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 taxes 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.