As President Reagan and his lawyers began their campaign to reshape American jurisprudence, an important early clash involved the tax-exempt status of Bob Jones University. For what it claimed were religious reasons, Bob Jones refused to admit blacks, then relented under legal pressure but prohibited interracial dating. The Internal Revenue Service determined that these practices violated the “fundamental public policy” against race discrimination, and that Bob Jones therefore wasn’t entitled to a tax exemption as an educational institution.

In the Supreme Court, the Justice Department opposed the IRS: “Congress—not the courts or the Executive Branch—has exclusive authority” to legislate, the department wrote. “While we think Congress should by law authorize the IRS to deny tax exemptions to racially segregated schools, nowhere in the Internal Revenue Code . . . has it done so.”So argued department lawyers W. Bradford Reynolds and Chuck Cooper, path-breaking opponents of racial preferences. (They were joined on the brief by a career government lawyer who famously informed the justices, in a footnote, that he disagreed with most of the brief.)

The administration’s argument for judicial restraint and limited government held little appeal for the court of the time. Only Justice William Rehnquist dissented in Bob Jones University v. U.S. (1983). Chief Justice Warren Burger’s majority opinion, which treats the actual language of the tax code as but a subordinate factor in the analysis, is a model of the dubious interpretative method then prevailing. The appointment of Justice Antonin Scalia, who insisted on adhering to statutory text, was three years away. Fast-forward to today, when the Burger court’s empowerment of IRS regulation-writers has an unlikely champion in the Trump administration.

In a rule proposed in September for a public comment period ending Tuesday, the IRS seeks a vast expansion of its ability to deny tax exemption to universities and other private schools that discriminate based on race. Bob Jones’s policies were contemptible, open and notorious, and—in the court’s view—so integral to the school that they defined the institution’s “purpose.”

A university with such a wretched purpose, the court said, lacked the charitable character necessary for federal tax exemption. In part because the court tailored its decision to Bob Jones’s exceptional facts, the IRS has seldom exercised its court-created authority to deny schools tax exemption based on discrimination.

But the new IRS proposal ignores Burger’s restrictive language. It broadly states that a school isn’t tax exempt if it has “any” practice, in “any” program, that discriminates based on race. That language would unleash IRS agents. Students for Fair Admissions v. Harvard (2023), the decision barring racial preferences in university admissions, is one of the Supreme Court’s most essential rulings in decades—a clear, powerful repudiation of discriminatory practices that had taken hold in elite institutions across America.

The decision catalyzed a re-evaluation of corporate employment practices, too, causing many companies to reassess preference programs that had no basis in law. This effort to stop discrimination can’t end with Fair Admissions.

The administration has rightly assigned it high priority, including by enforcing employment laws enacted for that purpose and by ending government programs that encouraged discriminatory practices, like Lyndon B. Johnson’s affirmative-action executive order. As important as that battle is, other conservative principles must also guide it.

Atop the list is the rule of law. Commitment to a government of laws, not men, undergirds conservatives’ emphasis on the text of statutes and the original meaning of the Constitution. It is why conservative jurists honor the separation of powers, resisting innovative intrusions by the administrative state. It is why they insist on fair notice of the law’s requirements and why they believe in constraining discretionary—and therefore potentially arbitrary—government action.

Against those principles—and against the principles articulated in Bob Jones by conservative legends Brad Reynolds and Chuck Cooper—consider this new IRS proposal.

For starters, the proposal is unlawful. It blows past the limitations of Burger’s majority opinion, vastly expanding an authority that the Reagan administration and Rehnquist rightly said Congress had never granted.

The proposal creates endless opportunities for IRS mischief. How will the IRS—a tax authority—determine when illegal race discrimination occurred, and how will it judge when that discrimination is so grave as to forfeit a school’s tax exemption? How extensive must that discrimination be, how purposeful, how central to the school’s publicly declared mission? At Bob Jones, the initial policy was essentially “no blacks need apply.”Yet the IRS proposal would deny tax exemption for “any” discrimination. This would give IRS agents boundless discretion to select schools to investigate, threaten, coerce and disqualify.

A final principle is relevant here, one of administrative law and of politics: What goes around comes around. This administration can’t govern with an eye only to the next two years. The legal authorities it asserts are loaded guns, to be picked up and wielded by its successors.

Some in the Trump administration may have a list of universities they believe should lose tax exemption. If this IRS rule is adopted and withstands judicial scrutiny, the next Democratic president will arrive with a list, too.

Mr. Scalia, a Washington lawyer, served as U.S. labor secretary, 2019-21. [video] WSJ Opinion: So, Who’s Going to Win the Midterms?