Point & Counterpoint: The Constitutionality of Tax Exemptions for Home State Bonds Under the Dormant Commerce Clause

6 Pages Posted: 1 Apr 2007

See all articles by Linda M. Beale

Linda M. Beale

Wayne State University Law School

Abstract

The state exemption from taxation of interest on municipal and local home-state bonds when other states' bond interest is subject to tax creates a difficult issue for dormant Commerce Clause analysis. Two state courts have considered the extraterritorial bond taxation issue and have come to opposite conclusions regarding its constitutionality. This Point examines the arguments presented by the two cases and by various commentators, including concerns about the vagueness of the dormant Commerce Clause discrimination concept, the difficulty of applying the market participant exception in this context, and the changes in the global financial markets. It suggests that the home state exemption, while perhaps misguided, should be permitted under a contemporary view of federalism and the relations among the states.

Keywords: municiple bonds, dormant Commerce Clause, market participant, federalism

Suggested Citation

Beale, Linda M., Point & Counterpoint: The Constitutionality of Tax Exemptions for Home State Bonds Under the Dormant Commerce Clause. Wayne State University Law School Research Paper No. 7-12. Available at SSRN: https://ssrn.com/abstract=976481 or http://dx.doi.org/10.2139/ssrn.976481

Linda M. Beale (Contact Author)

Wayne State University Law School ( email )

471 Palmer
Detroit, MI 48202
United States

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