September 28, 2005
State tax conference
Posted by Victor Fleischer

Good call, Kristin:  The Supreme Court granted cert in Cuno vs. Daimler Chrysler, the case that Kristin Hickman's conference at Minnesota will examine.  The Sixth Circuit held that an Ohio state tax incentive was unconstitutional under the dormant commerce clause, as it favored in-state development over out-of-state development.  The easiest way for me to see this was to think about two corporations, both selling products in Ohio, both needing to build a new distribution center.  One builds the new distribution center in Cleveland, the other in Erie PA.  The former gets better treatment under Ohio law, as it has a lower Ohio tax liability.  Following the logic of last term's dormant commerce clause case dealing with restrictions on out of state wineries, it's hard to see how state tax incentives would survive. 

On the other hand, there has to be a line drawn somewhere, and there are lots of essentially arbitrary places to draw that line.  Suppose Ohio builds a new road from Columbus to Cleveland, and this new road benefits the business that's based in Cleveland more than the one that's based in Erie PA.  Does that violate the Commerce Clause?  Surely not.  So maybe the Court will find a way to draw a principled distinction between taxes and burdens on commerce.  Not sure what that would look like, though. 

Having exhausted my diminutive knowledge about state taxes, I direct any interested readers to Kristin's conference. 

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