## Facts

- Iowa historically allowed pari-mutuel betting at racetracks and taxed those proceeds at 6%.
- In 1989, Iowa authorized additional gambling, including slot machines on excursion riverboats, and imposed a graduated tax on riverboat slot-machine revenues with a top rate of 20%.
- In 1994, Iowa authorized racetracks to operate slot machines and imposed a graduated tax on racetrack slot-machine revenues with a top rate that rose automatically to 36%.
- The 1994 law left unchanged the maximum 20% tax rate on riverboat slot-machine revenues.
- Racetracks and a dog owners’ association challenged the 20%/36% differential as violating the Fourteenth Amendment’s Equal Protection Clause, asserting racetracks and riverboats were not materially different for tax purposes.
- An Iowa trial court upheld the statute, but the Iowa Supreme Court reversed and found no rational basis for the differential.
- The U.S. Supreme Court granted certiorari to review the federal equal protection holding.

## Issues

1. Whether the judgment rested on an adequate and independent state-law ground that would bar U.S. Supreme Court review.
2. Whether Iowa’s differential tax on slot-machine revenues (riverboats at up to 20% versus racetracks at up to 36%) violates the Equal Protection Clause.

## Decision

- The Court held it had jurisdiction because the state court treated state and federal equal protection analyses as the same, so the judgment did not rest on an independent state ground.
- The Court applied rational-basis review to the differential tax classification.
- The Court reversed the Iowa Supreme Court, holding the differential tax did not violate federal equal protection.
- The Court concluded that multiple rational reasons could support taxing racetrack slot revenues more heavily than riverboat slot revenues.
- The case was remanded after reversal.

## Legal Principles

- Tax classifications distinguishing among enterprises operating within a state are reviewed under rational-basis scrutiny for equal protection purposes.
- Under rational-basis review, a classification is constitutional if any reasonably conceivable set of facts could provide a rational basis for it.
- A legislature may pursue more than one objective within a statute and may include provisions reflecting compromise or competing goals without violating equal protection.
- Courts may not invalidate economic or tax line-drawing merely because it imperfectly advances an asserted primary purpose; the question is whether a rational justification is possible.

## Conclusion

The Supreme Court upheld Iowa’s higher tax rate on racetrack slot-machine revenues, finding that the differential could rationally reflect legislative choices about how much to assist racetracks and whether to favor riverboats and related local interests, and it reversed the state court’s contrary equal protection ruling.


Fitzgerald v. Racing Ass'n of Cent. Iowa, 539 U.S. 103 (2003)