Opinion ID: 1395261
Heading Depth: 2
Heading Rank: 3

Heading: Striking the Balance

Text: The final step in the Erickson approach, striking the balance, is not an easy task here. However, I find that the above analysis of the various elements to be weighed tips the scale in favor of the Zobels. This conclusion is reinforced by my reading of United States Supreme Court case law which has dealt, under privileges and immunities analysis, with other states' enactments of similar statutory exemption schemes. These are the factors which I find weigh in favor of the Zobels: The statute does, as the state has admitted, have the effect of placing a disproportionate share of the tax burden on those who have recently exercised their right to migrate, and this, although not triggering the strict scrutiny approach, does constitute a substantial infringement of a well-estabalished constitutional right. I think it can fairly be characterized as penalizing that right. The only proffered purpose which I find to be at all related to the distinction drawn here is that of establishing some rough notion of equity between former and future Alaskan taxpayers. This purpose is permissible in this limited context ( i.e., tax relief legislation), but it is not among the weightier of permissible state concerns. And considering that the relationship between means (the classification) and ends (establishing equity) is rendered somewhat less fair and substantial because the classification is not based on past tax liability, but rather on past filing of returns, I find that the balance comes out in favor of the Zobels. In so ruling, I think it appropriate to derive guidance from the reasoning of the United States Supreme Court cases dealing with analogous problems in the privileges and immunities context. Generally, privileges and immunities analysis is applied to distinctions between residents and nonresidents, whereas distinctions between long-term and short-term residents are analyzed under the equal protection or due process clauses. [9] However, this court has recognized that privileges and immunities case law and reasoning may be helpful in assessing parallel equal protection claims. Lynden Transport, Inc. v. State, 532 P.2d 700, 706 (Alaska 1975). I find merit in the Zobels' contention that a state probably has more authority generally to draw distinctions between residents and nonresidents than between two sets of bona fide residents based on length of residency. [10] Thus, cases striking down a distinction between residents and nonresidents are fairly persuasive authority for the proposition that that distinction cannot be drawn between long-term and short-term residents. Two United States Supreme Court cases stand for the proposition that a state cannot place greater tax burdens on non-residents than on residents based solely on residency. In Travis v. Yale & Towne Manufacturing Co., 252 U.S. 60, 40 S.Ct. 228, 64 L.Ed. 460 (1920), the Court found invalid a New York taxing system which, although it taxed residents and nonresidents at the same rate, granted New York residents some exemptions which were not available to nonresidents. Nonresidents were given a credit for taxes paid to their state of residence, and New York apparently thought that the state of residence would grant substantially equivalent personal exemptions, thus equalizing the tax burden between residents and nonresidents. However, some states, notably Connecticut and New Jersey, did not have an income tax, and so of course residents of those states received neither the tax credits nor the exemptions. In effect, residents were granted exemptions which nonresidents were not. The Supreme Court had little difficulty striking this tax mechanism down: Whether [non-New York resident taxpayers] must pay a tax upon the first $1,000 or $2,000 of income, while their associates and competitors who reside in New York do not, makes a substantial difference. Under the circumstances as disclosed, we are unable to find adequate ground for the discrimination, and are constrained to hold that it is an unwarranted denial to the citizens of New York. This is not a case of occasional or accidental inequality due to circumstances personal to the taxpayer, but a general rule, operating to the disadvantage of all non-residents, including those who are citizens of the neighboring states, and favoring all residents, including those who are citizens of the taxing state. 252 U.S. at 80-81, 40 S.Ct. at 232, 64 L.Ed. at 470 (citations omitted). In a more recent case, the Court struck down the New Hampshire Commuters Income Tax in Austin v. New Hampshire, 420 U.S. 656, 95 S.Ct. 1191, 43 L.Ed.2d 530 (1975). The statute in that case imposed a four per cent tax rate both on income which non-New Hampshire residents earned within the state and on income which New Hampshire residents earned outside the state. (Income which New Hampshire residents earned inside the state was not taxed.) Again, however, it was the exemption provisions which altered the impact of the tax. The income which New Hampshire residents earned outside the state was exempted in three situations: (1) if such income was taxed by the state from which it was derived; (2) if it was exempted from taxation by the state from which it was derived; or (3) if the state from which it was derived did not tax such income. In short, no resident of New Hampshire was taxed on his out-of-state income. Nonresidents were still taxed at four per cent or the rate at which the nonresident's home state would tax such income had it been earned in the home state, whichever was less. Again, the Court had little difficulty striking this scheme down, noting, The overwhelming fact, as the State concedes, is that the tax falls exclusively on the income of nonresidents; ... . 420 U.S. at 665, 95 S.Ct. at 1197, 43 L.Ed.2d at 537-38. I find these cases to be persuasive in reaching the conclusion that the exemption scheme in the case at bar cannot stand. If New York and New Hampshire cannot manipulate their tax exemption provisions to impact disproportionately on nonresidents, Alaska should not be able to follow this same course concerning newly arrived residents. Finally, I agree with Justice Dimond on the severability issue presented by the cross-appeal- i.e., that the invalid portions of the statute (งง 1 and 4-9) are severable, and งง 2, 3, 10 and 11 may stand. Based on these considerations, I agree that the judgment of the superior court as to the tax exemption statute should be affirmed.