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The Economic Foundation of the Dormant Commerce Clause

46 Pages Posted: 25 Mar 2016 Last revised: 23 May 2017

Michael S. Knoll

University of Pennsylvania Law School; University of Pennsylvania Wharton School -- Real Estate Department

Ruth Mason

University of Virginia School of Law

Date Written: March 17, 2016

Abstract

Last Term, a sharply divided Supreme Court decided a landmark dormant Commerce Clause case, Comptroller of the Treasury of Maryland v. Wynne. Wynne represents the Court’s first clear acknowledgement of the economic underpinnings of one of its main doctrinal tools for resolving tax discrimination cases, the internal consistency test. In deciding Wynne, the Court relied on economic analysis we provided. This Essay explains that analysis, why the majority accepted it, and why the dissenters’ objections to the majority’s reasoning miss their mark. Essential to our analysis and the Court’s decision in Wynne is the idea that states are capable of discriminating not only on an inbound basis, but also on an outbound basis, and that the Commerce Clause prohibits discrimination on either basis. To aid in explicating our position, this Essay introduces the term “retentionism” as an analogue to protectionism. Whereas taxes or regulations are protectionist when they discourage outsiders from engaging in economic activities within a state, taxes or regulations are retentionist when then discourage in-state economic actors from engaging in out-of-state activities. As we show, the tax struck down in Wynne was both protectionist and retentionist.

Keywords: dormant commerce clause, Wynne, tax discrimination, competitive neutrality, protectionism

Suggested Citation

Knoll, Michael S. and Mason, Ruth, The Economic Foundation of the Dormant Commerce Clause (March 17, 2016). 103 Virginia Law Review 309 (2017); Virginia Law and Economics Research Paper No. 8; U of Penn, Inst for Law & Econ Research Paper No. 16-9. Available at SSRN: https://ssrn.com/abstract=2754321

Michael S. Knoll

University of Pennsylvania Wharton School -- Real Estate Department ( email )

Philadelphia, PA 19104-6330
United States

University of Pennsylvania Law School ( email )

3501 Sansom Street
Philadelphia, PA 19104
United States
215-898-6190 (Phone)
215-573-2025 (Fax)

Ruth Mason (Contact Author)

University of Virginia School of Law ( email )

580 Massie Road
Charlottesville, VA 22903
United States

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