Comptroller of the Treasury of Maryland v. Wynne et ux.

v. WYNNE et ux.

certiorari to the court of appeals of maryland

No. 13–485. Argued November 12, 2014—Decided May 18, 2015 Maryland's personal income tax on state residents consists of a “state” income tax, Md. Tax-Gen. Code Ann. § 10–105(a), and a “county” income tax, §§ 10–103, 10–106. Residents who pay income tax to another jurisdiction for income earned in that other jurisdiction are allowed a credit against the “state” tax but not the “county” tax. § 10–703. Nonresidents who earn income from sources within Maryland must pay the “state” income tax, §§ 10–105(d), 10–210, and nonresidents not subject to the county tax must pay a “special nonresident tax” in lieu of the “county” tax, § 10–106.1. Respondents, Maryland residents, earned pass-through income from a Subchapter S corporation that earned income in several States. Respondents claimed an income tax credit on their 2006 Maryland income tax return for taxes paid to other States. The Maryland State Comptroller of the Treasury, petitioner here, allowed respondents a credit against their “state” income tax but not against their “county” income tax and assessed a tax deficiency. That decision was affirmed by the Hearings and Appeals Section of the Comptroller's Office and by the Maryland Tax Court, but the Circuit Court for Howard County reversed on the ground that Maryland's tax system violated the Commerce Clause of the Federal Constitution. The Court of Appeals of Maryland affirmed and held that the tax unconstitutionally discriminated against interstate commerce. Held: Maryland's personal income tax scheme violates the dormant Commerce Clause. Pp. 548–571. (a) The Commerce Clause, which grants Congress power to “regulate Commerce . . . among the several States,” Art. I, § 8, cl. 3, also has “a further, negative command, known as the dormant Commerce Clause,” Oklahoma Tax Comm'n v. Jefferson Lines, Inc., 514 U. S. 175, 179, which precludes States from “discriminat[ing] between transactions on the basis of some interstate element,” Boston Stock Exchange v. State Tax Comm'n, 429 U. S. 318, 332, n. 12. Thus, inter alia, a State “may not tax a transaction or incident more heavily when it crosses state lines than when it occurs entirely within the State,” Armco Inc. v. Hardesty, 467 U. S. 638, 642, or “impose a tax which discriminates against interstate commerce either by providing a direct commercial advantage to

local business, or by subjecting interstate commerce to the burden of `multiple taxation,' ” Northwestern States Portland Cement Co. v. Min-nesota, 358 U. S. 450, 458. Pp. 548–550.

(b) The result in this case is all but dictated by this Court's dormant Commerce Clause cases, particularly J. D. Adams Mfg. Co. v. Storen, 304 U. S. 307, 311, Gwin, White & Prince, Inc. v. Henneford, 305 U. S. 434, 439, and Central Greyhound Lines, Inc. v. Mealey , 334 U. S. 653, 662, which all invalidated state tax schemes that might lead to double taxation of out-of-state income and that discriminated in favor of intrastate over interstate economic activity. Pp. 550–551. (c) This conclusion is not affected by the fact that these three cases involved a tax on gross receipts rather than net income, and a tax on corporations rather than individuals. This Court's decisions have previously rejected the formal distinction between gross receipts and net income taxes. And there is no reason the dormant Commerce Clause should treat individuals less favorably than corporations; in addition, the taxes invalidated in J. D. Adams and Gwin, White applied to the income of both individuals and corporations. Nor does the right of the individual to vote in political elections justify disparate treatment of corporate and personal income. Thus the Court has previously entertained and even sustained dormant Commerce Clause challenges by individual residents of the State that imposed the alleged burden on interstate commerce. See Department of Revenue of Ky. v. Davis, 553 U. S. 328, 336; Granholm v. Heald, 544 U. S. 460, 469. Pp. 551–556. (d) Maryland's tax scheme is not immune from dormant Commerce Clause scrutiny simply because Maryland has the jurisdictional power under the Due Process Clause to impose the tax. “[W]hile a state may, consistent with the Due Process Clause, have the authority to tax a particular taxpayer, imposition of the tax may nonetheless violate the Commerce Clause.” Quill Corp. v. North Dakota, 504 U. S. 298, 305. Pp. 556–558. (e) Maryland's income tax scheme discriminates against interstate commerce. The “internal consistency” test, which helps courts identify tax schemes that discriminate against interstate commerce, assumes that every State has the same tax structure. Maryland's income tax scheme flails the internal consistency test because if every State adopted Maryland's tax structure, interstate commerce would be taxed at a higher rate than intrastate commerce. Maryland's tax scheme is inherently discriminatory and operates as a tariff, which is fatal because tariffs are “[t]he paradigmatic example of a law discriminating against interstate commerce.” West Lynn Creamery, Inc. v. Healy, 512 U. S. 186, 193. Petitioner emphasizes that by offering residents who earn income in interstate commerce a credit against the “state” portion of

the income tax, Maryland actually receives less tax revenue from residents who earn income from interstate commerce rather than intrastate commerce, but this argument is a red herring. The critical point is that the total tax burden on interstate commerce is higher. Pp. 561–569. 431 Md. 147, 64 A. 3d 453, affirmed. Alito, J., delivered the opinion of the Court, in which Roberts, C. J., and Kennedy , Breyer , and Sotomayor , JJ., joined. Scalia, J., filed a dissenting opinion, in which Thomas, J., joined as to Parts I and II, post, p. 571. Thomas, J., filed a dissenting opinion, in which Scalia, J., joined except as to the first paragraph, post, p. 578. Ginsburg , J., filed a dissenting opinion, in which Scalia and Kagan, JJ., joined, post, p. 581.

William F. Brockman, Acting Solicitor General of Maryland, argued the cause for petitioner. With him on the briefs were Douglas F. Gansler , Attorney General, Steven M. Sullivan, Chief of Litigation, Julia Doyle Bernhardt, Deputy Chief of Litigation, Brian L. Oliner , Assistant Attorney General, and H. Bartow Farr III .

Eric J. Feigin argued the cause for the United States as amicus curiae urging reversal. With him on the brief were Solicitor General Verrilli, Assistant Attorney General Del-ery, Acting Assistant Attorney General Ashford, Deputy Solicitor General Stewart, Johnathan S. Cohen, and Damon W. Taaffe.

Dominic F. Perella argued the cause for respondents. With him on the brief were Neal Kumar Katyal, Frederick Liu, and Sean Marotta.*

This case involves the constitutionality of an unusual feature of Maryland's personal income tax scheme. Like many other States, Maryland taxes the income its residents earn both within and outside the State, as well as the income that nonresidents earn from sources within Maryland. But unlike most other States, Maryland does not offer its residents a full credit against the income taxes that they pay to other States. The effect of this scheme is that some of the income earned by Maryland residents outside the State is taxed twice. Maryland's scheme creates an incentive for taxpayers to opt for intrastate rather than interstate economic activity.

We have long held that States cannot subject corporate income to tax schemes similar to Maryland's, and we see no reason why income earned by individuals should be treated less favorably. Maryland admits that its law has the same economic effect as a state tariff, the quintessential evil targeted by the dormant Commerce Clause. We therefore affirm the decision of Maryland's highest court and hold that this feature of the State's tax scheme violates the Federal Constitution.

Maryland, like most States, raises revenue in part by levying a personal income tax. The income tax that Maryland

on State Taxation by Karl Frieden, Frederick Nicely , and Douglas Lind-holm; for the Maryland Chamber of Commerce by Jerome B. Libin, Jeffrey A. Friedman, and Walter Hellerstein; for the National Association of Publicly Traded Partnerships by Timothy P . O'Toole and Alan I. Horowitz; for the National Federation of Independent Business Small Business Legal Center et al. by Steven G. Bradbury , Steven A. Engel, Michael J. Rufkahr , Karen R. Harned, Elizabeth Milito , and Devala Janardan; for Tax Economists by David W. T. Daniels; for the Tax Executives Institute, Inc., by Daniel B. DeJong , W. Patrick Evans, and Eli J. Dicker; and for the Tax Foundation by Joseph D. Henchman.

A brief of amici curiae was filed for Michael S. Knoll et al. by H. David Rosenbloom, and Mr. Knoll and Ruth Mason, both pro se.

Maryland also taxes the income of nonresidents. This tax has two parts. First, nonresidents must pay the “state” income tax on all the income that they earn from sources within Maryland. §§ 10–105(d) (Supp. 2014), 10–210 (2010). Second, nonresidents not subject to the county tax must pay a “special nonresident tax” in lieu of the “county” tax. § 10– 106.1; Frey, supra, at 125–126, 29 A. 3d, at 483. The “special nonresident tax” is levied on income earned from sources within Maryland, and its rate is “equal to the lowest county income tax rate set by any Maryland county.” § 10–106.1. Maryland does not tax the income that nonresidents earn from sources outside Maryland. See § 10–210.

Respondents Brian and Karen Wynne are Maryland residents. In 2006, the relevant tax year, Brian Wynne owned stock in Maxim Healthcare Services, Inc., a Subchapter S corporation.1 That year, Maxim earned income in States

Petitioner, the Maryland State Comptroller of the Treasury, denied this claim and assessed a tax deficiency. In accordance with Maryland law, the Comptroller allowed the Wynnes a credit against their Maryland “state” income tax but not against their “county” income tax. The Hearings and Appeals Section of the Comptroller's Office slightly mod-ifed the assessment but otherwise affirmed. The Maryland Tax Court also affirmed, but the Circuit Court for Howard County reversed on the ground that Maryland's tax system violated the Commerce Clause.

The Court of Appeals of Maryland affirmed. 431 Md. 147, 64 A. 3d 453. That court evaluated the tax under the four-part test of Complete Auto Transit, Inc. v. Brady , 430 U. S. 274 (1977), which asks whether a “tax is applied to an activity with a substantial nexus with the taxing State, is fairly apportioned, does not discriminate against interstate commerce, and is fairly related to the services provided by the State.” Id., at 279. The Court of Appeals held that the tax flailed both the fair apportionment and nondiscrimination parts of the Complete Auto test. With respect to fair appor-

shareholders on a pro rata basis and are reported on the shareholders' individual tax returns.” Gitlitz v. Commissioner , 531 U. S. 206, 209 (2001) (citation omitted). Maryland affords similar pass-through treatment to the income of an S corporation. 431 Md. 147, 158, 64 A. 3d 453, 459 (2013). By contrast, C corporations—organized under Subchapter C rather than S of Chapter 1 of the Internal Revenue Code—must pay their own taxes because they are considered to be separate tax entities from their shareholders. 14A W. Fletcher, Cyclopedia of the Law of Corporations §§ 6971, 6973 (rev. ed. 2008 and Cum. Supp. 2014–2015). Because of limitations on the number and type of shareholders they may have, S corporations tend to be smaller, more closely held corporations. Id., §§ 7025.50, 7026.

We granted certiorari. 572 U. S. 1134 (2014).

A

The Commerce Clause grants Congress power to “regulate Commerce . . . among the several States.” Art. I, § 8, cl. 3. These “few simple words . . . reflected a central concern of the Framers that was an immediate reason for calling the Constitutional Convention: the conviction that in order to succeed, the new Union would have to avoid the tendencies toward economic Balkanization that had plagued relations among the Colonies and later among the States under the Articles of Confederation.” Hughes v. Oklahoma, 441 U. S. 322, 325–326 (1979). Although the Clause is framed as a positive grant of power to Congress, “we have consistently

This interpretation of the Commerce Clause has been disputed. See Camps Newfound/Owatonna, Inc. v. Town of Harrison, 520 U. S. 564, 609–620 (1997) (Thomas, J., dissenting); Tyler Pipe Industries, Inc. v. Washington State Dept. of Revenue, 483 U. S. 232, 259–265 (1987) (Scalia, J., concurring in part and dissenting in part); License Cases, 5 How. 504, 578–579 (1847) (Taney, C. J.). But it also has deep roots. See, e. g., Case of the State Freight Tax, 15 Wall. 232, 279– 280 (1873); Cooley v. Board of Wardens of Port of Philadel-phia ex rel. Soc. for Relief of Distressed Pilots, 12 How. 299, 318–319 (1852); Gibbons v. Ogden, 9 Wheat. 1, 209 (1824) (Marshall, C. J.). By prohibiting States from discriminating against or imposing excessive burdens on interstate commerce without congressional approval, it 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. Fulton Corp. v. Faulkner , 516 U. S. 325, 330– 331 (1996); Hughes, supra, at 325; Welton v. Missouri, 91 U. S. 275, 280 (1876); see also The Federalist Nos. 7, 11 (A. Hamilton), and 42 (J. Madison).

Under our precedents, the dormant Commerce Clause precludes States from “discriminat[ing] between transactions on the basis of some interstate element.” Boston Stock Exchange v. State Tax Comm'n, 429 U. S. 318, 332, n. 12 (1977). This means, among other things, that a State “may not tax a transaction or incident more heavily when it crosses state lines than when it occurs entirely within the State.” Armco Inc. v. Hardesty, 467 U. S. 638, 642 (1984). “Nor may a State impose a tax which discriminates against interstate commerce either by providing a direct commercial advantage to local business, or by subjecting interstate commerce to the

B

Our existing dormant Commerce Clause cases all but dictate the result reached in this case by Maryland's highest court. Three cases involving the taxation of the income of domestic corporations are particularly instructive.

In J. D. Adams Mfg. Co. v. Storen, 304 U. S. 307 (1938), Indiana taxed the income of every Indiana resident (includ-ing individuals) and the income that every nonresident derived from sources within Indiana. Id., at 308. The State levied the tax on income earned by the plaintiff Indiana corporation on sales made out of the State. Id., at 309. Holding that this scheme violated the dormant Commerce Clause, we explained that the “vice of the statute” was that it taxed, “without apportionment, receipts derived from activities in interstate commerce.” Id., at 311. If these receipts were also taxed by the States in which the sales occurred, we warned, interstate commerce would be subjected “to the risk of a double tax burden to which intrastate commerce is not exposed, and which the commerce clause forbids.” Ibid.

The next year, in Gwin, White & Prince, Inc. v. Henne-ford, 305 U. S. 434 (1939), we reached a similar result. In that case, the State of Washington taxed all the income of persons doing business in the State. Id., at 435. Washington levied that tax on income that the plaintiff Washington corporation earned in shipping fruit from Washington to other States and foreign countries. Id., at 436–437. This tax, we wrote, “discriminates against interstate commerce, since it imposes upon it, merely because interstate commerce is being done, the risk of a multiple burden to which local commerce is not exposed.” Id., at 439.

In the third of these cases involving the taxation of a domestic corporation, Central Greyhound Lines, Inc. v. Mealey ,

In all three of these cases, the Court struck down a state tax scheme that might have resulted in the double taxation of income earned out of the State and that discriminated in favor of intrastate over interstate economic activity. As we will explain, see Part II–F, infra, Maryland's tax scheme is unconstitutional for similar reasons.

C

The principal dissent distinguishes these cases on the sole ground that they involved a tax on gross receipts rather than net income. We see no reason why the distinction between gross receipts and net income should matter, particularly in light of the admonition that we must consider “not the formal language of the tax statute but rather its practical effect.” Complete Auto , 430 U. S., at 279. The principal dissent claims, see post, at 592 (opinion of Ginsburg , J.), that “[t]he Court, historically, has taken the position that the difference between taxes on net income and taxes on gross receipts from interstate commerce warrants different results,” 2 C. Trost & P. Hartman, Federal Limitations on State and Local Taxation 2d § 10:1, p. 251 (2003) (hereinafter Trost) (emphasis added). But this historical point is irrelevant. As the principal dissent seems to acknowledge, our cases rejected this formal distinction some time ago. And the distinction between gross receipts and net income taxes was not the basis for our decisions in J.

The discarded distinction between taxes on gross receipts and net income was based on the notion, endorsed in some early cases, that a tax on gross receipts is an impermissible “direct and immediate burden” on interstate commerce, whereas a tax on net income is merely an “indirect and incidental” burden. United States Glue Co. v. Town of Oak Creek, 247 U. S. 321, 328–329 (1918); see also Shaffer v. Carter, 252 U. S. 37, 57 (1920). This arid distinction between direct and indirect burdens allowed “very little coherent, trustworthy guidance as to tax validity.” 2 Trost § 9:1, at 212. And so, beginning with Justice Stone's seminal opinion in Western Live Stock v. Bureau of Revenue , 303 U. S. 250 (1938), and continuing through cases like J. D. Adams and Gwin, White , the direct-indirect burdens test was replaced with a more practical approach that looked to the economic impact of the tax. These cases worked “a substantial judicial reinterpretation of the power of the States to levy taxes on gross income from interstate commerce.” 1 Trost § 2:20, at 175.

After a temporary reversion to our earlier formalism, see Spector Motor Service, Inc. v. O'Connor , 340 U. S. 602 (1951), “the gross receipts judicial pendulum has swung in a wide arc, recently reaching the place where taxation of gross receipts from interstate commerce is placed on an equal footing with receipts from local business, in Complete Auto Transit Inc. v . Brady ,” 2 Trost § 9:1, at 212. And we have now squarely rejected the argument that the Commerce Clause distinguishes between taxes on net and gross income. See Jefferson Lines, 514 U. S., at 190 (explaining that the Court in Central Greyhound “understood the gross receipts tax to be simply a variety of tax on income”); Moorman Mfg. Co. v. Bair, 437 U. S. 267, 280 (1978) (rejecting a suggestion that the Commerce Clause distinguishes between gross receipts

For its part, petitioner distinguishes J. D. Adams, Gwin, White , and Central Greyhound on the ground that they concerned the taxation of corporations, not individuals. But it is hard to see why the dormant Commerce Clause should treat individuals less favorably than corporations. See Camps Newfound, 520 U. S., at 574 (“A tax on real estate, like any other tax, may impermissibly burden interstate commerce” (emphasis added)). In addition, the distinction between individuals and corporations cannot stand because the taxes invalidated in J. D. Adams and Gwin, White applied to the income of both individuals and corporations. See Ind. Stat. Ann., ch. 26, § 64–2602 (Burns 1933) (tax in J. D. Adams); 1935 Wash. Sess. Laws ch. 180, Tit. II, § 4(e), pp. 710–711 (tax in Gwin, White).

Attempting to explain why the dormant Commerce Clause should provide less protection for natural persons than for corporations, petitioner and the Solicitor General argue that

This argument flails because corporations also benefit heavily from state and local services. Trucks hauling a corporation's supplies and goods, and vehicles transporting its employees, use local roads. Corporations call upon local police and fire departments to protect their facilities. Corporations rely on local schools to educate prospective employees, and the availability of good schools and other government services are features that may aid a corporation in attracting and retaining employees. Thus, disparate treatment of corporate and personal income cannot be justi-fed based on the state services enjoyed by these two groups of taxpayers.

The sole remaining attribute that, in the view of petitioner, distinguishes a corporation from an individual for present purposes is the right of the individual to vote. The principal dissent also emphasizes that residents can vote to change Maryland's discriminatory tax law. Post, at 583–584. The argument is that this Court need not be concerned about state laws that burden the interstate activities of individuals because those individuals can lobby and vote against legislators who support such measures. But if a State's tax unconstitutionally discriminates against interstate commerce, it is invalid regardless of whether the plaintiff is a resident voter or nonresident of the State. This Court has thus entertained and even sustained dormant Commerce Clause challenges by individual residents of the State that imposed the alleged burden on interstate commerce, Department of Revenue of Ky. v. Davis, 553 U. S. 328, 336 (2008); Granholm v. Heald, 544 U. S. 460, 469 (2005), and we have also sustained such a challenge to a tax whose burden was borne by in-

The principal dissent and Justice Scalia respond to these holdings by relying on dictum in Goldberg v. Sweet, 488 U. S. 252, 266 (1989), that it is not the purpose of the dormant Commerce Clause “ `to protect state residents from their own state taxes.' ” Post, at 584 (Ginsburg , J., dissenting); post, at 576 (Scalia, J., dissenting). But we repudiated that dictum in West Lynn Creamery, Inc. v. Healy, 512 U. S. 186 (1994), where we stated that “[s]tate taxes are ordinarily paid by in-state businesses and consumers, yet if they discriminate against out-of-state products, they are unconstitutional.” Id., at 203. And, of course, the dictum must bow to the holdings of our many cases entertaining Commerce Clause challenges brought by residents. We find the dissents' reliance on Goldberg 's dictum particularly inappropriate since they do not find themselves similarly bound by the rule of that case, which applied the internal consistency test to determine whether the tax at issue violated the dormant Commerce Clause. 488 U. S., at 261.

In addition, the notion that the victims of such discrimination have a complete remedy at the polls is fanciful. It is likely that only a distinct minority of a State's residents earns income out of State. Schemes that discriminate against income earned in other States may be attractive to legislators and a majority of their constituents for precisely this reason. It is even more farfetched to suggest that natural persons with out-of-state income are better able to infu-ence state lawmakers than large corporations headquartered

It would be particularly incongruous in the present case to disregard our prior decisions regarding the taxation of corporate income because the income at issue here is a type of corporate income, namely, the income of a Subchapter S corporation. Only small businesses may incorporate under Subchapter S, and thus acceptance of petitioner's submission would provide greater protection for income earned by large Subchapter C corporations than small businesses incorporated under Subchapter S.

D

In attempting to justify Maryland's unusual tax scheme, the principal dissent argues that the Commerce Clause imposes no limit on Maryland's ability to tax the income of its residents, no matter where that income is earned. It argues that Maryland has the sovereign power to tax all of the income of its residents, wherever earned, and it therefore reasons that the dormant Commerce Clause cannot constrain Maryland's ability to expose its residents (and nonresidents) to the threat of double taxation.

This argument confuses what a State may do without vio-lating the Due Process Clause of the Fourteenth Amendment with what it may do without violating the Commerce Clause. The Due Process Clause allows a State to tax “ all the income of its residents, even income earned outside the taxing jurisdiction.” Oklahoma Tax Comm'n v. Chickasaw Nation, 515 U. S. 450, 462–463 (1995). But “while a State may, consistent with the Due Process Clause, have the authority to tax a particular taxpayer, imposition of the tax may nonetheless violate the Commerce Clause.” Quill Corp. v. North Dakota, 504 U. S. 298, 305 (1992) (rejecting a due process challenge to a tax before sustaining a Commerce Clause challenge to that tax).

Our decision in Camps Newfound illustrates the point. There, we held that the Commerce Clause prohibited Maine

Although the principal dissent claims the mantle of precedent, it is unable to identify a single case that endorses its essential premise, namely, that the Commerce Clause places no constraint on a State's power to tax the income of its residents wherever earned. This is unsurprising. As cases like Quill Corp. and Camps Newfound recognize, the fact that a State has the jurisdictional power to impose a tax says nothing about whether that tax violates the Commerce Clause. See also, e. g., Barclays Bank PLC v. Franchise Tax Bd. of Cal., 512 U. S. 298 (1994) (separately addressing due process and Commerce Clause challenges to a tax); Moorman, 437 U. S. 267 (same); Standard Pressed Steel Co. v. Department of Revenue of Wash., 419 U. S. 560 (1975) (same); Lawrence v. State Tax Comm'n of Miss., 286 U. S. 276 (1932) (separately addressing due process and equal protection challenges to a tax); Travis v. Yale & Towne Mfg. Co., 252 U. S. 60 (1920) (separately addressing due process and privileges-and-immunities challenges to a tax).

One good reason why we have never accepted the principal dissent's logic is that it would lead to plainly untenable results. Imagine that Maryland taxed the income that its residents earned in other States but exempted income earned out of State from any business that primarily served Maryland residents. Such a tax would violate the dormant Commerce Clause, see Camps Newfound, supra, and it cannot be saved by the principal dissent's admonition that Maryland

The principal dissent, if accepted, would work a sea change in our Commerce Clause jurisprudence. Legion are the cases in which we have considered and even upheld dormant Commerce Clause challenges brought by residents to taxes that the State had the jurisdictional power to impose. See, e. g., Davis, 553 U. S. 328; Camps Newfound, supra; Fulton Corp., 516 U. S. 325; Bacchus Imports, 468 U. S. 263; Central Greyhound, 334 U. S. 653; Gwin, White , 305 U. S. 434; J. D. Adams, 304 U. S. 307. If the principal dissent were to prevail, all of these cases would be thrown into doubt. After all, in those cases, as here, the State's decision to tax in a way that allegedly discriminates against interstate commerce could be justified by the argument that a State may tax its residents without any Commerce Clause constraints.

E

While the principal dissent claims that we are departing from principles that have been accepted for “a century” and have been “repeatedly acknowledged by this Court,” see post, at 581, 582, 599, when it comes to providing supporting authority for this assertion, it cites exactly two Commerce Clause decisions that are supposedly inconsistent with our decision today. One is a summary affirmance, West Publishing Co. v. McColgan, 328 U. S. 823 (1946), and neither actually supports the principal dissent's argument.

In the first of these cases, Shaffer v. Carter, 252 U. S. 37, a resident of Illinois who earned income from oil in Oklahoma unsuccessfully argued that his Oklahoma income tax assessment violated several provisions of the Federal Constitution. His main argument was based on due process, but he also raised a dormant Commerce Clause challenge. Although the principal dissent relies on Shaffer for the proposition that a State may tax the income of its residents wherever

The dormant Commerce Clause challenge in Shaffer was nothing like the Wynnes' challenge here. The taxpayer in Shaffer argued that “[i]f the tax is considered an excise tax on business, rather than an income tax proper,” it unconstitutionally burdened interstate commerce. Brief for Appellant, O. T. 1919, No. 531, p. 166. The taxpayer did not argue that this burden occurred because he was subject to double taxation; instead, he argued that the tax was an impermissible direct “tax on interstate business.” Ibid. That argument was based on the notion that States may not impose a tax “directly” on interstate commerce. See supra, at 552– 553. After assuming that the taxpayer's business was engaged in interstate commerce, we held that “it is sufficient to say that the tax is imposed not upon the gross receipts, . . . but only upon the net proceeds, and is plainly sustainable, even if it includes net gains from interstate commerce. [United States Glue Co. v. Town of Oak Creek ], 247 U. S. 321.” Shaffer, supra, at 57.

Shaffer thus did not adjudicate anything like the double taxation argument that was accepted in later cases and is before us today. And the principal dissent's suggestion that Shaffer allows States to levy discriminatory net income taxes is refuted by a case decided that same day. In Travis, a Connecticut corporation challenged New York's net income tax, which allowed residents, but not nonresidents, certain tax exemptions. The Court first rejected the taxpayer's due process argument as “settled by our decision in Shaffer.” 252 U. S., at 75. But that due process inquiry was not the end of the matter: The Court then separately considered— and sustained—the argument that the net income tax's disparate treatment of residents and nonresidents violated the Privileges and Immunities Clause. Id., at 79–80.

The second case on which the principal dissent relies, West Publishing, is a summary affirmance and thus has “consider-

Moreover, we do not disagree with the result of West Publishing. The tax in that case was levied only on “ `the net income of every corporation derived from sources within this State ,' ” and thus was an internally consistent and nondiscriminatory tax scheme. See West Publishing Co. v. Mc- Colgan, 27 Cal. 2d 705, 707, n., 166 P. 2d 861, 862, n. (1946) (emphasis added). Moreover, even if we did disagree with the result, the citation in our summary affirmance to United States Glue Co. suggests that our decision was based on the since-discarded distinction between net income and gross receipts taxes. West Publishing did not—indeed, it could not—repudiate the double taxation cases upon which we rely.

The principal dissent also finds it significant that, when States first enacted modern income taxes in the early 1900's, some States had tax schemes similar to Maryland's. This practice, however, was by no means universal. A great many States—such as Alabama, Colorado, Georgia, Kentucky, and Maryland—had early income tax schemes that allowed their residents a credit against taxes paid to other States. See Ala. Code, Tit. 51, ch. 17, § 390 (1940); Colo. Stat. Ann., ch. 84A, § 38 (Cum. Supp. 1951); Ga. Code Ann. § 92–3111 (1974); Carroll's Ky. Stat. Ann., ch. 108, Art. XX, § 4281b–15 (Baldwin rev. 1936); Md. Ann. Code, Art. 81, ch.

In any event, it is hardly surprising that these early state ventures into the taxation of income included some protectionist regimes that favored the local economy over interstate commerce. What is much more significant is that over the next century, as our Commerce Clause jurisprudence developed, the States have almost entirely abandoned that approach, perhaps in recognition of their doubtful constitutionality. Today, the near-universal state practice is to provide credits against personal income taxes for such taxes paid to other States. See 2 J. Hellerstein & W. Hellerstein, State Taxation ¶20.10, pp. 20–163 to 20–164 (3d ed. 2003). 4

F

1

As previously noted, the tax schemes held to be unconstitutional in J. D. Adams, Gwin, White , and Central Greyhound had the potential to result in the discriminatory double taxation of income earned out of State and created a powerful incentive to engage in intrastate rather than interstate economic activity. Although we did not use the term in those cases, we held that those schemes could be cured by taxes that satisfy what we have subsequently labeled the

By hypothetically assuming that every State has the same tax structure, the internal consistency test allows courts to isolate the effect of a defendant State's tax scheme. This is a virtue of the test because it allows courts to distinguish between (1) tax schemes that inherently discriminate against interstate commerce without regard to the tax policies of other States, and (2) tax schemes that create disparate incentives to engage in interstate commerce (and sometimes result in double taxation) only as a result of the interaction of two different but nondiscriminatory and internally consistent schemes. See Armco , supra, at 645–646; Moorman, 437 U. S., at 277, n. 12; Brief for Tax Economists as Amici Curiae 23–24 (hereinafter Brief for Tax Economists); Brief for Michael S. Knoll & Ruth Mason as Amici Curiae 18–23 (hereinafter Brief for Knoll & Mason). The first category of taxes is typically unconstitutional; the second is not. 5 See Armco , supra, at 644–646; Moorman, supra, at 277, and

Neither petitioner nor the principal dissent questions the economic bona fides of the internal consistency test. And despite its professed adherence to precedent, the principal dissent ignores the numerous cases in which we have applied the internal consistency test in the past. The internal consistency test was formally introduced more than three decades ago, see Container Corp., supra, and it has been invoked in no fewer than seven cases, invalidating the tax in three of those cases. See American Trucking Assns., Inc. v. Michigan Pub. Serv. Comm'n, 545 U. S. 429 (2005); 7 Jeffer-

2

Maryland's income tax scheme flails the internal consistency test. 8 A simple example illustrates the point. Assume that every State imposed the following taxes, which are similar to Maryland's “county” and “special nonresident” taxes: (1) a 1.25% tax on income that residents earn in State, (2) a 1.25% tax on income that residents earn in other jurisdictions, and (3) a 1.25% tax on income that nonresidents

lenged tax imposed a heavier burden on interstate truckers in general than it did on intrastate truckers. Under the Michigan tax, some interstate truckers, i. e., those who used Michigan roads solely for trips that started and ended outside the State, did not pay this tax even though they benefited from the use of the State's roads; they were thus treated more favorably than truckers who did not leave the State. Other truckers who made interstate trips, i. e., those who made some intrastate trips, were treated less favorably. As the United States explained in its brief, “[n]either record evidence nor abstract logic makes clear whether the overall effect of such a system would be to increase or to reduce existing financial disincentives to interstate travel.” Brief for United States in American Trucking Assns., Inc. v. Michigan Pub. Serv. Comm'n, O. T. 2004, No. 03– 1230, p. 26.

Critically—and this dispels a central argument made by petitioner and the principal dissent—the Maryland scheme's discriminatory treatment of interstate commerce is not simply the result of its interaction with the taxing schemes of other States. Instead, the internal consistency test reveals what the undisputed economic analysis shows: Maryland's tax scheme is inherently discriminatory and operates as a tariff. See Brief for Tax Economists 4, 9; Brief for Knoll & Mason 2. This identity between Maryland's tax and a tariff is fatal because tariffs are “[t]he paradigmatic example of a law discriminating against interstate commerce.” West Lynn, 512 U. S., at 193. Indeed, when asked about the foregoing analysis made by amici Tax Economists and Knoll & Mason, counsel for Maryland responded, “I don't dispute the mathematics. They lose me when they switch from tariffs to income taxes.” Tr. of Oral Arg. 9. But Maryland has offered no reason why our analysis should change because we deal with an income tax rather than a formal tariff, and we see none. After all, “tariffs against the products of other States are so patently unconstitutional that our cases reveal not a single attempt by any State to enact one. Instead, the cases are filled with state laws that aspire to reap some of the benefits of tariffs by other means.” West Lynn, supra, at 193.

None of our dissenting colleagues dispute this economic analysis. The principal dissent focuses instead on a supposed “oddity” with our analysis: The principal dissent can envision other tax schemes that result in double taxation but

Petitioner and the Solicitor General argue that Maryland's tax is neutral, not discriminatory, because the same tax applies to all three categories of income. Specifically, they point out that the same tax is levied on (1) residents who earn income in State, (2) residents who earn income out of State, and (3) nonresidents who earn income in State. But the fact that the tax might have “ `the advantage of appearing nondiscriminatory' does not save it from invalidation.” Tyler Pipe , 483 U. S., at 248 (quoting General Motors Corp. v. Washington, 377 U. S. 436, 460 (1964) (Goldberg, J., dissenting)). See also American Trucking Assns., Inc. v. Scheiner, 483 U. S., at 281 (dormant Commerce Clause applies to state taxes even when they “do not allocate tax

Petitioner and the principal dissent, post, at 586, also note that by offering residents who earn income in interstate commerce a credit against the “state” portion of the income tax, Maryland actually receives less tax revenue from residents who earn income from interstate commerce rather than intrastate commerce. This argument is a red herring. The critical point is that the total tax burden on interstate commerce is higher, not that Maryland may receive more or less tax revenue from a particular taxpayer. See Armco , supra, at 642–645. Maryland's tax unconstitutionally discriminates against interstate commerce, and it is thus invalid regardless of how much a particular taxpayer must pay to the taxing State.

Once again, a simple hypothetical illustrates the point. Assume that State A imposes a 5% tax on the income that its residents earn in State but a 10% tax on income they earn in other jurisdictions. Assume also that State A happens to grant a credit against income taxes paid to other States. Such a scheme discriminates against interstate commerce because it taxes income earned interstate at a higher rate than income earned intrastate. This is so despite the fact that, in certain circumstances, a resident of State A who earns income interstate may pay less tax to State A than a neighbor who earns income intrastate. For example, if Bob lives in State A but earns his income in State B, which has a 6% income tax rate, Bob would pay a total tax of 10% on his income, though 6% would go to State B and (because of

The principal dissent is left with two arguments against the internal consistency test. These arguments are inconsistent with each other and with our precedents.

First, the principal dissent claims that the analysis outlined above requires a State taxing based on residence to “recede” to a State taxing based on source. Post, at 582. We establish no such rule of priority. To be sure, Maryland could remedy the infirmity in its tax scheme by offering, as most States do, a credit against income taxes paid to other States. See Tyler Pipe , supra, at 245–246, and n. 13. If it did, Maryland's tax scheme would survive the internal consistency test and would not be inherently discriminatory. Tweak our first hypothetical, supra, at 564–565, and assume that all States impose a 1.25% tax on all three categories of income but also allow a credit against income taxes that residents pay to other jurisdictions. In that circumstance, April (who lives and works in State A) and Bob (who lives in State A but works in State B) would pay the same tax. Specifically, April would pay a 1.25% tax only once (to State A), and Bob would pay a 1.25% tax only once (to State B, because State A would give him a credit against the tax he paid to State B).

But while Maryland could cure the problem with its current system by granting a credit for taxes paid to other States, we do not foreclose the possibility that it could comply with the Commerce Clause in some other way. See Brief for Tax Economists 32; Brief for Knoll & Mason 28– 30. Of course, we do not decide the constitutionality of a hypothetical tax scheme that Maryland might adopt because such a scheme is not before us. That Maryland's existing tax unconstitutionally discriminates against interstate commerce is enough to decide this case.

Moreover, the principal dissent's supposed flaw is simply a truism about every case under the dormant Commerce Clause (not to mention the Equal Protection Clause): Whenever government impermissibly treats like cases differently, it can cure the violation by either “leveling up” or “leveling down.” Whenever a State impermissibly taxes interstate commerce at a higher rate than intrastate commerce, that infirmity could be cured by lowering the higher rate, raising the lower rate, or a combination of the two. For this reason, we have concluded that “a State found to have imposed an impermissibly discriminatory tax retains flexibility in responding to this determination.” McKesson Corp. v. Division of Alcoholic Beverages and Tobacco, Fla. Dept. of Business Regulation, 496 U. S. 18, 39–40 (1990). See also Associated Industries of Mo. v. Lohman, 511 U. S. 641, 656 (1994); Fulton Corp., 516 U. S., at 346–347. If every claim that suffers from this “flaw” cannot succeed, no dormant Commerce Clause or equal protection claim could ever succeed.

G

Justice Scalia would uphold the constitutionality of the Maryland tax scheme because the dormant Commerce Clause, in his words, is “a judicial fraud.” Post, at 572. That was not the view of the Court in Gibbons v. Ogden, 9 Wheat., at 209, where Chief Justice Marshall wrote that there was “great force” in the argument that the Commerce Clause by itself limits the power of the States to enact laws regulating

Justice Scalia does not dispute the fact that state tariffs were among the principal problems that led to the adoption of the Constitution. See post, at 573. Nor does he dispute the fact that the Maryland tax scheme is tantamount to a tariff on work done out of State. He argues, however, that the Constitution addresses the problem of state tariffs by prohibiting States from imposing “ `Imposts or Duties on Imports or Exports.' ” Ibid. (quoting Art. I, § 10, cl. 2). But he does not explain why, under his interpretation of the Constitution, the Import-Export Clause would not lead to the same result that we reach under the dormant Commerce Clause. Our cases have noted the close relationship between the two provisions. See, e. g., State Tonnage Tax Cases, 12 Wall. 204, 214 (1871).

Justice Thomas also refuses to accept the dormant Commerce Clause doctrine, and he suggests that the Constitution was ratified on the understanding that it would not prevent a State from doing what Maryland has done here. He notes that some States imposed income taxes at the time of the adoption of the Constitution, and he observes that “[t]here is no indication that those early state income tax schemes provided credits for income taxes paid elsewhere.” Post, at 579 (dissenting opinion). “It seems highly implausible,” he writes, “that those who ratified the Commerce Clause understood it to conflict with the income tax laws of their States and nonetheless adopted it without a word of concern.” Post, at 579–580. This argument is plainly unsound.

First, because of the difficulty of interstate travel, the number of individuals who earned income out of State in 1787 was surely very small. (We are unaware of records

Second, Justice Thomas has not shown that the small number of individuals who earned income out of State were taxed twice on that income. A number of founding-era income tax schemes appear to have taxed only the income of residents, not nonresidents. For example, in his report to Congress on direct taxes, Oliver Wolcott, Jr., Secretary of Treasury, describes Delaware's income tax as being imposed only on “the inhabitants of this State,” and he makes no mention of the taxation of nonresidents' income. Report to 4th Cong., 2d Sess. (1796), concerning Direct Taxes, in 1 American State Papers, Finance 429 (1832). Justice Thomas likewise understands that the Massachusetts and Delaware income taxes were imposed only on residents. Post, at 579, n. These tax schemes, of course, pass the internal consistency test. Moreover, the difficulty of administering an income tax on nonresidents would have diminished the likelihood of double taxation. See R. Blakey, State Income Taxation 1 (1930).

Third, even if some persons were taxed twice, it is unlikely that this was a matter of such common knowledge that it must have been known by the delegates to the state ratifying conventions who voted to adopt the Constitution.

* * *

For these reasons, the judgment of the Court of Appeals of Maryland is affirmed.

It is so ordered.

Justice Scalia, with whom Justice Thomas joins as to Parts I and II, dissenting.

The Court holds unconstitutional Maryland's refusal to give its residents full credits against income taxes paid to other States. It does this by invoking the negative Com-

The fundamental problem with our negative Commerce Clause cases is that the Constitution does not contain a negative Commerce Clause. It contains only a Commerce Clause. Unlike the negative Commerce Clause adopted by the judges, the real Commerce Clause adopted by the People merely empowers Congress to “regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes.” Art. I, § 8, cl. 3. The Clause says nothing about prohibiting state laws that burden commerce. Much less does it say anything about authorizing judges to set aside state laws they believe burden commerce. The clear-est sign that the negative Commerce Clause is a judicial fraud is the utterly illogical holding that congressional consent enables States to enact laws that would otherwise constitute impermissible burdens upon interstate commerce. See Prudential Ins. Co. v. Benjamin, 328 U. S. 408, 421–427 (1946). How could congressional consent lift a constitutional prohibition? See License Cases, 5 How. 504, 580 (1847) (opinion of Taney, C. J.).

The Court's efforts to justify this judicial economic veto come to naught. The Court claims that the doctrine “has deep roots.” Ante, at 549. So it does, like many weeds.

The Court adds that “tariffs and other laws that burdened interstate commerce” were among “the chief evils that led to the adoption of the Constitution.” Ante , at 549. This line of reasoning forgets that interpretation requires heeding more than the Constitution's purposes; it requires heeding the means the Constitution uses to achieve those purposes. The Constitution addresses the evils of local impediments to commerce by prohibiting States from imposing certain especially burdensome taxes—“Imposts or Duties on Imports or Exports” and “Dut[ies] of Tonnage”—without congressional consent. Art. I, § 10, cls. 2–3. It also addresses these evils by giving Congress a commerce power under which it may

The failings of negative Commerce Clause doctrine go beyond its lack of a constitutional foundation, as today's decision well illustrates.

1. One glaring defect of the negative Commerce Clause is its lack of governing principle. Neither the Constitution nor our legal traditions offer guidance about how to separate improper state interference with commerce from permissible state taxation or regulation of commerce. So we must make the rules up as we go along. That is how we ended up with the bestiary of ad hoc tests and ad hoc exceptions that we apply nowadays, including the substantial nexus test, the fair apportionment test, and the fair relation test, Complete Auto Transit, Inc. v. Brady , 430 U. S. 274, 279 (1977), the interest-on-state-bonds exception, Department of Revenue of Ky. v. Davis, 553 U. S. 328, 353–356 (2008), and the sales-taxes-on-mail-orders exception, Quill Corp., supra, at 314–319.

The internal consistency rule invoked by the Court nicely showcases our ad hocery. Under this rule, a tax violates the Constitution if its hypothetical adoption by all States would interfere with interstate commerce. Ante, at 562–563. How did this exercise in counterfactuals find its way into our basic charter? The test, it is true, bears some resemblance to Kant's first formulation of the categorical imperative: “Act only according to that maxim whereby you can at the same time will that it should become a universal law” without contradiction. Grounding for the Metaphysics of Morals 30 (J.

2. Another conspicuous feature of the negative Commerce Clause is its instability. Because no principle anchors our development of this doctrine—and because the line between wise regulation and burdensome interference changes from age to economic age—one can never tell when the Court will make up a new rule or throw away an old one. “Change is almost [the doctrine's] natural state, as it is the natural state of legislation in a constantly changing national economy.” Ibid.

Today's decision continues in this proud tradition. Consider a few ways in which it contradicts earlier decisions:

• In an earlier case, the Court conceded that a trucking

tax “fail[ed] the `internal consistency' test,” but upheld the tax anyway. American Trucking Assns., Inc. v. Michigan Pub. Serv. Comm'n, 545 U. S. 429, 437 (2005). Now, the Court proclaims that an income tax “flails the internal consistency test,” and for that reason strikes it down. Ante, at 564.

• In an earlier case, the Court concluded that “[i]t is not a

purpose of the Commerce Clause to protect state resi-

dents from their own state taxes” and that residents

could “complain about and change the tax through the

[State's] political process.” Goldberg v. Sweet, 488 U. S.

252, 266 (1989). Now, the Court concludes that the neg-

ative Commerce Clause operates “regardless of whether

the plaintiff is a resident . . . or nonresident” and that

“the notion that [residents] have a complete remedy at

the polls is fanciful.” Ante, at 554, 555.

• In an earlier case, the Court said that “[t]he difference

in effect between a tax measured by gross receipts and

one measured by net income . . . is manifest and substan-

tial.” United States Glue Co. v. Town of Oak Creek, 247

U. S. 321, 328 (1918). Now, the Court says that the “for-

mal distinction” between taxes on net and gross income

“should [not] matter.” Ante , at 551.

• In an earlier case, the Court upheld a tax despite its

economic similarity to the gross-receipts tax struck

down in Central Greyhound Lines, Inc. v. Mealey , 334

U. S. 653 (1948). Oklahoma Tax Comm'n v. Jefferson

Lines, Inc., 514 U. S. 175, 190–191 (1995). The Court

explained that “economic equivalence alone has . . .

not been (and should not be) the touchstone of Com-

merce Clause jurisprudence.” Id., at 196–197, n. 7.

Now, the Court strikes down a tax in part because of its

economic similarity to the gross-receipts tax struck

down in Central Greyhound. Ante, at 550–551. The

Court explains that “we must consider `not the formal

language of the tax statute but rather its practical ef-

fect.' ” Ante, at 551. So much for internal consistency. 3. A final defect of our Synthetic Commerce Clause cases is their incompatibility with the judicial role. The doctrine

Today's enterprise of eliminating double taxation puts this problem prominently on display. The one sure way to eliminate all double taxation is to prescribe uniform national tax rules—for example, to allow taxation of income only where earned. But a program of prescribing a national tax code plainly exceeds the judicial competence. (It may even exceed the legislative competence to come up with a uniform code that accounts for the many political and economic differences among the States.) As an alternative, we could consider whether a State's taxes in practice overlap too much with the taxes of other States. But any such approach would drive us “to the perplexing inquiry, so unfit for the judicial department, what degree of taxation is the legitimate use, and what degree may amount to an abuse of power.” McCulloch v. Maryland, 4 Wheat. 316, 430 (1819). The Court today chooses a third approach, prohibiting States from imposing internally inconsistent taxes. Ante, at 562– 563. But that rule avoids double taxation only in the hypothetical world where all States adopt the same internally consistent tax, not in the real world where different States might adopt different internally consistent taxes. For example, if Maryland imposes its income tax on people who live in Maryland regardless of where they work (one internally consistent scheme), while Virginia imposes its income tax on people who work in Virginia regardless of where they live (another internally consistent scheme), Marylanders who work in Virginia still face double taxation. Post, at 596– 597. Then again, it is only fitting that the Imaginary Commerce Clause would lead to imaginary benefits.

* * *

Maryland's refusal to give residents full tax credits against income taxes paid to other States has its disadvantages. It threatens double taxation and encourages residents to work in Maryland. But Maryland's law also has its advantages. It allows the State to collect equal revenue from taxpayers with equal incomes, avoids the administrative burdens of verifying tax payments to other States, and ensures that every resident pays the State at least some income tax. Nothing in the Constitution precludes Maryland from decid-ing that the benefits of its tax scheme are worth the costs.

I respectfully dissent.

Justice Thomas, with whom Justice Scalia joins except as to the first paragraph, dissenting.

“I continue to adhere to my view that the negative Commerce Clause has no basis in the text of the Constitution, makes little sense, and has proved virtually unworkable in application, and, consequently, cannot serve as a basis for striking down a state statute.” McBurney v. Young , 569 U. S. 221, 237 (2013) (Thomas, J., concurring) (internal quotation marks and alteration omitted); accord, e. g., Camps

In reaching the contrary conclusion, the Court proves just how far our negative Commerce Clause jurisprudence has departed from the actual Commerce Clause. According to the majority, a state income tax that flails to provide residents with “a full credit against the income taxes that they pay to other States” violates the Commerce Clause. Ante, at 545. That news would have come as a surprise to those who penned and ratified the Constitution. As this Court observed some time ago, “Income taxes . . . were imposed by several of the States at or shortly after the adoption of the Federal Constitution.” Shaffer v. Carter, 252 U. S. 37, 51 (1920).* There is no indication that those early state income tax schemes provided credits for income taxes paid elsewhere. Thus, under the majority's reasoning, all of those state laws would have contravened the newly ratified Commerce Clause.

It seems highly implausible that those who ratified the Commerce Clause understood it to conflict with the income tax laws of their States and nonetheless adopted it without

In other areas of constitutional analysis, we would have considered these laws to be powerful evidence of the original understanding of the Constitution. We have, for example, relied on the practices of the First Congress to guide our interpretation of provisions defining congressional power. See, e. g., Golan v. Holder, 565 U. S. 302, 320–321 (2012) (Copyright Clause); McCulloch v. Maryland, 4 Wheat. 316, 401–402 (1819) (Necessary and Proper Clause). We have likewise treated “actions taken by the First Congress a[s] presumptively consistent with the Bill of Rights,” Town of Greece v. Galloway , 572 U. S. 565, 602 (2014) (Alito , J., concurring). See, e. g., id., at 575–577 (majority opinion); Car-roll v. United States, 267 U. S. 132, 150–152 (1925). And we have looked to founding-era state laws to guide our understanding of the Constitution's meaning. See, e. g., District of Columbia v. Heller, 554 U. S. 570, 600–602 (2008) (Second Amendment); Atwater v. Lago Vista, 532 U. S. 318, 337–340 (2001) (Fourth Amendment); Roth v. United States, 354 U. S. 476, 482–483 (1957) (First Amendment); Kilbourn v. Thomp-son, 103 U. S. 168, 202–203 (1881) (Speech and Debate Clause); see also Calder v. Bull, 3 Dall. 386, 396–397 (1798) (opinion of Paterson, J.) (Ex Post Facto Clause).

Even if one assumed that the negative Commerce Clause existed, I see no reason why it would be subject to a different mode of constitutional interpretation. The majority quibbles that I fail to “sho[w] that the small number of individuals

I am doubtful that the majority's application of one of our many negative Commerce Clause tests is correct under our precedents, see ante, at 575–576 (Scalia, J., dissenting); post, at 590–593 (Ginsburg , J., dissenting), but I am certain that the majority's result is incorrect under our Constitution. As was well said in another area of constitutional law: “[I]f there is any inconsistency between [our] tests and the historic practice . . . , the inconsistency calls into question the validity of the test, not the historic practice.” Town of Greece, supra, at 603 (Alito , J., concurring).

I respectfully dissent.

Justice Ginsburg , with whom Justice Scalia and Justice Kagan join, dissenting.

Today's decision veers from a principle of interstate and international taxation repeatedly acknowledged by this Court: A nation or State “may tax all the income of its residents, even income earned outside the taxing jurisdiction.” Oklahoma Tax Comm'n v. Chickasaw Nation, 515 U. S. 450, 462–463 (1995). In accord with this principle, the Court has regularly rejected claims that taxes on a resident's out-of-state income violate the Due Process Clause for lack of a sufficient “connection” to the taxing State. Quill Corp. v. North Dakota, 504 U. S. 298, 306 (1992) (internal quotation marks omitted); see, e. g., Lawrence v. State Tax Comm'n of Miss., 286 U. S. 276, 281 (1932). But under dormant Commerce Clause jurisprudence, the Court decides, a State is not really empowered to tax a resident's income from whatever source derived. In taxing personal income, the Court holds, source-based authority, i. e., authority to tax commerce con-

As I see it, nothing in the Constitution or in prior decisions of this Court dictates that one of two States, the domiciliary State or the source State, must recede simply because both have lawful tax regimes reaching the same income. See Moorman Mfg. Co. v. Bair, 437 U. S. 267, 277, n. 12 (1978) (finding no “discriminat[ion] against interstate commerce” where alleged taxation disparities were “the consequence of the combined effect” of two otherwise lawful income tax schemes). True, Maryland elected to deny a credit for income taxes paid to other States in computing a resident's county tax liability. It is equally true, however, that the other States that taxed the Wynnes' income elected not to offer them a credit for their Maryland county income taxes. In this situation, the Constitution does not prefer one lawful basis for state taxation of a person's income over the other. Nor does it require one State, in this case Maryland, to limit its residence-based taxation, should the State also choose to exercise, to the full extent, its source-based authority. States often offer their residents credits for income taxes paid to other States, as Maryland does for state income tax purposes. States do so, however, as a matter of tax “policy,” Chickasaw Nation, 515 U. S., at 463, n. 12 (internal quotation marks omitted), not because the Constitution compels that course.

For at least a century, “domicile” has been recognized as a secure ground for taxation of residents' worldwide income. Lawrence , 286 U. S., at 279. “Enjoyment of the privileges of residence within [a] state, and the attendant right to invoke the protection of its laws,” this Court has explained, “are inseparable from the responsibility for sharing the costs of government.” Ibid. “A tax measured by the net income of residents is an equitable method of distributing the burdens of government among those who are privileged to enjoy

More is given to the residents of a State than to those who reside elsewhere, therefore more may be demanded of them. With this Court's approbation, States have long favored their residents over nonresidents in the provision of local services. See Reeves, Inc. v. Stake, 447 U. S. 429, 442 (1980) (such favoritism does not violate the Commerce Clause). See also Martinez v. Bynum, 461 U. S. 321 (1983) (upholding residency requirements for free primary and secondary schooling). The cost of services residents enjoy is substantial. According to the State's Comptroller, for example, in 2012 Maryland and its local governments spent over $11 billion to fund public schools, $4 billion for state health programs, and $1.1 billion for the State's food supplemental program—all programs available to residents only. Brief for Petitioner 20–23. See also Brief for United States as Amicus Curiae 18 (Howard County—where the Wynnes lived in 2006— budgeted more than $903 million for education in fiscal year 2014). Excluding nonresidents from these services, this Court has observed, is rational for it is residents “who fund the state treasury and whom the State was created to serve.” Reeves, 447 U. S., at 442. A taxpayer's home State, then, can hardly be faulted for making support of local government activities an obligation of every resident, regardless of any obligations residents may have to other States.1

Residents, moreover, possess political means, not shared by outsiders, to ensure that the power to tax their income is

2

themselves and their property.” Ibid.

I hardly maintain, as the majority insistently asserts I do, that “the Commerce Clause places no constraint on a State's power to tax” its residents. Ante, at 557. See also ante, at 555–558. This Court has not shied away from striking down or closely scrutinizing state efforts to tax residents at a higher rate for out-of-state activities than for in-state activities (or to exempt from taxation only in-state activities). See, e. g., Department of Revenue of Ky. v. Davis, 553 U. S.

These rationales for a State taxing its residents' world-wide income are not diminished by another State's independent interest in “requiring contributions from [nonresidents] who realize current pecuniary benefits under the protection of the [State's] government.” Shaffer v. Carter, 252 U. S. 37, 51 (1920). A taxpayer living in one State and working in another gains protection and benefits from both—and so

States deciding whether to tax residents' entire worldwide income must choose between legitimate but competing tax policy objectives. A State might prioritize obtaining equal contributions from those who benefit from the State's protection in roughly similar ways. Or a State might prioritize ensuring that its taxpayers are not subject to double taxation. A State cannot, however, accomplish both objectives at once.

To illustrate, consider the Wynnes. Under the tax scheme in place in 2006, other Howard County residents who earned their income in State but who otherwise had the same tax profile as the Wynnes (e. g., $2.67 million in taxable net income) owed the same amount of taxes to Maryland as the Wynnes. See App. to Pet. for Cert. A–56. The scheme thus ensured that all residents with similar access to the State's protection and benefits and similar ability to pay made equal contributions to the State to defray the costs of those benefits. Maryland could not achieve that objective, however, without exposing the Wynnes to a risk of double taxation. Conversely, the Court prioritizes reducing the risk that the Wynnes' income will be taxed twice by two different States. But that choice comes at a cost: The Wynnes enjoyed equal access to the State's services but will have paid $25,000 less to cover the costs of those services than similarly situated neighbors who earned their income entirely within the State. See Pet. for Cert. 15.

States confront the same tradeoff when deciding whether to tax nonresidents' entire in-state income. A State can require all residents and nonresidents who work within the State under its protection to contribute equally to the cost of that protection. Or the State can seek to avoid exposing its workers to any risk of double taxation. But it cannot achieve both objectives.

The modern era of state income taxation dates from a Wis-consin tax enacted in 1911. See 1911 Wis. Laws ch. 658; R. Blakey, State Income Taxation 1 (1930). From close to the start of this modern era, States have taxed residents and nonresidents in ways materially indistinguishable from the way Maryland does now. In 1915, for example, Oklahoma began taxing residents' “entire net income . . . arising or accruing from all sources,” while at the same time taxing nonresidents' “entire net income from [sources] in th[e] State.” 1915 Okla. Sess. Laws ch. 164, § 1, pp. 232–233 (emphasis added). Like Maryland today, Oklahoma provided no credit to either residents or nonresidents for taxes paid elsewhere. See id., ch. 164, § 1 et seq., at 232–237. In 1917, neighboring Missouri adopted a similar scheme: Residents owed taxes on their “entire net income . . . from all sources” and nonresidents owed taxes on their “entire net income . . . from all sources within th[e] state.” 1917 Mo. Laws § 1(a), pp. 524–525 (emphasis added). Missouri too provided nei-

Almost immediately, this Court began issuing what be-came a long series of decisions, repeatedly upholding States' authority to tax both residents' worldwide income and nonresidents' in-state income. E. g., Maguire v. Trefry, 253 U. S. 12, 17 (1920) (resident income tax); Shaffer, 252 U. S., at 52–53, 57 (nonresident income tax). See also State Tax Comm'n of Utah v. Aldrich, 316 U. S. 174, 178 (1942); Curry , 307 U. S., at 368; Guaranty Trust Co. v. Virginia, 305 U. S. 19, 23 (1938); Graves, 300 U. S., at 313; Lawrence , 286 U. S., at 281. By the end of the 20th century, it was “a well-established principle of interstate and international taxation” that “sovereigns have authority to tax all income of their residents, including income earned outside their borders,” Chickasaw Nation, 515 U. S., at 462, 463, n. 12, and that sovereigns generally may also tax nonresidents on “income earned within the [sovereign's] jurisdiction,” id., at 463, n. 11.

Far from suggesting that States must choose between taxing residents or nonresidents, this Court specifically affirmed that the exact same “income may be taxed [simultaneously]

Likewise, in Guaranty Trust, both New York and Virginia had taxed income of a New York trust that had been distributed to a Virginia resident. 305 U. S., at 21–22. The resident sought to block Virginia's tax in order to avoid “double taxation” of the “identical income.” Id., at 22. Rejecting that challenge, the Court once again reiterated that “two States” may simultaneously tax the “same income.” Ibid.

The majority deems these cases irrelevant because they involved challenges brought under the Due Process Clause, not the Commerce Clause. See ante, at 556–558. These cases are significant, however, not because the constraints imposed by the two Clauses are identical. Obviously, they are not. See Quill Corp., 504 U. S., at 305. What the sheer volume and consistency of this precedent confirms, rather, is the degree to which this Court has—until now—endorsed the “well-established principle of interstate and international

In any event, it is incorrect that support for this principle is limited to the Court's Due Process Clause cases. In Shaf-fer, for example, this Court rejected both a Due Process Clause challenge and a dormant Commerce Clause challenge to an income tax “scheme” (the Oklahoma statute described above) with the very features the majority latches onto today: Oklahoma taxed residents on all worldwide income and nonresidents on all in-state income, without providing a credit for taxes paid elsewhere to either residents or nonresidents. 252 U. S., at 52–53 (Due Process Clause challenge); id., at 57 (dormant Commerce Clause challenge). See also supra, at 587. The specific tax challenged in Shaffer—a tax on a nonresident's in-state income—exposed taxpayers to the same risk of double taxation as the Maryland tax challenged in this case. The majority labors mightily to distinguish Shaffer, but it does not dispute the one thing that ought to give it pause: Today's decision overrules Shaffer's dormant Commerce Clause holding. See ante, at 558–559. I would not discard our precedents so lightly. Just as the tax in Shaffer encountered no constitutional shoals, so Maryland's scheme should survive the Court's inspection.

This Court's decision in West Publishing Co. v. McColgan, 328 U. S. 823 (1946), reinforces that conclusion. In West Publishing, the Court summarily affirmed a decision of the

“[T]here [is no] merit to the contention that [California's tax] discriminates against interstate commerce on the ground that it subjects part of plaintiff 's income to double taxation, given the taxability of plaintiff 's entire net income in the state of its domicile. Taxation in one state is not an immunization against taxation in other states. Taxation by states in which a corporation carries on business activities is justified by the advantages that attend the pursuit of such activities. Income may be taxed both by the state where it is earned and by the state of the recipient's domicile. Protection, benefit and power over the subject matter are not confined to either state.” 27 Cal. 2d 705, 710–711, 166 P. 2d 861, 864 (1946) (citations and internal quotation marks omitted).

In treating the matter summarily, the Court rejected an argument strikingly similar to the one the majority now embraces: that California's tax violated the dormant Commerce Clause because it subjected “interstate commerce . . . to the risk of a double tax burden.” Brief for Appellant Opposing Motion to Dismiss or Affirm in West Publishing Co. v. Mc- Colgan, O. T. 1945, No. 1255, pp. 20–21 (quoting J. D. Adams Mfg. Co. v. Storen, 304 U. S. 307, 311 (1938)).

The long history just recounted counsels in favor of respecting States' authority to tax without discount its residents' worldwide income. As Justice Holmes stated over a century ago, in regard to a “mode of taxation . . . of long standing, . . . the fact that the system has been in force for a very long time is of itself a strong reason . . . for leaving any improvement that may be desired to the legislature.” Paddell v. City of New York, 211 U. S. 446, 448 (1908). Only recently, this Court followed that sound advice in resisting a dormant Commerce Clause challenge to a taxing practice

The majority rejects Justice Holmes' counsel, observing that most States, over time, have chosen not to exercise plenary authority to tax residents' worldwide income. See ante, at 560–561. The Court, however, learns the wrong lesson from the “independent policy decision[s]” States have made. Chickasaw , 515 U. S., at 463, n. 12 (emphasis added; internal quotation marks omitted). This history demonstrates not that States “doub[t]” their “constitutiona[l]” authority to tax residents' income, wherever earned, as the majority speculates, ante, at 561, but that the very political processes the Court disregards as “fanciful,” ante, at 555, have in fact worked to produce policies the Court ranks as responsible—all the more reason to resist this Court's heavyhanded supervision.

The Court also attempts to defect the force of this history and precedent by relying on a “trilogy” of decisions it finds “particularly instructive.” Ante, at 550 (citing Central Greyhound Lines, Inc. v. Mealey , 334 U. S. 653 (1948); Gwin, White & Prince, Inc. v. Henneford, 305 U. S. 434 (1939); J. D. Adams Mfg., 304 U. S. 307). As the majority acknowledges, however, those three decisions involved gross receipts taxes, not income taxes. Ante, at 551–553. True, this Court has recently pointed to similarities between these two forms of taxation. See ante, at 552–553. But it is an indulgence in wishful thinking to say that this Court has previously “rejected the argument that the Commerce Clause distinguishes between” these taxes. Ante , at 552. For decades—includ-ing the years when the majority's “trilogy” was decided—the Court has routinely maintained that “the difference between taxes on net income and taxes on gross receipts from interstate commerce warrants different results” under the Com-

In Shaffer, for example, the Court rejected the taxpayer's dormant Commerce Clause challenge because “the tax [was] imposed not upon gross receipts . . . but only upon the net proceeds.” 252 U. S., at 57. Just three years before decid-ing J. D. Adams, the Court emphasized “manifest and substantial” differences between the two types of taxes, calling the burden imposed by a gross receipts tax “direct and immediate,” in contrast to the “indirect and incidental” burden imposed by an income tax. Stewart Dry Goods Co. v. Lewis, 294 U. S. 550, 558 (1935) (quoting United States Glue Co. v. Town of Oak Creek, 247 U. S. 321, 328 (1918)). And the Gwin, White opinion observed that invalidating the gross receipts tax at issue “left to the states wide scope for taxation of those engaged in interstate commerce, extending to . . . net income derived from it.” 305 U. S., at 441 (emphasis added).

The majority asserts that this Court “rejected” this distinction in Moorman Mfg . See ante, at 552. That decision in fact described gross receipts taxes as “more burdensome” than income taxes—twice. 437 U. S., at 280, 281. In particular, Moorman upheld a state income tax because an earlier decision had upheld a similar but “inherently more burdensome” gross receipts tax. Id., at 281. To say that the constitutionality of an income tax follows a fortiori from the constitutionality of a similar but “more burdensome” gross receipts tax is to affirm, not reject, a distinction between the two.

The Justices participating in the Court's “trilogy,” in short, would scarcely expect to see the three decisions invoked to invalidate a tax on net income.

Abandoning principles and precedent sustaining simultaneous residence- and source-based income taxation, the Court offers two reasons for striking down Maryland's

This Court has not rigidly required States to maintain internally consistent tax regimes. Before today, for two decades, the Court has not insisted that a tax under review pass the internal consistency test, see Oklahoma Tax Comm'n v. Jefferson Lines, Inc., 514 U. S. 175, 185 (1995), and has not struck down a state tax for failing the test in nearly 30 years, see American Trucking Assns., Inc. v. Scheiner, 483 U. S. 266, 284–287 (1987) ( ATA I ); Tyler Pipe Industries, Inc. v. Washington State Dept. of Revenue , 483 U. S. 232, 247– 248 (1987). Moreover, the Court has rejected challenges to taxes that funk the test. The Oklahoma tax “scheme” upheld under the dormant Commerce Clause in Shaffer, for example, is materially indistinguishable from—therefore as internally inconsistent as—Maryland's scheme. 252 U. S., at 57. And more recently, in American Trucking Assns., Inc. v. Michigan Pub. Serv. Comm'n, the Court upheld a “conced-e[dly]” internally inconsistent state tax. 545 U. S. 429, 438 (2005) (ATA II ). The Court did so, satisfied that there was a sufficiently close connection between the tax at issue and

6

the local conduct that triggered the tax. See ibid.

I see no reason why the Constitution requires us to disarm States from using a progressive tax, rather than a fat toll, to cover the costs of local services all residents enjoy. A head tax and a residence-based income tax differ, do they not, only in that the latter is measured by each taxpayer's ability to pay. Like the head tax, however, a residence-based income tax is triggered by the purely local conduct of residing in the State. And also like the head tax, a residence-based income tax covers costs closely connected to that residence: It finances services used by those living in the State. If a head tax qualifies for ATA II's reprieve from internal consistency, then so too must a residence-based income tax.

The majority asserts that because Maryland's tax scheme is internally inconsistent, it “operates as a tariff,” making it “ `patently unconstitutional.' ” Ante, at 565. This is a curious claim. The defining characteristic of a tariff is that it

ing.” See ante, at 563, n. 7. It is true that the United States made that argument. See Brief for United States as Amicus Curiae in ATA II, O. T. 2004, No. 03–1230, p. 26. But one searches the U. S. Reports in vain for any indication that the Court adopted it. Which is hardly surprising, for one would scarcely think that a test turning on “hypothetically” assessing a tax's “structure,” ante, at 562 (emphasis added), would require empirical data. What the Court in fact said in ATA II, is that the tax's internal inconsistency would be excused because any multiple taxation resulting from every State adopting the challenged tax would be caused by interstate firms' choosing to “engag[e] in local business in all those States.” 545 U. S., at 438.

There is, moreover, a deep flaw in the Court's chosen test. The Court characterizes internal consistency as a “cure,” ante, at 561–562, 568–569, but the test is scarcely that, at least for the double taxation the Court believes to justify its intervention. According to the Court, Maryland's tax “scheme” is internally inconsistent because Maryland simultaneously imposes two taxes: the county income tax and the special nonresident tax. See ante, at 551, 564–565, and n. 8. But only one of these taxes—the county income tax—actually falls on the Wynnes. Because it is the interaction between these two taxes that renders Maryland's tax scheme internally inconsistent, Maryland could eliminate the inconsistency by terminating the special nonresident tax—a measure that would not help the Wynnes at all. 8 Maryland could, in other words, bring itself into compliance with the test at the heart of the Court's analysis without removing the double tax burden the test is purportedly designed to “cure.”

To illustrate this oddity, consider the Court's “simple example” of April (who lives and works in State A) and Bob (who lives in State A, but works in State B). Ante, at 564, 568. Both States fail the internal consistency test because they impose (1) a 1.25% tax on income that residents earn in State, (2) a 1.25% tax on income that residents earn in other jurisdictions, and (3) a 1.25% tax on income that nonresidents earn in State. According to the Court, these

Each State, however, need not pursue the same approach to make their tax schemes internally consistent. 9 See ante, at 568. State A might choose to tax residents' worldwide income only, which it could do by eliminating the third tax (on nonresidents' in-state income). State B might instead choose exclusively to tax income earned within the State by deleting the second tax (on residents' out-of-state income). Each State's tax scheme would then be internally consistent. But the tax burden on April and Bob would remain unchanged: Just as under the original schemes, April would have to pay a 1.25% tax only once, to State A, and Bob would have to pay a 1.25% tax twice: once to State A, where he resides, and once to State B, where he earns the income. The Court's “cure,” in other words, is no match for the perceived disease.10

The Court asserts that this flaw is just a “truism” of every discrimination case, whether brought under the dormant

The majority's rule does not work this way. As just explained, Maryland can “cure” what the majority deems discrimination without lowering the Wynnes' taxes or increasing the tax burden on any of the Wynnes' neighbors—by terminating the special nonresident tax. See supra, at 596– 597. The State can, in other words, satisfy the majority not by lowering Bob's taxes or by raising April's taxes, but by eliminating the taxes imposed on yet a third taxpayer (say, Cathy). The Court's internal consistency test thus scarcely resembles “ordinary” antidiscrimination law. Whatever virtue the internal consistency test has in other contexts, this shortcoming makes it a poor excuse for jettisoning taxation principles as entrenched as those here.

* * *

This case is, at bottom, about policy choices: Should States prioritize ensuring that all who live or work within the State shoulder their fair share of the costs of government? Or must States prioritize avoidance of double taxation? As I have demonstrated, supra, at 596–597 and this page, achiev-