civil forfeiture remains, however, a source of revenue for government as it wages its war on drugs. For example, although James Daniel Good requires notice and a hearing prior to seizure of real property, the burden remains upon property owners to prove their innocence. Failure to prove innocence at a preseizure hearing means that government may seize the property and liquidate it for revenue purposes. We believe that more can be done by the courts, under the Constitution, to further rein in governments use of civil forfeiture. Indeed, as we read the Constitution, more must be done.
At a minimum, civil forfeitures of real property should all be declared unconstitutional. The common law of England and the United States at the time of the Constitutions ratification did not provide for civil forfeiture of real properties; such forfeitures could be accomplished only following criminal convictions of the owners of real property. Unlike captured pirate ships and contraband goods, there is no chance that real property can stealthily escape jurisdiction before its owner is convicted. Consequently, the pragmatic rationale for allowing in rem seizures of personal property does not apply to real property. Because in rem forfeiture of real property was unheard of at the time the Constitution was ratified, the framers and ratifiers of the Constitution cannot plausibly be supposed to have intended to permit such forfeitures. Thus, any forfeitures of real property sought by government should be part of the explicit punishment sought in criminal proceedings.
Given the abuses that have marked civil forfeiture under the Drug Act, the Court might consider it wise to adopt an even more stringent approach to civil forfeiture. Under such an approach, the government would be barred from using civil procedures for the forfeiture of any propertyreal or personalwhenever (1) the property is forfeitable to the government because of its use in criminal wrongdoing, and (2) the government cannot prove that the property owner is beyond the personal jurisdiction of domestic courts. If the property owner is within the jurisdiction of domestic courts, then he or she should be duly accused, indicted, tried, and convicted before his or her property is forfeited to government. The protections of the criminal process are essential to safeguard innocent parties from government overreaching. If the owner is outside of domestic jurisdiction, the government must then, in good faith, attempt to notify the owner that his or her property temporarily (pending the outcome of a criminal trial) has been seized. If the owner then appears to wage a defense, a criminal conviction should be necessary before final forfeiture. In contrast, if the owner refuses to attend the trial, the property can then be forfeited in a civil action. In either case, however, the burden should be upon the government to prove wrongdoing by the owner, and not (as it is now) upon the owner to prove his or her innocence of any wrongdoing.
Given that one role of the courts is to protect citizens constitutional rights from legislative legerdemain, the label attached by the legislature to the forfeiture should be of no consequence. In all cases, a court should ask, Is this forfeiture punitive in purpose? If the answer is no (that is, if the court finds that no puni-tive purpose is served by the forfeiture), the court should then ask, Is the property contraband, or is it a legal good? If it is contra-band, then the government can constitutionally seize these goods and destroy them. But if the property is not contraband, absent a criminal conviction, a taking of private property has occurred and under the Fifth Amendment fair compensation must be paid to the dispossessed owner.
When a court finds that the forfeiture is designed to be punitive, all procedural requirements of the criminal law should be met before the forfeiture is final. If the owner of the property is outside the courts jurisdiction, then fair notice to the defendant of the charges is necessary, as is a fair opportunity for defense. If the defendant fails to show for his or her trial after being notified (or after a reasonable attempt to notify has been made), then a conviction obtained in absentia permits forfeiture to the government of the defendants property. The value of such forfeitures would still be limited, of course, by the excessive-fines clause of the Eighth Amendment.
Although superficially a sin tax on undesirable behavior, civil forfeiture is more accurately described as a money tree for legislatures and law-enforcement agencies. This tree is regularly shaken down for revenues by government. Such shakedowns, however, are precisely the kinds of government overreaching that the rule of law and constitutional protections are supposed to prevent. The Bill of Rights is intended to restrain governments scope of action in dealing with the criminally accused. To avoid these restraints, legislatures label their punitive actions civil rather than criminal. For too long, courts have allowed government to escape constitutional fetters by this sleight of hand. Although the Supreme Court now grants less deference to legislative labels than in the past, civil forfeiture remains a viable source of revenue for government. As a matter of policy, complete abandonment of civil forfeiture (as opposed to criminal forfeiture) is appropriate. As a matter of constitutional law, civil forfeiture outside of its narrow historical confines of the mar-itime law ought to be struck down as unconstitutional. When the government seeks revenues, it ought to secure these explicitly from uniform taxes levied upon the general populace; when the government seeks to punish criminals, it ought to do so within the guidelines of the Bill of Rights.
In this spirit, the Constitution, particularly the Bill of Rights, is usefully viewed as a sin tax on oppressive government. Tyrannical government was a sin well known to Americas founding generation. They rebelled against a distant government that taxed without representation, refused jury trials to those accused of crimes, and, generally, denied rights essential to citizens of a free and prosperous nation. James Madison and his peers sought to check government by special-interest groups. To this end, the original Constitution and the Bill of Rights were designed to raise the costs of government tyranny.
Some portion of this constitutional sin tax is self-enforcing and self-sustaining; for example, the separation of executive from legislative powers increases the costs of enacting interest-group legislation. But other portions of this tax require active and ongoing enforcement by a constitutional tax collector: the courts. Courts sit in judgment on the legislative and executive branches, requiring these branches to adhere to their constitutionally prescribed roles. If the legislature or the executive attempts to make an end run around the Constitution, the courts are charged with stymieing such unconstitutional power grabs. By keeping the other branches within their constitutional boundaries, the judicial branch can enforce the Constitutions tax on overreaching government behavior.
The analogy is not perfect between ordinary sin taxes and the Constitution. Constitutional protections provide no public revenues. Nevertheless, to the extent that ordinary sin taxes are aimed at discouraging antisocial behavior, the Constitution surely is such a tax, for few behaviors are as antisocial and uncontrollable as actions by a government unchecked by meaningful constitutional restraints. The U.S. Constitution unquestionably was meant to impose such restraints. The courts have failed to realize the full potential of this document; they have allowed the legislative and executive branches to employ the label civil forfeiture as an artifice to elude clear constitutional prohibitions. We are encouraged by the recent trend of Supreme Court cases reining in civil forfeiture, but much work remains to be done toward the fuller restoration of citizens constitutional rights.
. 21 U.S.C. § 881(a)(7) (1988).
. United States v. One Single Family Residence, 683 F.Supp. 783 (S.D. Fla. 1988).
. The Drug Act is not the only source of civil-forfeiture provisions, but as a practical matter, civil forfeitures occur overwhelmingly in the context of the so-called war on drugs. In this report, we deal only with forfeitures initiated under the drugs laws. We note, however, that the original health care bill President Clinton sent to Congress contains a civil-forfeiture provision. Under the president's plan, the Department of Health and Human Services as well as the attorney general would be authorized to audit and evaluate physicians' practices. If the government finds that a physician committed a federal health-care offense, that physician's personal property (e.g., office and laboratory equipment) could be seized without the physician ever being convicted of a crime. Such offenses are defined in the proposed act as knowingly falsifying or concealing a material fact in any matter involving a...health plan. President Clinton's proposed Health Security Act (1993), § 5433. Monies raised from these seizures would be ear-marked for an antifraud account to finance additional investigations of such newly created offenses. § 5432. See also Dental Economics, February 1994, at 17; and Bradley A. Smith, The Health Police Are Coming, Wall Street Journal, December 16, 1993, p. A16.
. Moreover, there are now constitutional bounds on the amount of such taxes. See Department of Revenue of Montana v. Kurth Ranch, et al., 114 S.Ct. 1937 (1994).
. See Donald J. Boudreaux and A. C. Pritchard, The Price of Prohibition, 36 Arizona L. Rev. 1 (Spring 1994). Alcohol prohibition in the United States was repealed in 1933 during the fiscal crisis confronting the Depression-era Congress. We argue that this repeal occurredand occurred when it didbecause the Great Depression substantially reduced incomes (and, hence, income-tax revenues) and Congress was desperate for the funds available from taxing legally sold liquor.
. Consequently, government gains a stake in the formally prohibited industryan industry which, in the case of drugs, supplies hundreds of millions of dollars annually in revenue to government. In 1991 alone, federal civil forfeitures were approximately $700 million. See Bruce L. Benson, David W. Rasmussen, and David L. Sollars, Police Bureaucracies, Their Incentives, and the War on Drugs, Public Choice (forthcoming). This annual figure rose to nearly $900 million in 1992. Sourcebook of Criminal Justice Statistics, Bureau of Justice Statistics (1992), table 4.43. See also Jarret B. Wollstein, The Government's War on Property, 43 Freeman 24452 (July 1993). Of course, these civil-forfeiture revenues are not listed as tax receipts in government budgets; nor do legislators call them taxes. Their formal label, however, cannot disguise their essential character.
. And, as we discuss below, retention of civil-forfeiture revenues causes these agencies to make inefficient law-enforcement choices.
. See Benson et al., note 7 above, p. 22.
. See Benson et al., note 7 above. Agencies' quest for forfeiture proceeds may also help explain support by law-enforcement agencies for gun control (particularly bans on assault weapons): heavily armed drug dealers are better able to protect their properties from government officials than are unarmed or weakly armed dealers. But this speculation may be inaccurate. If gun control is effective in reducing the munitions of drug dealers, the profitability of dealing drugs may decline because turf protection will be more costly. In turn, reduced drug-crime profitability might reduce the aggregate value of assets seizable through civil forfeiture. An alternative hypothesis is that law-enforcement agencies support gun control because voters regard guns as substitutes for police protection services. By reducing the number of guns possessed by law-abiding citizens, the demand for police services increases. This effect is especially plausible if gun-control statutes reduce gun possession by criminals proportionately less than they reduce gun possession by noncriminals.
. Once the government demonstrates that probable cause exists, the burden of proof in a civil forfeiture proceeding shifts to the claimant [i.e., the property owner seeking the return of seized property] to establish by a preponderance of the evidence that the property is not subject to forfeiture. United States v. A Single Family Residence, 803 F.2d 625, 629 (11th Cir. 1986).
. See generally A. C. Pritchard, Government Promises and Due Process: an Economic Analysis of the New Property, 77 VA. L. Rev. 1053, 106974 (1991).
. As we discuss below, insofar as government is excused from the inconvenience of abiding by the Constitution, members of the subgroup bearing the disproportionate burden of the civil-forfeiture tax are not sufficiently likely to be criminals. It is precisely in those cases in which majoritarian outcomes are likely to trample the rights of politically weak groups that constitutional restraints on government are justified. The U.S. Constitution (especially the Bill of Rights) safe-guards accused criminals from government overreaching, thus discouraging government from falsely prosecuting innocent people.
. Much of the cost of civil-forfeiture seizures ultimately falls on tenants and other lessees. A landlord who knows about the possibility of civil forfeiture understands that he faces some positive chance of losing his property to the government because of drug offenses committed by his tenants. This landlord will thus raise the rent. A form of fiscal illusion is thus created; fiscal illusion is rational ignorance about the full costs of government. As the costs of government become more and more detached from explicit tax payments (by, e.g., being hidden in higher rental rates), fiscal illusion increases. Larger-than-optimal government is the consequence.
. See Benson et al., note 7 above, which cites evidence that increased enforcement of drug laws reduces police efforts to thwart nondrug violent and property crimes (resulting in an increase in these latter species of crimes). See also Randy E. Barnett, Bad Trip: Drug Prohibition and the Weakness of Public Policy, 103 Yale Law Journal 25932630 (June 1994), esp. p. 2596.
. Recall that empirical evidence suggests that civil-forfeiture proceeds add to the discretionary budgets of law-enforcement agencies. See Benson et al., note 7 above, p. 22.
. Although drug-law enforcement would have no revenue advantage over other law-enforcement activities, a bias causing excessive drug-law enforcement may nevertheless exist insofar as drug-related arrests and seizures are more visible evidence of bureaucratic output than is, say, a drop in the number of burglaries. But even if such a bureaucratic-output bias exists, it is amplified when enforcement agencies are able to appropriate civil-forfeiture loot.
. See, e.g., James M. Buchanan and Gordon Tullock, The Calculus of Consent (Ann Arbor: Univ. of Michigan Press, 1962); Robert E. McCormick and Robert D. Tollison, Politicians, Legislation, and the Economy: An Inquiry into the Interest-Group Theory of Government (Leiden: Martinus Nijhoff, 1981); James M. Buchanan and Robert D. Tollison, eds., The Theory of Public Choice-II (Ann Arbor: Univ. of Michigan Press, 1984); William C. Mitchell and Randy T. Simmons, Beyond Politics (Boulder: Westview Press, 1994; Dwight R. Lee and Richard B. McKenzie, Regulating Government (Lexington, Mass.: D. C. Heath, 1987); and Dennis C. Mueller, Public Choice, 2nd ed. (New York: Cambridge Univ. Press, 1989).
. See James C. Miller III, William F. Shughart II, and Robert D. Tollison, A Note on Centralized Regulatory Review, 43 Public Choice 8388 (1984). These authors argue that [i]f regulatory administration is decentralized, with rules issued piecemeal by a variety of independent agencies, then concentrated interests will typically be more successful in inducing regulators to fashion their decisions to benefit them. In contrast, a centralized review process makes this outcome less likely (p. 83). The reason centralization of regulatory policy making and review reduces public decision-making bias is that centralization sums the individual welfare losses created by the regulatory bodies subject to its jurisdiction (p. 86). A legislature, of course, is a more centralized evaluator of alternative law-enforcement policies than are individual law-enforcement agencies.
. Characterizing drug use as a victimless crime can be challenged. Those who object to our characterization typically point to families and friends rendered distraught by drug abuse, lost productivity, and increased burdens on the health-care system. While we do not deny that drug abuse causes genuine, deep, and often expensive tragedies, it remains, in our view, a victimless crime. Drug use is victim-less in the significant sense that no one is physically coerced, defrauded, or blackmailed into acting against his or her will, or involuntarily stripped of property. This fact distinguishes drug use from crimes such as murder, rape, and burglary. See Barnett, note 15 above, p. 2621: [D]rug use is a victimless crime in the sense that it is conduct that does not physically interfere with the person or property of another. Also, Barnett persuasively argues (pp. 262125) that criminalizing noncoercive, nonfraudulent, and nonthieving activities actually increases social costs because victimless crimes have no complaining victims. Consequently, police must rely upon highly invasive techniques to detect such crimes, to apprehend their perpetrators, and to gather incriminating evidence. Constitutional protections from zealous law-enforcement authorities are thereby seriously imperiled. Another social cost of criminalizing victimless behavior is that valuable disapproving attitudes about criminal activity with victims become diluted.
Criminalizing behavior that is commonly engaged in by a substantial segment of society inevitably debases the currency of criminal proscriptions. If a legal system declares that both drug use and robbery are reprehensible, it is not only making a moral statement about drug use, it is making a moral statement about robbery.
Steven B. Duke and Albert C. Gross, America's Longest War: Rethinking Our Tragic Crusade against Drugs (New York: G. P. Putnam's Sons, 1993), p. 106.
. The American People Talk about Drugs, poll conducted by the Drug Policy Foundation, Washington, D.C., April 1990.
. NBC Nightly News phone poll, January 4, 1994. Legalization was supported by 42,812 of the callers; while 39,254 opposed it. Moreover, unlike violent and property crimes, drug prohibitions are condemned by a number of prominent people. This number includes former Secretary of State George Schulze, Baltimore Mayor Kurt Schmoke, economist and Nobel laureate Milton Friedman, columnist William Buckley, and the editors of the news magazine the Economist.
. In rem cases typically have amusingly odd names, for example, United States v. One 1976 Mercedes Benz 280S, Serial No. 11602012072193, 618 F.2d 453 (7th Cir. 1980).
. Act of August 6, 1861, 12 Stat. 319; and Act of July 17, 1862, 12 Stat. 589.
. For a thorough review of the effects of crisesreal and fabricatedon the growth of government in the United States, see Robert Higgs, Crisis and Leviathan (New York: Oxford Univ. Press, 1987).
. Miller v. United States, 78 U.S. (11 Wall.) 268, 305 (1871): The Constitution confers upon Congress expressly power to declare war...and make rules respecting capture on land and water. Upon the exercise of these powers no restrictions are imposed. Of course the power to declare war involves the power to prosecute it by all means and in any manner in which war may be legitimately prosecuted. It therefore includes the right to seize and confiscate all property of an enemy and to dispose of it at the will of the captor. This is and always has been an undoubted belligerent right.
. See An Act imposing Taxes on distilled Spirits and Tobacco, and for other Purposes, 15 Stat. 125, 133 (July 20, 1868).
. 96 U.S. 395 (1877).
. Ibid., p. 39697.
. Ibid., p. 399.
. It is interesting to note that real property is the single largest source of federal drug-related civil-forfeiture revenues. See Sourcebook of Criminal Justice Statistics, note 7 above, table 4.43.
. 96 U.S. 395 (1877), p. 401.
. 116 U.S. 436 (1886).
. 116 U.S. 616, 633-34 (1886).
. 161 U.S. 475 (1896).
. United States v. Regan, 232 U.S. 37 (1914).
. Hepner v. United States, 213 U.S. 103 (1909).
. United States v. One Assortment of 89 Firearms, 465 U.S. 354, 361 (1984).
. 448 U.S. 242 (1980).
. 416 U.S. 663 (1974).
. 416 U.S. 663 (1974).
. These cases are Republic National Bank of Miami v. United States, 113 S.Ct. 554 (1992); United States v. 92 Buena Vista Ave., 113 S.Ct. 1126 (1993); Austin v. United States, 113 S.Ct. 2801 (1993); and United States v. James Daniel Good Real Property, 114 S.Ct. 492 (1993).
. Austin, at 2806.
. Austin, at 2812.
. Brief for the United States in James Daniel Good, at 13.
. On takings law in general, see Richard A. Epstein, Takings: Private Property and the Power of Eminent Domain (Cambridge, Mass.: Harvard Univ. Press, 1985).
. It would be incorrect to argue that all civil forfeiture should be declared unconstitutional. Civil forfeiture was well known to the founding generation and was clearly a part of the English common-law tradition handed down to the newly independent United States. Such forfeitures were limited to contraband and personal properties used in the commission of maritime-related offenses.
The authors thank Bruce Benson, Karol Ceplo, Dwight Lee, Jody Lipford, Hugh Macaulay, Roger Meiners, Bill Shughart, and Bruce Yandle for instructive discussion and comments.
|Donald J. Boudreaux is Research Fellow at the Independent Institute, Associate Editor of The Independent Review, and Professor of Economics and the Martha and Nelson Getchell Chair at George Mason University.|