Is the Dormant Commerce Clause a “Judicial Fraud”?

Monday’s Supreme Court ruling in Comptroller of the Treasury of Maryland v. Wynne was less notable for the concrete issue it resolved than for the broad rift it exposed between, on the one hand, a clear majority of the Court and, on the other hand, Justices Scalia and Thomas. Reiterating in the strongest possible terms points that each has made in the past, Justices Scalia and Thomas disavowed a principle that has been part of American jurisprudence for nearly two centuries.

The Issue in Wynne

Wynne involved the application of the so-called dormant Commerce Clause (DCC) to a provision of the Maryland personal income tax law. Like most other states, Maryland taxes its residents on the income that they earn both in and out of state. However, unlike most other states, Maryland does not give a full credit for taxes that residents pay to the states in which they earn out-of-state income. As a consequence, a Maryland resident who earns out-of-state income is subject to less favorable tax treatment than one who earns only in-state income. Such favoritism for intrastate commerce, the Supreme Court held in Wynne, violates the DCC—a longstanding doctrine forbidding states from engaging in protectionist legislation.

Justice Alito’s majority opinion in Wynne was joined by Chief Justice Roberts and Justices Kennedy, Breyer, and Sotomayor. Justice Ginsburg, joined by Justices Scalia and Kagan, dissented on the ground that the Court misapplied prior precedents. The sort of double taxation at issue in Wynne, Justice Ginsburg argued, was only problematic with respect to corporations and when applied to gross receipts, not with respect to natural persons taxed on net income. The majority thought that these distinctions were not material.

Tax scholars can debate whether Justice Alito or Justice Ginsburg had the better argument with respect to the precise question posed by the Maryland tax provision at issue in Wynne. However, that disagreement was relatively minor compared to the differences revealed in the dissents of Justices Scalia and Thomas.

The Legitimacy of the Dormant Commerce Clause

Although Justice Scalia joined Justice Ginsburg’s Wynne dissent on the ground that he thought the majority misapplied the DCC precedents, he also wrote separately to express a more profound disagreement with the majority. In his view, the DCC itself “is a judicial fraud.” He nonetheless reaffirmed his willingness to adhere to a very narrow subset of DCC precedents. Justice Thomas would not even go that far. He reaffirmed that he would not apply the DCC at all.

Why do Justices Scalia and Thomas have so little regard for the DCC? The answer begins with the text of the Constitution. There is no express DCC. The principle is an inference from the grant to Congress in Article I, Section 8 of the power to regulate interstate (and foreign and Indian) commerce. That inference is unwarranted, Justices Scalia and Thomas say. To evaluate the argument against the DCC, one must understand why someone might think that the courts are empowered to enforce it.

The rationale for inferring a DCC has shifted over the years. Originally, the dominant theory held that congressional power to regulate interstate commerce was exclusive. Any particular act either was in interstate commerce—and thus regulable by Congress and not the states—or outside of interstate commerce—and thus regulable by the states and not Congress. That original rationale is no longer tenable, however. Often some line of business has both intrastate and interstate elements, and when it does, modern constitutional case law permits states to regulate unless a federal statute preempts the state regulation.

But the modern rationale for the DCC does not rest on fictive completely separate spheres of federal and state regulatory competence. Rather, the modern view is that the Constitution has embedded within it a structural principle opposing interstate trade wars. As Justice Alito’s opinion correctly notes, the DCC “strikes at one of the chief evils that led to the adoption of the Constitution, namely, state tariffs and other laws that burdened interstate commerce.”

Justice Scalia has two answers to Justice Alito, but neither is very satisfactory. First, Justice Scalia notes that Article I, Section 10 of the Constitution expressly addresses the tariff concern by forbidding states from enacting “Imposts or Duties on Imports or Exports.” That express prohibition is the extent of the limit, Justice Scalia says. In going beyond it, he adds, the DCC supplements rather than construes the Constitution.

In response, Justice Alito asks Justice Scalia a pointed question: If you think the DCC is a fraud, why abandon the doctrine rather than simply shift it from the Commerce Clause to the Imposts or Duties Clause? To be sure, the Imposts or Duties Clause does not contain every detail of the DCC doctrine, but so what? The First Amendment does not expressly apply to art, music, or dancing, much less to telephones and the Internet, but everyone—including Justices Scalia and Thomas—accepts that express protection for “speech” and the “press” has been sensibly applied to reach these other forms of communication.

Justice Scalia’s second key objection is institutional. Even if the Constitution enshrines free trade among the states as a value, he says it should be up to Congress to implement that value.

Yet this objection fails for practical reasons. Congress lacks the capacity to keep track of and override all of the laws that discriminate against or unduly burden interstate commerce that may be enacted by any of the fifty states and thousands of local governments. The judicially enforceable DCC thus operates as a kind of default principle. The courts presume that Congress would preempt such state and local laws if it had the capacity to do so. The fact that Congress has the power to override a judicial ruling finding a DCC violation acts as a failsafe in case the presumption fails. And the fact that Congress only very rarely exercises that power shows that in applying the presumption embodied in the DCC, the courts have done a pretty good job of approximating what Congress would do to combat state-versus-state protectionism if it had the capacity.

An Inconsistent Attack on Structural Inference

Moreover, even if Justices Scalia and Thomas were right that there is no DCC in the sense of a specific provision of the Constitution that grounds the doctrines that have developed to combat interstate protectionism, it would not follow that the doctrine is illegitimate. Both Justices Scalia and Thomas have joined, or in some instances led the Court in inferring judicially enforceable constitutional norms from the Constitution’s basic structure and purposes.

Two examples illustrate the sorts of structural inference that these and other Justices have drawn. First, there is no express provision of the Constitution forbidding Congress from “commandeering” states into enforcing federal law. Yet the Court found one in Printz v. United States. Justice Scalia, writing for a majority of the Court (including Justice Thomas) treated the absence of an express text as no obstacle to a constitutional rule. “Because there is no constitutional text speaking to this precise question, the answer to the” question whether the Constitution forbids such commandeering, Justice Scalia wrote, “must be sought in historical understanding and practice, in the structure of the Constitution, and in the jurisprudence of this Court.” The answer, he said, was yes.

Likewise, the Constitution contains no express provision generally establishing a principle of state sovereign immunity to private lawsuits. On the contrary, by forbidding such suits “against one of the United States by Citizens of another State,” the Eleventh Amendment could be read to permit suits against a state by its own citizens. Yet a line of cases in which Justices Scalia and Thomas have enthusiastically joined finds a broader principle of state sovereign immunity in the Constitution’s structure.

To be clear, by accepting some structural principles as part of the Constitution, Justices Scalia and Thomas did not commit themselves to accept all such principles. They may have good reason to conclude that the anti-commandeering principle and the state sovereign immunity principle are implicit in the Constitution’s structure but that the anti-trade-war principle of the DCC doctrine is not.

However, if that is their point, then they ought to make it more modestly. They ought to provide reasons to conclude that, all things considered, the DCC is such an unsatisfactory doctrine that it deserves to be uprooted. The claim that it is “a judicial fraud” is grossly overstated and inconsistent with a methodology that Justices Scalia and Thomas have accepted in other contexts.

Podcast: Play in new window | Download