The Supreme Court, dealing a blow to states' rights, Wednesday upheld a federal law requiring states and local governments to issue only registered bonds or forfeit the tax-exempt status of the interest.
The justices adopted a special master's report settling a dispute between South Carolina and the Treasury over a provision in the 1982 deficit reduction law.The attorneys general of 25 states sided with South Carolina in the case, as had the National Governor's Association, which argued federal regulation of municipal bonds unconstitutionally encroached upon states' rights.
But in a 193-page report, the special master appointed by the court to hear the dispute concluded, "The burdens of establishing and maintaining a system of registered municipal bonds do not weigh heavily upon the states."
Justice William Brennan, in the 7-1 decision, agreed with the decision of the special master. He said the law does not violate the 10th Amendment, which reserves some powers for the states.
Brennan said the "owners of state bonds have no constitutional entitlement not to pay taxes on income they earn from state bonds, and states have no constitutional entitlement to issue bonds paying lower interest rates than other issuers."
In other action, the court:
- Ruled the government may disqualify military veterans who are alcoholics from receiving benefits by viewing their condition as "willful misconduct" rather than an uncontrollable disease.
By a 4-3 vote, the justices said the Veterans Administration, in denying benefits to two men, did not violate a federal law protecting the rights of the handicapped.
- Ruled that unions may distribute handbills urging consumers to boycott "neutral employers" against whom the unions have no grievance.
Voting 8-0 in a case from Florida, the justices said that although federal labor law generally prohibits unions from engaging in "secondary boycott" picketing of neutral employers it does not ban non-picketing activities aimed at such businesses.