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have a “significant nexus” with a navigable body of water, but failed to provide a clear
definition of the term, leaving the lower courts to make decisions on a case-by-case
basis.37
In some cases, local authorities have rezoned land from commercial to residential use, or
prohibited particular types of business from operating in specific areas. Owners who buy
land with the intention of developing it in a way that is subsequently prohibited by
regulation can lose much of their investment. These losses are therefore sometimes called
“partial” or “regulatory takings.” Partial takings often occur as a result of the Endangered
Species Act, under which it is illegal to kill or harm any plant or animal listed as
endangered. Private property that is identified as the habitat of an endangered species can
be subject to development restrictions. Development is banned in large sections of forest
in the Pacific Northwest due to the act.

In 1992, the Supreme Court ruled in Lucas v. South Carolina Coastal Council that the state
was not required to compensate a landowner whose anticipated property development
had been barred by state environmental protection law. The decision distinguished
between takings, which deprive a landowner of the entire value of a piece of property by
transferring ownership to another party, and regulations, which merely deprive the owner
of part of the expected value of his or her property by precluding some of its valuable
uses. To be eligible for compensation, the court said, the taking must render the property
valueless, which environmental regulations do not do.
While Lucas held that the Constitution does not require federal and state governments to
compensate owners for the regulatory devaluation of their land, states may pass laws
offering such compensation. Opponents of such measures say this amounts to paying
landowners to obey the law and could undermine environmental protection efforts. States
have responded in various ways. A 2004 Oregon law mandated that landowners be
reimbursed for regulatory takings, and Arizona voters approved a November 2006
referendum to the same effect. However, voters in California, Washington, and Idaho
rejected similar initiatives that month.38
Taxation. Residents of the United States are subject to a variety of taxes on their property,
expenditures, and importantly, income. The federal government gained the power to tax
individual income in 1913 with the passage of the Sixteenth Amendment. Today the
United States has a graduated, progressive income-tax system, wherein wealthy taxpayers
shoulder a greater proportion of the tax burden than poorer taxpayers. Federal income-tax
rates range from zero to 35 percent. Each individual’s overall income-tax payments
depend on his or her income, family status, spending, and eligibility for a variety of tax
breaks and credits.
The federal government also taxes the estates of deceased persons before their assets may
be passed on to their heirs. In recent years this estate tax has grown controversial and its
status has become complex. Today, the rate of the tax ranges from 18 to 55 percent of an
estate’s value, but the first $2 million is exempt from taxation. However, the exempt
portion of the tax is scheduled to rise to $3.5 million in 2009. The tax itself is scheduled
to expire in 2010, and then to return at a higher rate with fewer exemptions in 2011. This
confusing state of affairs—with its bizarre incentives to die or to hope for death in
particular years—has led to agitation for congressional action.

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