Tài liệu The Silence of Congress pdf

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Published by
State University of New York Press, Albany
© 2007 State University of New York
All rights reserved
Printed in the United States of America
No part of this book may be used or reproduced in any manner whatsoever
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For information, contact State University of New York Press, Albany, NY
www.sunypress.edu
Production by Kelli W. LeRoux
Marketing by Anne M. Valentine
Library of Congress Cataloging-in-Publication Data
Zimmerman, Joseph Francis, 1928––
The silence of Congress : state taxation of interstate commerce /
Joseph F. Zimmerman
p. cm.
Includes bibliographical references and index.
ISBN 978–0–7914–7205–7 (alk. paper)
1. Intergovernmental tax relations—United States. 2. Interstate commerce—
Taxation—United States—States. I. Title. II. Title: State taxation of interstate
commerce.
HJ275.Z56 2007
336.2Ј01373—dc22
20066100301
10 9 8 7 6 5 4 3 2 1
This book is dedicated with love to
Kieran Thomas Taylor
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Contents
Preface viii
Acknowledgments xi
Chapter 1. State Competition for Tax Revenue 1
Chapter 2. Excise and Documentary Taxes 23
Chapter 3. Severance Taxes 47
Chapter 4. The Nonresident Income Tax 61
Chapter 5. Corporate Income Taxation 79
Chapter 6. Escheats and Tax Revenue Competition 105
Chapter 7. Competition for Other Tax Resources 131
Chapter 8. The Silence of Congress 153
Chapter 9. Fairness in Taxation of Interstate Income 175
Notes 193
Bibliography 233
Index 277
vii
Preface
T
he United States Constitution established the world’s first federal
system encompassing an economic union and a political union
whose central characteristic is dual sovereignty with Congress possess-
ing delegated powers and states possessing reserved or residual powers.
A federal system automatically raises questions pertaining to the nature
of appropriate relations between the national government and state gov-
ernments at the boundary lines of their respective authority and between
sister states each possessing equal powers. Relations between states in
such unions may be cooperative, competitive, and/or conflictive in gen-
eral and with respect to taxation of interstate commerce in particular.
The constitution reserves substantial powers, including taxation, to
state legislatures and the result has been the enactment of nonuniform
state taxation laws that may or may not cause interstate relations prob-
lems and result in a state filing a motion in the U.S. Supreme Court for
permission to file a complaint in equity against another state seeking to
invoke the court’s original jurisdiction. The passage of time witnessed
state legislatures enacting an increasing number of tax credits and exemp-
tions for a wide variety of purposes including economic development and
research. Collectively, these statutes resulted in nonharmonious state
laws levying taxes on interstate commerce that often produce taxpayer
inequities, costly taxpayer compliance costs, and law suits by individuals
and multijurisdictional corporations seeking equity in taxation.
The constitution delegates to Congress two most important powers
to solve problems prevalent under the Articles of Confederation and
Perpetual Union. The constitutional authority to levy taxes to raise rev-
enues relieved Congress of its former dependence on voluntary contri-
butions of funds by states that often were not made or were made in
part. The plenary power to regulate commerce among the several states
was granted in the expectation Congress would enact statutes, reinforced
viii
by the supremacy of the laws clause, to invalidate barriers, tax and
others, to interstate commerce erected by state legislatures disrupting the
economic union. Congress in its first session in 1789 exercised its taxa-
tion powers by imposing imposts on imports. However, the national
legislature did not enact a statute regulating interstate commerce until
1887. Failure to exercise this delegated power led to the use of the term
“the Silence of Congress” and the U.S. Supreme Court in 1824 develop-
ing its dormant commerce clause doctrine in order to allow state and
U.S. courts to adjudicate controversies involving state-erected barriers to
interstate commerce.
Although Congress subsequently on a gradual basis enacted laws
regulating such commerce, no statute regulating state taxation of inter-
state commerce was enacted until 1959 and this statute and eighteen of
the nineteen subsequent statutes regulating such taxation are minor ones.
The exception is the prohibition of taxation of Internet sales that
deprives state and local governments levying a sales tax of revenues in
excess of $16 billion annually.
State and U.S. courts adjudicate interstate taxation controversies and
private citizen and corporate challenges of state taxes levied on interstate
commerce. The U.S. Supreme Court and individual justices on several
occasions issued opinions calling on Congress to harmonize such state
taxation as Congress, the political branch representing the people, pos-
sesses plenary authority to address problems created by nonuniform
state taxation of interstate commerce and is better equipped, in terms of
staff and hearings, to fashion comprehensive remedies than the court.
The latter acts spasmodically after invoking its original jurisdiction or
agreeing to review the decision of a lower court and in both types of
cases its jurisdiction is limited to the narrow issue in controversy.
Furthermore, academics specializing in taxation of interstate commerce,
other tax experts, and multijurisdictional corporations urged Congress
to initiate action to make state taxation of interstate commerce more uni-
form. The congressional response has been very limited and designed
principally to protect specified taxpayers.
The purposes of this book are to examine (1) the desirability of
Congress’s decision to leave prime responsibility for resolving taxation
controversies involving interstate commerce to state and U.S. courts, (2)
tax regulatory actions that could be initiated by Congress and the
prospect for their enactment, (3) alternative methods of achieving uni-
form state laws levying taxes on interstate commerce, and (4) actions
Congress should initiate to encourage enactment of uniform state laws
and interstate regulatory compacts.
Preface ix
ix
The volume concludes by adding three maxims involving state taxa-
tion of interstate commerce to the four developed by Adam Smith in
1776 and presenting the outline of a broad theory of interstate relations
encompassing the subject of state taxation of interstate commerce.
x Preface
Acknowledgments
T
he literature on state taxation in the United States is large, and
searching such literature is time-consuming. I have been most fortu-
nate in having highly competent research associates who identified and
obtained copies of pertinent books, government reports, journal articles,
Ph.D. dissertations, conference papers, and other unpublished docu-
ments.
I am most pleased to acknowledge a special debt of gratitude to Paul
Alexander, Winston R. Brownlow, and Katherine M. Zuber, who per-
formed their assignments in a most conscientious, professional, and
timely manner. Without their assistance, completion of a scholarly man-
uscript on the subject of state taxation of interstate commerce would
have been delayed significantly.
As usual, I compliment Addie Napolitano for excellence in preparing
the manuscript for publication and for solving word processing prob-
lems. Any errors of act or misinterpretation are solely my responsibility.
xi
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Chapter 1
State Competition for Tax Revenue
A
dam Smith in 1776 established four famous tax maxims for all
nations. A tax, a compulsory extraction of funds, should (1) fall
equally on each taxpayer, (2) be certain and not arbitrary, (3) be conve-
nient in terms of payment, and (4) be economical to collect.
1
These
maxims remain valid, but were developed prior to the establishment in
1789 of the first federation—the United States of America—and its com-
plex system of national, state, and local taxation including the national
graduated personal income tax that suggests the first maxim should be
modified to read “fall equally on each taxpayer according to his or her
ability to pay.” The federal system has revealed the need for additional
maxims (see chapter 9).
A confederate or a federal system may encourage states to increase
their respective revenues by enacting taxes whose incidence, directly
or indirectly, falls primarily on business firms and residents in sister
states and one or more foreign nations. New York during the confed-
eracy established by the Articles of Confederation and Perpetual
Union, for example, levied import duties on goods entering the state’s
ports from overseas, including goods destined for sister states, a form
of tax exportation.
1