SCOTUS to Weigh ‘Collision Between the Imperatives of State Sovereignty and Free Markets’

Next month the U.S. Supreme Court will hear oral argument in
Comptroller v. Wynne, a case arising out of Maryland’s
efforts to collect personal income tax from state residents whose
income is partially earned—and taxed—outside of the state. As Santa
Clara University law professor Bradley W. Joondeph
observes at SCOTUSblog, this case presents a “collision between
the imperatives of state sovereignty and free markets—between the
states’ autonomy in matters core to their separate existence, and
the axiom that commerce among the states must be protected from
parochial trade barriers.”

The constitutional issue presented by this case is what’s known
as the dormant Commerce Clause. It says that in addition to
granting Congress the power to regulate interstate commerce, the
Commerce Clause also imposes an independent and judicially
enforceable limit on the power of the states to erect interstate
trade barriers. Under this reading of the Constitution, the dormant
Commerce Clause mandates what we might call a domestic free trade
zone. If a state law trumpets intrastate commerce at the expense of
interstate commerce, it should be struck down.

Maryland residents Brian and Karen Wynne are part-owners of a
business called Maxim Healthcare Services. They earn income from
that business, and pay taxes on it, in more than 30 states. Yet
Maryland expects them to pay personal income taxes on 100 percent
of that income, regardless of the taxes they’ve already paid on it
in other states. To give some perspective, unlike Maryland, most
states offer a tax credit to their residents when it comes to
personal income earned and taxed elsewhere.

The Wynnes argue that Maryland is violating the dormant Commerce
Clause because it imposes a harsher tax regime on people like them
than it does on those residents whose income is earned entirely
within the state. “The State’s tax scheme discourages interstate
commerce,” the Wynnes argue in their
brief to the Supreme Court, “by penalizing tens of thousands of
small businesspeople and business owners for operating across state
lines.”

Maryland, by contrast,
asserts that “the Constitution does not require a state to
subordinate its own legitimate taxing authority to the taxing
authority of other states.” In effect, the state argues, if
Maryland (or any other state) wants to impose multiple taxes on the
personal income of its residents, the Supreme Court has no business
standing in the way.

How might the Supreme Court settle this dispute? At the Law
& Liberty blog, Michael S. Greve worries that the Court may
well let
“the Taxman Cometh, Twice.” He writes:

Barring a major revamp of this jurisprudence, it’s hard to see
how the Wynnes can lose. The state court got this right, and
there’s no conflict with binding decisions elsewhere. So why did
the Supreme Court—which grants cert to state courts only
in exceedingly rare cases—yank this case up?

I have a fear: in a string of cases, Justice Thomas and Justice
Scalia have argued, both with characteristic force and clarity,
that the entire dormant Commerce Clause is completely made up.
(Justice Thomas seems prepared to jettison it altogether.) To their
minds, the doctrine is an extra-textual invention—an interstate
version of Lochner, and a constitutional common law rule
of the sort that we’re not supposed to have. The Chief has
expressed sympathy with that view. Maybe they found a fourth vote
to grant cert.”

We’ll see. Oral argument in Comptroller v. Wynne is
scheduled for November 12.