Court Opinion

ID: 9431086
Source: CourtListenerOpinion
Date Created: 2023-08-02 23:31:18.108232+00
Date Added: 2024-06-11T17:16:45.166404
License: Public Domain

*254Justice Scalia,
with whom
The Chief Justice joins in Part I, concurring in part and dissenting in part.
I join Part IV of the Court’s opinion, upholding Washington’s unapportioned wholesale tax and rejecting Tyler Pipe’s claim that it did not have a sufficient nexus with Washington to give the State taxing jurisdiction. I dissent, however, from the remainder of the opinion, invalidating the State’s manufacturing tax as unconstitutionally discriminatory under the Commerce Clause. The standard for discrimination adopted by the Court, which drastically limits the States’ discretion to structure their tax systems, has no basis in the Constitution, and is not required by our past decisions.
I
Implicitly in these cases, ante, at 245-248, and explicitly in American Trucking Assns., Inc. v. Scheiner, post, at 284, the Court imposes on state taxes a requirement of “internal consistency,” demanding that they “‘be such that, if applied by every jurisdiction,’ there would be no impermissible interference with free trade.” Armco Inc. v. Hardesty, 467 U. S. 638, 644 (1984) (quoting Container Corp. of America v. Franchise Tax Board, 463 U. S. 159, 169 (1983)).1 It is clear, for the reasons given by the Court, ante, at 246-247, that the Washington business and occupation (B & O) tax fails that test. So would any unapportioned flat tax on multistate activities, such as the axle tax or marker fee at issue in Scheiner, post, p. 266. It is equally clear to me, however, that this internal consistency principle is nowhere to be found in the Constitution. Nor is it plainly required by our prior decisions. Indeed, in order to apply the internal consistency *255rule in this case, the Court is compelled to overrule a rather lengthy list of prior decisions, from Hinson v. Lott, 8 Wall. 148 (1869), to General Motors Corp. v. Washington, 377 U. S. 436 (1964), and including, as is made explicit in Scheiner, post, p. 266, Capitol Greyhound Lines v. Brice, 339 U. S. 542 (1950), Aero Mayflower Transit Co. v. Board of Railroad Comm’rs, 332 U. S. 495 (1947), and Aero Mayflower Transit Co. v. Georgia Public Service Comm’n, 295 U. S. 285 (1935). Moreover, the Court must implicitly repudiate the approval given in dicta 10 years ago to New York’s pre-1968 transfer tax on securities. See Boston Stock Exchange v. State Tax Comm’n, 429 U. S. 318, 330 (1977).2 Finally, we noted only two Terms ago — and one Term after Armco, supra, was decided — that we had never held that “a State must credit a sales tax paid to another State against its own use tax.” Williams v. Vermont, 472 U. S. 14, 21-22 (1985). See Southern Pacific Co. v. Gallagher, 306 U. S. 167, 172 (1939). If we had applied an internal consistency rule at that time, the need for such a credit would have followed as a matter of mathematical necessity. The Court’s presumed basis for creating this rule now, 198 years after adoption of the Constitution, is that the reasoning of Armco requires it. See Scheiner, post, at 284. In my view, however, that reasoning was dictum, which we should explicitly reject. And if one insists on viewing it as holding, and thus *256as conflicting with decades of precedents upholding internally inconsistent state taxes, it seems to me that Armco rather than those numerous other precedents ought to be overruled.
Prior to Armco, the internal consistency test was applied only in cases involving apportionment of the net income of businesses that more than one State sought to tax. That was the issue in Container Corp., see 463 U. S., at 169-171, the only case cited by Armco in support of an internal consistency rule, see 467 U. S., at 644-645, and there is no reason automatically to require internal consistency in other contexts. A business can of course earn net income in more than one State, but the total amount of income is a unitary figure. Hence, when more than one State has taxing jurisdiction over a multistate enterprise, an inconsistent apportionment scheme could result in taxation of more than 100% of that firm’s net income. Where, however, tax is assessed not on unitary income but on discrete events such as sale, manufacture, and delivery, which can occur in a single State or in different States, that apportionment principle is not applicable; there is simply no unitary figure or event to apportion. That we have not traditionally applied the internal consistency test outside the apportionment context is amply demonstrated by the lengthy list of cases that the Court has (openly or tacitly) had to overrule here and in Scheiner.
It is possible to read Armco as requiring such a test in all contexts, but it is assuredly not necessary to do so. Armco dealt with West Virginia’s 0.27% selling tax and 0.88% manufacturing tax, and its exemption from the selling tax for in-state but not out-of-state manufacturers. We discussed the internal consistency of that taxing scheme only after finding the selling tax discriminatory “[o]n its face,” 467 U. S., at 642, because “[t]he tax provides that two companies selling tangible property at wholesale in West Virginia will be treated differently depending on whether the taxpayer conducts manufacturing in the State or out of it.” Ibid. Combined with the finding that the selling tax imposed on *257out-of-state producers could not be deemed to “compensate” for the higher manufacturing tax imposed only on West Virginia producer/sellers, id., at 642-643, that was enough to invalidate the tax. We went on to address the internal consistency rule in response to the State’s argument that the taxpayer had not shown “actual discriminatory impact on it by pointing to a State that imposes a manufacturing tax that results in a total burden higher than that imposed on Armco’s competitors in West Virginia.” Id., at 644. After reciting the internal consistency principle applicable in apportionment cases, we said that “[a] similar rule applies where the allegation is that a tax on its face discriminates against interstate commerce,” ibid., regardless of “the shifting complexities of the tax codes of 49 other States . . . .” Id., at 645. The holding of Armco thus establishes only that a facially discriminatory taxing scheme that is not internally consistent will not be saved by the claim that in fact no adverse impact on interstate commerce has occurred. To expand that brief discussion into a holding that internal consistency is always required, and thereby to revolutionize the law of state taxation, is remarkable.
Rather than use isolated language, written with no evident consideration of its potential significance if adopted as a general rule, to overturn a lengthy list of settled decisions, one would think that we would instead use the settled decisions to limit the scope of the isolated language. As the cases from the past few Terms indicate, the internal consistency test invalidates a host of taxing methods long relied upon by the States and left unhampered by Congress. We are already on shaky ground when we invoke the Commerce Clause as a self-operative check on state legislation, see Part II, infra, requiring us to develop rules unconstrained by the text of the Constitution. Prudence counsels in favor of the least intrusive rule possible.
Applying more traditional tests, the Washington B & 0 tax is valid. It is not facially discriminatory. Unlike the *258West Virginia tax in Armco, Washington’s selling tax is imposed on all goods, whether produced in-state or out-of-state. No manufacturing tax is (or could be) imposed on out-of-state manufacturers,' so no discrimination is present (or possible) there. All the State does is to relieve local producer/sellers from the burden of double taxation by declining to assess a manufacturing tax on local businesses with respect to goods on which a selling tax is paid. Nor does this arrangement, notwithstanding its nondiscriminatory appearance, have discriminatory effects in and of itself. An in-state manufacturer selling in-state pays one tax to Washington; an in-state manufacturer selling out-of-state pays one tax to Washington; and an out-of-state manufacturer selling in-state pays one tax to Washington. The State collects the same tax whether interstate or intrastate commerce is involved. The tax can be considered to have discriminatory effects only if one consults what other States are in fact doing (a case-by-case inquiry that appeals to no one, ante, at 247) or unless one adopts an assumption as to what other States are doing. It is the latter course that the internal consistency rule adopts, assuming for purposes of our Commerce Clause determination that other States have the same tax as the tax under scrutiny. As noted earlier, I see no basis for that assumption in the tradition of our cases; and I see little basis for it in logic as well. Specifically, I see no reason why the fact that other States, by adopting a similar tax, might cause Washington’s tax to have a discriminatory effect on interstate commerce, is of any more significance than the fact that other States, by adopting a dissimilar tax, might produce such a result. The latter, of course, does not suffice to invalidate a tax. To take the simplest example: A tax on manufacturing (without a tax on wholesaling) will have a discriminatory effect upon interstate commerce if another State adopts a tax on wholesaling (without a tax on manufacturing) — for then a company manufacturing and selling in the former State would pay only a single tax, while a company *259manufacturing in the former State but selling in the latter State would pay two taxes. When this very objection was raised in Armco, we replied that, unlike the situation in Armco itself, “such a result would not arise from impermissible discrimination against interstate commerce . . . .” 467 U. S., at 645. That response was possible there because the West Virginia tax was facially discriminatory; it is not possible here because the Washington B & 0 tax is not.
It seems to me that we should adhere to our long tradition of judging state taxes on their own terms, and that there is even less justification for striking them down on the basis of assumptions as to what other States might do than there is for striking them down on the basis of what other States in fact do. Washington’s B & 0 tax is plainly lawful on its own. It may well be that other States will impose similar taxes that will increase the burden on businesses operating interstate-just as it may well be that they will impose dissimilar taxes that have the same effect. That is why the Framers gave Congress the power to regulate interstate commerce. Evaluating each State’s taxing scheme on its own gives this Court the power to eliminate evident discrimination, while at the same time leaving the States an appropriate degree of freedom to structure their revenue measures. Finer tuning than this is for the Congress.
II
I think it particularly inappropriate to leap to a restrictive “internal consistency” rule, since the platform from which we launch that leap is such an unstable structure. It takes no more than our opinions this Term, and the number of prior decisions they explicitly or implicitly overrule, to demonstrate that the practical results we have educed from the so-called “negative” Commerce Clause form not a rock but a “quagmire,” Northwestern States Portland Cement Co. v. Minnesota, 358 U. S. 450, 458 (1959). Nor is this a recent liquefaction. The fact is that in the 114 years since *260the doctrine of the negative Commerce Clause was formally adopted as holding of this Court, see Case of the State Freight Tax, 15 Wall. 232 (1873), and in the 50 years prior to that in which it was alluded to in various dicta of the Court, see Cooley v. Board of Wardens, 12 How. 299, 319 (1852); Gibbons v. Ogden, 9 Wheat. 1, 209 (1824); id., at 226-229, 235-239 (Johnson, J., concurring in judgment), our applications of the doctrine have, not to put too fine a point on the matter, made no sense. See generally D. Currie, The Constitution in the Supreme Court: The First Hundred Years 1789-1888, pp. 168-181, 222-236, 330-342, 403-416 (1985).3
That uncertainty in application has been attributable in no small part to the lack of any clear theoretical underpinning for judicial “enforcement” of the Commerce Clause. The text of the Clause states that “Congress shall have Power . . . To regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes.” Art. I, § 8, cl. 3. On its face, this is a charter for Congress, not the courts, to ensure “an area of trade free from interference by the States.” Boston Stock Exchange, 429 U. S., at 328. The pre-emption of state legislation would automatically fol*261low, of course, if the grant of power to Congress to regulate interstate commerce were exclusive, as Charles Pinckney’s draft constitution would have provided, see Abel, The Commerce Clause in the Constitutional Convention and in Contemporary Comment, 25 Minn. L. Rev. 432, 434 (1941), and as John Marshall at one point seemed to believe it was. See Gibbons v. Ogden, supra, at 209. However, unlike the District Clause, which empowers Congress “To exercise exclusive Legislation,” Art. I, § 8, cl. 17, the language of the Commerce Clause gives no indication of exclusivity. See License Cases, 5 How. 504, 579 (1847) (opinion of Taney, C. J.). Nor can one assume generally that Congress’ Article I powers are exclusive; many of them plainly coexist with concurrent authority in the States. See Kewanee Oil Co. v. Bicron Corp., 416 U. S. 470, 479 (1974) (patent power); Goldstein v. California, 412 U. S. 546, 560 (1973) (copyright power); Houston v. Moore, 5 Wheat. 1, 25 (1820) (court-martial jurisdiction over the militia); Sturges v. Crowninshield, 4 Wheat. 122, 193-196 (1819) (bankruptcy power). Furthermore, there is no correlative denial of power over commerce to the States in Art. I, §10, as there is, for example, with the power to coin money or make treaties. And both the States and Congress assumed from the date of ratification that at least some state laws regulating commerce were valid. See License Cases, supra, at 580-581. The exclusivity rationale is infinitely less attractive today than it was in 1847. Now that we know interstate commerce embraces such activities as growing wheat for home consumption, Wickard v. Filburn, 317 U. S. 111 (1942), and local loan sharking, Perez v. United States, 402 U. S. 146 (1971), it is more difficult to imagine what state activity would survive an exclusive Commerce Clause than to imagine what would be precluded.
Another approach to theoretical justification for judicial enforcement of the Commerce Clause is to assert, as did Justice Curtis in dicta in Cooley v. Board of Wardens, supra, at 319, that “[w]hatever subjects of this power are in their *262nature national, or admit only of one uniform system, or plan of regulation, may justly be said to be of such a nature as to require exclusive legislation by Congress.” That would perhaps be a wise rule to adopt (though it is hard to see why judges rather than legislators are fit to determine what areas of commerce “in their nature” require national regulation), but it has the misfortune of finding no conceivable basis in the text of the Commerce Clause, which treats “Commerce . . . among the several States” as a unitary subject. And attempting to limit the Clause’s pre-emptive effect to state laws intended to regulate commerce (as opposed to those intended, for example, to promote health), see Gibbons v. Ogden, supra, at 203, while perhaps a textually possible construction of the phrase “regulate Commerce,” is a most unlikely one. Distinguishing between laws with the purpose of regulating commerce and “police power” statutes with that effect is, as Taney demonstrated in the License Cases, supra, at 582-583, more interesting as a metaphysical exercise than useful as a practical technique for marking out the powers of separate sovereigns.
The least plausible theoretical justification of all is the idea that in enforcing the negative Commerce Clause the Court is not applying a constitutional command at all, but is merely interpreting the will of Congress, whose silence in certain fields of interstate commerce (but not in others) is to be taken as a prohibition of regulation. There is no conceivable reason why congressional inaction under the Commerce Clause should be deemed to have the same pre-emptive effect elsewhere accorded only to congressional action. There, as elsewhere, “Congress’ silence is just that—silence ....” Alaska Airlines, Inc. v. Brock, 480 U. S. 678, 686 (1987). See Currie, supra n. 3, at 334 (noting “the recurring fallacy that in some undefined cases congressional inaction was to be treated as if it were permissive or prohibitory legislation — though *263the Constitution makes clear that Congress can act only by affirmative vote of both Houses” (footnotes omitted)).4
The historical record provides no grounds for reading the Commerce Clause to be other than what it says — an authorization for Congress to regulate commerce. The strongest evidence in favor of a negative Commerce Clause — that version of it which renders federal authority over interstate commerce exclusive — is Madison’s comment during the Convention: “Whether the States are now restrained from laying tonnage duties depends on the extent of the power ‘to regulate commerce.’ These terms are vague but seem to exclude this power of the States.” 2 M. Farrand, Records of the Federal Convention of 1787, p. 625 (1937). This comment, however, came during discussion of what became Art. I, § 10, cl. 3: “No State shall, without the Consent of Congress, lay any Duty of Tonnage . . . .” The fact that it is difficult to conceive how the power to regulate commerce would not include the power to impose duties; and the fact that, despite this apparent coverage, the Convention went on to adopt a provision prohibiting States from levying duties on tonnage without congressional approval; suggest that Madison’s as*264sumption of exclusivity of the federal commerce power was ill considered and not generally shared.
Against this mere shadow of historical support there is the overwhelming reality that the Commerce Clause, in its broad outlines, was not a major subject of controversy, neither during the constitutional debates nor in the ratifying conventions. Instead, there was “nearly universal agreement that the federal government should be given the power of regulating commerce,” Abel, 25 Minn. L. Rev., at 443-444, in much the form provided. “The records disclose no constructive criticisms by the states of the commerce clause as proposed to them.” F. Frankfurter, The Commerce Clause under Marshall, Taney and Waite 12 (1937). In The Federalist, Madison and Hamilton wrote numerous discourses on the virtues of free trade and the need for uniformity and national control of commercial regulation, see The Federalist No. 7, pp. 62-63 (C. Rossiter ed. 1961); id., No. 11, pp. 89-90; id., No. 22, pp. 143-145; id., No. 42, pp. 267-269; id., No. 53, p. 333, but said little of substance specifically about the Commerce Clause — and that little was addressed primarily to foreign and Indian trade. See generally Abel, supra, at 470-474. Madison does not seem to have exaggerated when he described the Commerce Clause as an addition to the powers of the National Government “which few oppose and from which no apprehensions are entertained.” The Federalist No. 45, p. 293. I think it beyond question that many “apprehensions” would have been “entertained” if supporters of the Constitution had hinted that the Commerce Clause, despite its language, gave this Court the power it has since assumed. As Justice Frankfurter pungently put it: “the doctrine that state authority must be subject to such limitations as the Court finds it necessary to apply for the protection of the national community . . . [is] an audacious doctrine, which, one may be sure, would hardly have been publicly avowed in support of the adoption of the Constitution.” Frankfurter, supra, at 19.
*265In sum, to the extent that we have gone beyond guarding against rank discrimination against citizens of other States— which is regulated not by the Commerce Clause but by the Privileges and Immunities Clause, U. S. Const., Art. IV, § 2, cl. 1 (“The Citizens of each State shall be entitled to all Privileges and Immunities of Citizens in the several States”) — the Court for over a century has engaged in an enterprise that it has been unable to justify by textual support or even coherent nontextual theory, that it was almost certainly not intended to undertake, and that it has not undertaken very well. It is astonishing that we should be expanding our beachhead in this impoverished territory, rather than being satisfied with what we have already acquired by a sort of intellectual adverse possession.

 The majority finds Washington’s manufacturing tax exemption for local wholesalers discriminatory because it “excludes similarly situated manufacturers and wholesalers which conduct one of those activities within Washington and the other activity outside the State.” Ante, at 246-247. That exclusion, however, can only be deemed facially discriminatory if one assumes that every State’s taxing scheme is identical to Washington’s.

 The New York statute taxed, inter alia, both the sale and delivery of securities if either event occurred in New York, 429 U. S., at 321, but imposed only one tax if both events occurred in that State. While the Court invalidated as discriminatory an amendment to that law reducing the tax for in-state sales by nonresidents and placing a cap on the tax payable on transactions involving in-state sales, it also declared that the statute prior to the amendment “was neutral as to in-state and out-of-state sales.” Id., at 330. That is plainly not true if internal consistency is a requirement of neutrality: assuming that all States had New York’s pre-1968 scheme, if sale and delivery both took place in New York, there would be a single tax, while if sale took place in New York and delivery in New Jersey, there would be double taxation.

 Professor Currie’s discussion of the Commerce Clause decisions of the Marshall and Taney Courts is summed up by his assessment of the leading Taney Court decision: “Taken by itself, Cooley [v. Board of Wardens, 12 How. 299 (1852),] may appear arbitrary, conclusory, and irreconcilable with the constitutional text. Nevertheless, anyone who has slogged through the Augean agglomeration preceding Curtis’s labors must find them scarcely less impressive than those of the old stable-cleaner himself.” D. Currie, The Constitution in the Supreme Court: The First Hundred Years 1789-1888, p. 234 (1985). He concludes his discussion of the Chase Court’s Commerce Clause jurisprudence by noting: “In doctrinal terms the Court’s efforts in this field can be described only as a disaster.” Id., at 342 (footnote omitted). And the Waite Court receives the following testimonial: “It is a relief that with the Bowman decision [Bowman v. Chicago & Northwestern R. Co., 125 U. S. 465 (1888),] we have reached the end of the commerce clause decisions of the Waite period, for they do not make elevating reading.” Id., at 416 (footnote omitted). Future commentators are not likely to treat recent eras much more tenderly.

 Unfortunately, this “legislation by inaction” theory of the negative Commerce Clause seems to be the only basis for the doctrine, relied upon by the Court in Scheiner, post, at 289, n. 23, that Congress can authorize States to enact legislation that would otherwise violate the negative Commerce Clause. See Prudential Ins. Co. v. Benjamin, 328 U. S. 408 (1946). Nothing else could explain the Benjamin principle that what was invalid state action can be rendered valid state action through “congressional consent.” There is surely no area in which Congress can permit the States to violate the Constitution. Thus, in Cooley v. Board of Wardens, 12 How. 299 (1852), Justice Curtis, to whom there had not occurred the theory of congressional legislation by inaction, wrote'of the relationship between States and the negative Commerce Clause as follows: “If the States were divested of the power to legislate on this subject by the grant of the commercial power to Congress, it is plain this Act could not confer upon them power thus to legislate. If the Constitution excluded the States from making any law regulating commerce, certainly Congress cannot re-grant, or in any manner reconvey to the States that power.” Id., at 318.