Laws Preventing Business from Displaying the Costs of Regulation Are Unconstitutional

Minimum wage laws have forced restaurants to raise prices and lose business.  Many owners are not happy. One recourse is to tell customers about the effects of these laws on their pocketbook. Some restaurants are posting a minimum wage surcharge on their menus, so that diners recognize the reasons that establishments have jacked up their prices.

But in some jurisdictions this surcharge is illegal. For instance, in New York a statewide law bans the practice even if notice is prominently displayed. Such laws violate the First Amendment and block one of the best ways of getting the public to debate the costs of minimum wage laws.

Commercial speech gets somewhat less protection than political speech under current doctrine. But even if this surcharge and explanation were (wrongly) given only the protection afforded to commercial speech, such laws would still be unconstitutional. Commercial speech, like advertising, cannot be prohibited unless the restriction is “narrowly tailored to advance a significant government interest.” But it is hard to see any significant government interest advanced by these laws.

In any event, the speech at issue here is political speech, because it provides information about the effects of the minimum wage. If so, it can only be suppressed by a compelling government interest, like forestalling violence. To be sure, the surcharge is motivated by commercial interests. But the political nature of speech should not be measured by its motivation but by its content.  Unions make endorsements at election time that are surely motivated by what they believe it is good for the livelihood of their officials and their members but they are nonetheless obviously political speech. Economics is a big part of politics.

Could the government constitutionally prevent businesses from breaking out sales taxes as a separate item on receipts? Clearly not, and the reason is that structure of this receipt conveys information about tax rates, an obviously political subject. If sales taxes were not displayed separately, sales taxes would be even higher than they are.  Customer reactions confirm that the restaurants’ surcharges also implicated political debate: some people were so offended by its implicit critique of the minimum wage that they refused to eat at restaurants with the surcharge.

New York’s law not only offends Supreme Court doctrine but  also undermines the core mission of the First Amendment. Information about politics is underproduced, because not only the speaker but democracy as a whole benefits from it. Yet the speaker cannot capture the benefits of others or force them to contribute to the costs of his speech, meaning that many people will speak on politics less than is optimal.   Government restrictions only exacerbate the problem of underproduction.

Moreover, most citizens pay little attention to  the effects of policies because their vote is not likely to affect the results of election that determine policies.  They are particularly likely not to consider the effects of legislation, like the minimum wage, that may have enormous total costs, but impose relatively small and hidden costs on individuals.  Getting voters to talk about the real costs of regulation over dinner advances democratic deliberation.