THE CREATION OF A GROUNDLESS EXCEPTION TO THE DORMANT COMMERCE CLAUSE: AN EXPANSION ON THE DISSENTING OPINION IN DEPARTMENT OF REVENUE V. DAVIS

Abstract

Most states exempt from state taxable income interest earned on in-state bonds. Some of those states, however, do not afford the same treatment to out-of-state bonds. This differential taxation scheme was the subject of the Supreme Court Case, Department of Revenue v. Davis, in which the Court upheld the disparate treatment of state-issued bonds.
This article analyzes the Court’s rationale for upholding the differential tax system in light of prior precedent interpreting the dormant Commerce Clause of the Constitution. It is the author’s contention that the doctrine created in, United Haulers Ass'n v. Oneida-Herkimer Solid Waste Mgmt., the “government-entity” exception to the dormant Commerce Clause, and applied in, Davis, was created under a false distinction and therefore should never have come to light. Had the “government-entity” exception not existed, the differential tax scheme most likely would have been struck down as a violation of the dormant Commerce Clause.