State Taxation History

State Taxation and Regulation: The Old Law

In 1959, the Supreme Court acknowledged that, with respect to the taxing power of the states in light of the negative (or “dormant”) commerce clause, “some three hundred full-dress opinions” as of that year had not resulted in “consistent or reconcilable” doctrine but rather in something more resembling a “quagmire.” 1 Although many of the principles still applicable in constitutional law may be found in the older cases, the Court has worked a revolution in this area, though at different times for taxation and for regulation. Thus, in this section we summarize the “old” law and then deal more fully with the “modern” law of the negative commerce clause.

Resources

References

This text about State Taxation History is based on “The Constitution of the United States of America: Analysis and Interpretation”, published by the U.S. Government Printing Office.

[Footnote 1] Northwestern States Portland Cement Co. v. Minnesota, 358 U.S. 450, 457-58 (1959) (quoting Miller Bros. Co. v. Maryland, 347 U.S. 340, 344 (1954)). Justice Frankfurter was similarly skeptical of definitive statements. “To attempt to harmonize all that has been said in the past would neither clarify what has gone before nor guide the future. Suffice it to say that especially in this field opinions must be read in the setting of the particular cases and as the product of preoccupation with their special facts.” Freeman v. Hewit, 329 U.S. 249, 251-52 (1946). The comments in all three cases dealt with taxation, but they could just as well have included regulation.

General Considerations

The task of drawing the line between state power and the commercial interest has proved a comparatively simple one in the field of foreign commerce, the two things being in great part territorially distinct.2 With “commerce among the States” affairs are very different. Interstate commerce is conducted in the interior of the country, by persons and corporations that are ordinarily engaged also in local business; its usual incidents are acts that, if unconnected with commerce among the states, would fall within the state's powers of police and taxation, while the things it deals in and the instruments by which it is carried on comprise the most ordinary subject matter of state power. In this field, the Court consequently has been unable to rely upon sweeping solutions. To the contrary, its judgments have often been fluctuating and tentative, even contradictory, and this is particularly the case with respect to the infringement of interstate commerce by the state taxing power.3

Resources

References

This text about State Taxation History is based on “The Constitution of the United States of America: Analysis and Interpretation”, published by the U.S. Government Printing Office.

[Footnote 2] See J. HELLERSTEIN & W. HELLERSTEIN, STATE AND LOCAL TAXATION: CASES AND MATERIALS (8th ed. 2005), ch. 5.

[Footnote 3] In addition to the sources previously cited, see J. HELLERSTEIN & W. HELLERSTEIN (8th ed.), ch. 5, supra. For a succinct description of the history, see Hellerstein, State Taxation of Interstate Business: Perspectives on Two Centuries of Constitutional Adjudication, 41 TAX LAW. 37 (1987).

Modern Law: General Considerations

Transition from the old law to the modern standard occurred relatively smoothly in the field of regulation, 4 but in the area of taxation the passage was choppy and often witnessed retreats and advances.5 In any event, both taxation and regulation now are evaluated under a judicial balancing formula comparing the burden on interstate commerce with the importance of the state interest, save for discriminatory state action that cannot be justified at all.

Resources

References

This text about State Taxation History is based on “The Constitution of the United States of America: Analysis and Interpretation”, published by the U.S. Government Printing Office.

[Footnote 4] Formulation of a balancing test was achieved in Southern Pacific Co. v. Arizona, 325 U.S. 761 (1945), and was thereafter maintained more or less consistently. The Court's current phrasing of the test was in Pike v. Bruce Church, Inc., 397 U.S. 137 (1970).

[Footnote 5] Indeed, scholars dispute just when the modern standard was firmly adopted. The conventional view is that it was articulated in Complete Auto Transit, Inc. v. Brady, 430 U.S. 274 (1977), but there also seems little doubt that the foundation of the present law was laid in Northwestern States Portland Cement Co. v. Minnesota, 358 U.S. 450 (1959).

Tables of Contents

• State Taxation History and other Topics in the Contents – Article 1 of the U.S. Constitution
• U.S. Constitutional Law Category
• List of amendments to the U.S. Constitution
• State Taxation History and other Topics in the Constitution Contents
• Interpretation of the U.S. Constitution (Table of Contents)
• Clauses of the Constitution (Table of Contents)