675 N.W.2d 1 (2004)

RACING ASSOCIATION OF CENTRAL IOWA, Iowa Greyhound Association, Dubuque Racing Association, Ltd., and Iowa West Racing Association, Appellants,
v.
Michael FITZGERALD, Treasurer, State of Iowa, Appellee.

No. 01-0011.

Supreme Court of Iowa.

February 3, 2004.

*3 Mark McCormick, Thomas L. Flynn, and Edward M. Mansfield of Belin Lamson McCormick Zumbach Flynn, a Professional Corporation, Des Moines, for appellant Racing Association of Central Iowa.

Gerald Crawford and Brad Schroeder of The Crawford Law Firm, Des Moines, for appellant Iowa Greyhound Association.

Stephen C. Krumpe of O'Connor & Thomas, P.C., Dubuque, for appellant Dubuque Racing Association, Ltd.

Lawrence P. McLellan of Sullivan & Ward, P.C., Des Moines, for appellant Iowa West Racing Association.

Thomas J. Miller, Attorney General, and Jeffrey D. Farrell and Jean M. Davis, Assistant Attorneys General, for appellee.

TERNUS, Justice.

When this case was initially before our court, we held that a statute taxing gross gambling receipts generated at racetracks at a rate nearly twice the rate imposed on gross gambling receipts generated on riverboats violated the United States Constitution and the Iowa Constitution. See Racing Ass'n v. Fitzgerald, 648 N.W.2d 555, 562 (Iowa 2002) (reversing district court's summary judgment for the State) [hereinafter "RACI"]. On certiorari to the United States Supreme Court, that part of our decision holding the statute violated the Equal Protection Clause of the United States Constitution was reversed. See Fitzgerald v. Racing Ass'n, 539 U.S. 103, ___, 123 S.Ct. 2156, 2161, 156 L.Ed.2d 97, 105 (2003). The Supreme Court then remanded the case "for further proceedings not inconsistent with [its] opinion." Id. Although this court's ruling that the statute also violated the equality provision contained in the Iowa Constitution was not reviewed by the Supreme Court, id. at ___, 123 S.Ct. at 2159, 156 L.Ed.2d at 102, we take the opportunity on remand to reconsider our prior decision on the state constitution claim in light of the Court's ruling on the federal constitution issue.

After giving due consideration to the Court's analysis and decision, we find no basis to change our earlier opinion that the differential tax violates article I, section 6 of the Iowa Constitution. Therefore, we reverse the trial court's contrary ruling and remand this case for a determination of the appropriate relief.

I. Review of Pertinent Background Facts and Proceedings.

This action was commenced by the appellant, Racing Association of Central Iowa (RACI), to enjoin the collection of that portion of taxes it was required to pay on adjusted gross receipts from gambling in excess of the tax charged to "excursion boats" on such receipts. See generally 1989 Iowa Acts ch. 67 (authorizing gambling on "excursion boats"). RACI claimed the tax was unconstitutional under the Equal Protection Clauses of the United States and Iowa Constitutions.

RACI operates a pari-mutuel horse racetrack and casino known as Prairie Meadows Racetrack and Casino in Altoona, Iowa. Appellant, Dubuque Racing Association, Ltd., which intervened in RACI's *4 lawsuit, operates a pari-mutuel dog racetrack and casino known as Dubuque Greyhound Park and Casino in Dubuque, Iowa. Another intervenor, appellant Iowa West Racing Association, holds the gaming license and owns the slot machines for Bluffs Run Racetrack and Casino in Council Bluffs, Iowa. The fourth appellant, Iowa Greyhound Association, intervened to protect the interests of its members, greyhound owners who race at the Dubuque and Council Bluffs dog tracks.

The tax statute challenged by these parties is Iowa Code section 99F.11 (1999), which imposes a tax "on the adjusted gross receipts received annually from gambling games." The maximum rate is twenty percent. See Iowa Code § 99F.11. The statute has an exception, however, for the "adjusted gross receipts ... from gambling games at racetrack enclosures." Id. The tax rate on racetrack gambling receipts began at twenty-two percent in 1997, and has automatically increased by two percent each year to a maximum rate of thirty-six percent in 2004. See id.

In our first consideration of this case, we held this differential tax violated the Equal Protection Clause of the United States Constitution and article I, section 6 of the Iowa Constitution. See RACI, 648 N.W.2d at 562.^[1] As already mentioned, the United States Supreme Court reversed our decision to the extent it rested on federal constitutional grounds. See Fitzgerald, 539 U.S. at ___, 123 S.Ct. at 2161, 156 L.Ed.2d at 105. It did not, however, consider the legality of the differential tax rates under the Iowa Constitution. Thus, the case was remanded "for further proceedings not inconsistent with [the Court's] opinion." Id.

Notwithstanding the fact the Supreme Court did not discuss the validity of the statute under the Iowa Constitution, we find it appropriate to reconsider our ruling on the state constitution claim since our court applied the federal rational basis test in determining whether the tax violated the Iowa Constitution. See RACI, 648 N.W.2d at 558. Thus, we again address, in light of the Court's certiorari ruling on the federal claim, whether section 99F.11 violates the Iowa equality provision. See generally Chicago & N.W. Ry. v. Fachman, 255 Iowa 989, 996, 125 N.W.2d 210, 214 (1963) (labeling article I, section 6 of the Iowa Constitution the "`equality' provision"); Sperry & Hutchinson Co. v. Hoegh, 246 Iowa 9, 19, 65 N.W.2d 410, 416 (1954) (same). Before doing so, however, we consider the effect of the Court's decision on our analysis.

II. Import of Supreme Court's Decision that Statute Did Not Violate the Equal Protection Clause of the United States Constitution.

It is this court's constitutional obligation as the highest court of this sovereign state to determine whether the challenged classification violates Iowa's constitutional equality provision. Callender v. Skiles, 591 N.W.2d 182, 187 (Iowa 1999) (noting that while "we have deemed the federal and state ... equal protection clauses to be identical in scope, import, and purpose[,] ... it is the exclusive prerogative of our court to determine the constitutionality of Iowa statutes challenged under our own constitution"); *5 Bierkamp v. Rogers, 293 N.W.2d 577, 581 (Iowa 1980) (noting that notwithstanding Supreme Court decision on issue, "[i]t is our constitutional obligation to determine whether the classifications drawn ... are violative of Article I, section 6, of our Constitution"); see William H. Rehnquist, The Supreme Court: How It was, How It Is 172 (1987) (stating "the question of the meaning of the Iowa Constitution is preeminently a question to be decided by the Supreme Court of Iowa, and not by some other court"); Robert F. Williams, Equality Guarantees in State Constitutional Law, 63 Tex. L.Rev. 1195, 1197 (1985) ("When faced with state constitutional equality claims, state courts should recognize their obligation to take these provisions seriously.") [hereinafter "State Equality Guarantees"]. While the Supreme Court's judgment on the constitutionality of Iowa's disparate tax rates under the federal Equal Protection Clause is persuasive, it is not binding on this court as we evaluate this law under the Iowa Constitution. See Callender, 591 N.W.2d at 187; Bierkamp, 293 N.W.2d at 579.

Two methodologies have been identified for an independent analysis of state equal protection claims: "Under the first, the state court adopts the federal frame of analysis but applies those constructs independently. Under the second, courts reject the federal constructs and apply their own analytical frameworks." State Equality Guarantees, 63 Tex. L.Rev. at 1219 (footnote omitted). In determining the proper analysis here, it is appropriate to consider both methodologies.

A. Independent analysis. We begin with the second approach—applying an independently crafted analysis. Notwithstanding the broad statement made by this court in its initial opinion that we will apply the same analysis under the state equal protection provision as is applied under the federal Equal Protection Clause, this court has always reserved to itself the ability to employ a different analytical framework under state constitutional provisions. See, e.g., Bowers v. Polk County Bd. of Supervisors, 638 N.W.2d 682, 689 (Iowa 2002) ("We usually deem the federal and state equal protection clauses to be identical in scope, import, and purpose." (Emphasis added.)); In re Interest of C.P., 569 N.W.2d 810, 811 (Iowa 1997) ("Typically, we deem the federal and state due process and equal protection clauses to be identical in scope, import, and purpose." (Emphasis added.)); Krull v. Thermogas Co., 522 N.W.2d 607, 614 (Iowa 1994) ("In equal protection challenges based on the federal and Iowa Constitutions, we usually interpret both federal and state equal protection provisions the same." (Emphasis added.)); Exira Cmty. Sch. Dist. v. State, 512 N.W.2d 787, 792-93 (Iowa 1994) ("We usually deem the federal and state due process and equal protection clauses to be identical in scope, import, and purpose." (Emphasis added.)). The implication of these cases is that while we will generally apply the same analysis to federal and state equal protection claims, this court has not foreclosed the possibility that there may be situations where differences in the scope, import, or purpose of the two provisions warrant divergent analyses. See generally State Equality Provisions, 63 Tex. L.Rev. at 1207-08 (noting the distinction between federal equal protection and "Jacksonian [e]quality [p]rovisions").^[2]

*6 Despite this court's right to fashion its own test for examining claims brought under our state constitution, we do not think this case is the proper forum to consider an analysis that might be more compatible with Iowa's constitutional language. We decline to do so here because the racetracks did not propose in their initial briefing that the test to be applied to their claim under the Iowa Constitution was any different than that applied under the federal Equal Protection Clause. Therefore, it is prudent to delay any consideration of whether a different analysis is appropriate to a case in which this issue was thoroughly briefed and explored. See In re Detention of Garren, 620 N.W.2d 275, 280 n. 1 (Iowa 2000) (refusing to deviate from federal analysis in considering state constitutional claim because appellant "ha[d] suggested no legal deficiency in the federal principles ..., nor ha[d] he offered an alternative test or guidelines").

B. Independent application of federal test. That brings us to the alternative manner in which this court might exercise its obligation to rule upon the state constitutional claim: by applying federal principles independently. This approach is nothing new. As noted above, this court ruled many years ago that federal decisions are persuasive, but not binding, on this court in its consideration of claims based on the Iowa Constitution. See Bierkamp, 293 N.W.2d at 579; accord State v. Cline, 617 N.W.2d 277, 283 (Iowa 2000) (refusing to adopt federal good faith exception to exclusionary rule for searches that violate Iowa constitution), overruled in part on other grounds by State v. Turner, 630 N.W.2d 601, 606 n. 2 (Iowa 2001). It follows, then, that this court's independent application of the rational basis test might result in a dissimilar outcome from that reached by the Supreme Court in considering the federal constitutional claim. See State Equality Guarantees, 63 Tex. L.Rev. at 1219 ("Courts that apply the federal constructs independently ... often reach results that directly conflict with those reached by the federal courts."); William J. Brennan, Jr., State Constitutions and the Protection of Individual Rights, 90 Harv. L.Rev. 489, 500 (1977) ("[E]xamples abound where state courts have independently considered the merits of constitutional arguments and declined to follow opinions of the United States Supreme Court they find unconvincing, even where the state and federal constitutions are similarly or identically phrased.") [hereinafter "Brennan"]. This result is particularly possible in view of "the ill-defined parameters of the equal protection clause." Miller v. Boone County Hosp., 394 N.W.2d 776, 781 (Iowa 1986); see also Chicago & N.W. Ry., 255 Iowa at 996, 125 N.W.2d at 214 (noting, in considering state and federal equal protection claims, "[w]hile the general rules applicable in such cases seem pretty well settled, as is so often the case the difficulty arises in their application").

Our court's decision in Bierkamp illustrates this proposition. In Bierkamp, we acknowledged Iowa's guest statute did not violate the Equal Protection Clause of the Fourteenth Amendment in view of a United States Supreme Court decision upholding a similar statute against an equal protection challenge and the Court's more recent dismissal of a series of appeals on the same issue for want of a substantial federal question. 293 N.W.2d at 579. Notwithstanding the validity of the statute under the federal constitution, our court, *7 applying the same analysis as that used by the Supreme Court, held the guest statute violated article I, section 6 of the Iowa Constitution. Id. at 582.

Based on our prior precedents and the sovereign nature of our state and its constitution, our court has an obligation to evaluate independently the validity—under the Iowa Constitution—of the differential tax rates imposed on excursion boats and racetracks. See Brennan, 90 Harv. L.Rev. at 502 ("[T]he decisions of the Court are not, and should not be, dispositive of questions regarding rights guaranteed by counterpart provisions of state law."). When we independently consider this issue, we arrive at a conclusion different from that reached by the Supreme Court under the federal constitution.

III. Governing Legal Principles.

We start our review of the challenged legislation with a statement of the governing principles of law. The Supreme Court has stated that the Equal Protection Clause "is essentially a direction that all persons similarly situated should be treated alike." City of Cleburne v. Cleburne Living Ctr., 473 U.S. 432, 439, 105 S.Ct. 3249, 3254, 87 L.Ed.2d 313, 320 (1985); accord Chicago & N.W. Ry., 255 Iowa at 1002, 125 N.W.2d at 217 ("All persons in like situations should stand equal before the law. No favoritism should be tolerated."). Whether this ideal has been met in the context of economic legislation is determined through application of the rational basis test. See Fitzgerald, 539 U.S. at ___, 123 S.Ct. at 2159, 156 L.Ed.2d at 103. In its consideration of the case at hand, the Court described the rational basis test as follows:

"[T]he Equal Protection Clause is satisfied so long as there is a plausible policy reason for the classification, the legislative facts on which the classification is apparently based rationally may have been considered to be true by the governmental decisionmaker, and the relationship of the classification to its goal is not so attenuated as to render the distinction arbitrary or irrational."

Id. (quoting Nordlinger v. Hahn, 505 U.S. 1, 11, 112 S.Ct. 2326, 2332, 120 L.Ed.2d 1, 13 (1992)). The Court has in the past more succinctly stated this standard as "whether the classifications drawn in a statute are reasonable in light of its purpose." McLaughlin v. Florida, 379 U.S. 184, 191, 85 S.Ct. 283, 288, 13 L.Ed.2d 222, 228 (1964); accord College Area Renters & Landlord Ass'n v. City of San Diego, 50 Cal.Rptr.2d 515, 520 (Ct.App.1996) ("Although equal protection does not demand that a statute apply equally to all persons, it does require that persons similarly situated with respect to the legitimate purpose of the law receive like treatment." (Original emphases omitted and emphasis added.)). It was this enunciation of the rational basis test that our court said in Bierkamp was appropriate for analyzing a claim based on the Iowa equality provision found in article I, section 6 of the Iowa Constitution. 293 N.W.2d at 580.

Based on these principles, this court must first determine whether the Iowa legislature had a valid reason to treat racetracks differently from riverboats when taxing the gambling revenue of these businesses. See Fitzgerald, 539 U.S. at ___, 123 S.Ct. at 2159, 156 L.Ed.2d at 103 (requiring "`a plausible policy reason for the classification'" (citation omitted)). In this regard, "the statute must serve a legitimate governmental interest." Glowacki v. State Bd. of Med. Exam'rs, 501 N.W.2d 539, 541 (Iowa 1993). Moreover, the claimed state interest must be "realistically conceivable." Miller, 394 N.W.2d at 779 (emphasis added).<sup>[3]</sup> Our court must *8 then decide whether this reason has a basis in fact.<sup>[4]</sup>See Fitzgerald, 539 U.S. at ___, 123 S.Ct. at 2159, 156 L.Ed.2d at 103 (requiring that legislature could rationally believe facts upon which classification was based are true). Finally, we must consider whether the relationship between the classification, i.e., the differences between racetracks and excursion boats, and the purpose of the classification is so weak that the classification must be viewed as arbitrary. See id. (requiring that "`the relationship of the classification to its goal [not be] so attenuated as to render the distinction arbitrary or irrational'" (citation omitted)); accord Chicago Title Ins. Co. v. Huff, 256 N.W.2d 17, 29 (Iowa 1977) (requiring rational relationship between classification and a legitimate state purpose or governmental interest). This approach was followed by our court in Federal Land Bank v. Arnold, 426 N.W.2d 153 (Iowa 1988), where we said: "First we must examine the legitimacy of the end to be achieved; we then scrutinize the means used to achieve that end." 426 N.W.2d at 156.

Our examination of this statute must also be guided by the general legal principles that control a court's review of the constitutionality of a legislative enactment. These tenets are well established. "Statutes are cloaked with a strong presumption of constitutionality." In re Detention of Morrow, 616 N.W.2d 544, 547 (Iowa 2000); accord Home Builders Ass'n v. City of West Des Moines, 644 N.W.2d 339, 352 (Iowa 2002) ("Taxing statutes are presumed to be constitutional."). Therefore, a person challenging a statute shoulders a heavy burden of rebutting this presumption. In re Detention of Morrow, 616 N.W.2d at 547; Glowacki, 501 N.W.2d at 541. This burden includes the task of negating every reasonable basis that might support the disparate treatment. Home Builders Ass'n, 644 N.W.2d at 352. In summary, "`[a] statute must clearly, palpably, and without doubt infringe upon the constitution before we will declare it unconstitutional.'" Glowacki, 501 N.W.2d at 541 (citation omitted).

These rigorous standards have not, however, prevented this court from finding economic and social legislation in violation *9 of equal protection provisions. See, e.g., Glowacki, 501 N.W.2d at 541-42 (statute limiting stays of disciplinary orders issued by board of medical examiners); Federal Land Bank, 426 N.W.2d at 157-58 (redemption periods for property sold at foreclosure sale); Miller, 394 N.W.2d at 781 (notice requirement for claims against local government); Bierkamp, 293 N.W.2d at 585 (guest statute); Gleason v. City of Davenport, 275 N.W.2d 431, 435 (Iowa 1979) (notice requirement for claims against municipalities); Chicago & N.W. Ry., 255 Iowa at 1004-05, 125 N.W.2d at 218-19 (wage payment statute); Sperry & Hutchinson Co., 246 Iowa at 24-25, 65 N.W.2d at 419 (issuance of trading stamps by certain retailers). Our prior cases illustrate that, although the rational basis standard of review is admittedly deferential to legislative judgment, "`it is not a toothless one'" in Iowa. Mathews v. de Castro, 429 U.S. 181, 185, 97 S.Ct. 431, 434, 50 L.Ed.2d 389, 394 (1976) (citation omitted); accord Fed. Land Bank, 426 N.W.2d at 156 (recognizing the "deferential scrutiny" accorded the state "in the realm of economic policy and regulation," but stating that "even in the economic sphere, a citizen's guarantee of equal protection is violated if desirable legislative goals are achieved by the state through wholly arbitrary classifications or otherwise invidious discrimination"); Bierkamp, 293 N.W.2d at 581 (noting court's "considerable deference to the judgment of the legislature ... is not, in and of itself, necessarily dispositive"). Indeed, this court's meaningful review of social and economic legislation is mandated by our constitutional obligation to safeguard constitutional values by ensuring all legislation complies with those values. See Luse v. Wray, 254 N.W.2d 324, 327 (Iowa 1977) (holding it is for the judicial branch to determine whether another branch of government has exceeded its constitutional limitations); Davenport Water Co. v. Iowa State Commerce Co., 190 N.W.2d 583, 592 (Iowa 1971) ("[Q]uestions relative to constitutionality of legislation ... stand as law issues determinable by the judiciary alone.").

We turn now to a consideration of the Iowa taxing scheme in light of these principles.

IV. Discussion.

Although the State has advanced several reasons for the legislative classification challenged in this case, we focus our discussion primarily on those found satisfactory by the Supreme Court, as that is the reason for our reconsideration of the state constitutional claim. The Supreme Court viewed the issue as whether there was "rational support for the 20 percent/36 percent differential." Fitzgerald, 539 U.S. at ___, 123 S.Ct. at 2160, 156 L.Ed.2d at 104. It then concluded "[t]hat difference" was helpful to the riverboats because it (1) "encourage[d] the economic development of river communities [and] promote[d] riverboat history"; (2) "protect[ed] the reliance interests of riverboat operators" who were accustomed to a twenty percent tax rate; and (3) "aid[ed] the financial position of the riverboats." Id. We will address each suggested purpose separately.

A. Economic development of river communities and promotion of riverboat history. Our court does not accept the economic development of river communities and the promotion of riverboat history as a rational basis for the legislature's distinction between excursion boats and racetracks. Although these are laudable legislative goals, "the legislative facts on which the classification is apparently based [cannot] rationally [be] considered to be true by the governmental decisionmaker," as required by the Court's articulation of the rational basis test. See id. at ____, 123 *10 S.Ct. at 2159, 156 L.Ed.2d at 103. We note initially that excursion boat gambling was never anticipated as solely a "river" activity so as to promote "river communities." When the legislature authorized gambling on "excursion boats" in 1989, it was envisioned that these boats would be located on inland waters, such as lakes and reservoirs, as well as on the Mississippi River and Missouri River, the historical location of riverboats. See 1989 Iowa Acts ch. 67, § 7(1) ("The commission shall decide the number, location and type of excursion gambling boats licensed under this chapter for operation on the rivers, lakes, and reservoirs of this state." (Emphasis added.)) (codified at Iowa Code § 99F.7(1) (1991)); id. § 7(13) ("An excursion gambling boat operated on inland waters of this state shall meet all the requirements of chapter 106...." (Emphasis added.)) (codified at Iowa Code § 99F.7(13) (1991)). Moreover, there is nothing peculiar about racetracks that prevents their location in river cities. In fact, two of the three communities in which racetracks are located —Dubuque and Council Bluffs—are river communities. See generally Miller, 394 N.W.2d at 779 ("`For the purpose of ascertaining whether or not the classification is arbitrary and unreasonable, we must take into consideration matters of common knowledge and common report and the history of the times.'" (Citation omitted.)). The Dubuque racetrack is actually on an island in the Mississippi River. On the other hand, the excursion boat docked near Osceola, Iowa, is moored on a lake, not a river, and is certainly not located in a river community. In addition, one river community—Council Bluffs—has both a racetrack and an excursion boat, only blocks apart. So, to justify the differential tax treatment of these enterprises on the supposed connection of excursion boats to river communities and riverboat history and the absence of such a connection by racetracks is illogical.

We acknowledge "the overinclusive-underinclusive dichotomy is usually applied only as part of a strict scrutiny analysis." Bierkamp, 293 N.W.2d at 584. But our court has stated, in holding legislation violative of the state constitution under the rational basis test, "that as a classification involves extreme degrees of overinclusion and underinclusion in relation to any particular goal, it cannot be said to reasonably further that goal." Id. That is precisely the case here insofar as the differential tax is based on the promotion of river communities and riverboat history. Thus, this legislative purpose cannot withstand review under the rational basis standard. See Fed. Land Bank, 426 N.W.2d at 157-58 (holding discrimination in redemption periods was equal protection violation where class membership did not correlate with purported class distinctions drawn by legislature); Chicago & N.W. Ry., 255 Iowa at 997, 125 N.W.2d at 214 ("It is often said a reasonable classification is one which includes all who are similarly situated, and none who are not."); Dunahoo v. Huber, 185 Iowa 753, 756, 171 N.W. 123, 124 (1919) (finding statute violated state constitution because classification made by legislature was unwarranted "where the evil to be remedied relates to members of one class quite as well as to another"); see also Ill. Sporting Goods Ass'n v. County of Cook, 845 F.Supp. 582, 591 (N.D.Ill.1994) (holding ordinance that prohibited location of gun shop within .5 miles of a school or public park was "under-inclusive in violation of the equal protection clause" because the ordinance contained exceptions to the ban that permitted certain businesses to continue to sell guns within the restricted geographical area); Callaway v. City of Edmond, 791 P.2d 104, 107-08 (Okla.Crim. *11 App.1990) (finding state equal protection violation because ordinance prohibiting persons under eighteen years of age from entering any pool hall or similar establishment "sweeps too broadly" and "is not rationally related to the ultimate objective of regulating gambling": "Singling out poolhalls or other similar businesses from all other amusement establishments is an act of discrimination, not policy."); State ex rel. Boan v. Richardson, 198 W.Va. 545, 482 S.E.2d 162, 168 (W.Va.1996) (rejecting as legitimate basis for challenged classification that statute reducing workers' compensation benefits upon receipt of old age insurance benefits under Social Security Act avoided duplication of benefits because the statute did not "in fact avoid[] `duplication of benefits'").

Even if this court were to take a more expansive view of potential legislative purposes and assume the general assembly sought to promote economic development in general, the taxing scheme still suffers from an irrational classification. There is nothing in the record, nor is it a matter of common knowledge, that excursion boats are a superior economic development tool as compared to racetracks. To the contrary, it appears that both types of gambling enterprises have the potential to enhance the economic climate of the communities in which they are located. If we presume the legislatur