Justices Ponder 'Incoherent' Commerce Clause in Bond Tax Case
Justice Samuel A. Alito Jr. commented during oral arguments yesterday in a bond taxation case that the U.S. Supreme Court’s commerce clause jurisprudence is “utterly incoherent.”
The appeal asks whether Kentucky is violating the Constitution’s dormant commerce clause when it exempts the interest on in-state municipal bonds from taxation while taxing income from out-of-state bonds, the New York Times reports. The case is Department of Revenue of Kentucky v. Davis.
Alito dissented in April when the Supreme Court upheld a requirement for trash haulers to use publicly owned disposal facilities. The majority ruled in that case, United Haulers Association v. Oneida-Herkimer Solid Waste Management Authority, that the state can discriminate in favor of itself.
Lawyers for Kentucky cited United Haulers while lawyers for a couple challenging the policy cited cases barring protectionist barriers for in-state milk producers.
Atlanta attorney C. Christopher Trower said the trash decision allows a state to favor itself if it treats all private businesses—both in the state and outside it—the same, Law.com reports.
But Chief Justice John G. Roberts Jr., who wrote the majority opinion in the trash case, suggested that Kentucky competes with bonds issued in other states. “And they’re making the Kentucky bonds more attractive through this discriminatory tax,” he said.
Later in the arguments, Roberts appeared to be warming to Kentucky’s arguments, SCOTUSblog reports. Kentucky was not taxing an out-of-state commodity, he said, it was merely taxing its residents.
The justices appear to be closely divided in the case, the Wall Street Journal reports (sub. req.). More than 40 states offer similar tax breaks.
