Comptroller of Treasury of Md. v. Wynne
The Court ruled that Maryland's personal income tax scheme violates the Constitution's limits on state interference with interstate commerce, because it lets some income earned by Maryland residents in other states be taxed twice.
The decision means Maryland residents who pay income tax to other states must get a credit against both parts of Maryland's income tax, not just one, and it reinforces long-standing limits on how states can structure taxes that fall more heavily on interstate economic activity than on purely local activity.
How it got here: Maryland's Comptroller and Tax Court upheld the assessment, a county circuit court reversed on constitutional grounds, and the Maryland Court of Appeals affirmed that reversal before the Comptroller sought Supreme Court review.
The Case in Depth
What happened
Brian and Karen Wynne, Maryland residents, owned stock in an S corporation that earned income in dozens of other states and paid taxes there. On their 2006 Maryland return, the Wynnes claimed a credit for those out-of-state taxes. Maryland allowed the credit against the "state" portion of its income tax but not against the separate "county" portion, resulting in a tax deficiency assessment.
The question before the Court
Could Maryland tax its residents' out-of-state income without giving them a credit against the local "county" portion of their income tax?
Why it matters
Maryland residents who earn income in other states will now get a credit against the local county portion of their income tax, not just the state portion, ending double taxation on that income. Other states with similar tax structures may need to revisit their own credit rules, and businesses and individuals who work across state lines gain a clearer constitutional baseline for challenging taxes that penalize interstate earning.
What changes now
This is a final merits decision, not a temporary order. Maryland's tax scheme, insofar as it denies the county-tax credit, is unconstitutional, and Maryland must revise how it credits residents for taxes paid to other states, such as by extending its existing state-tax credit to the county tax or through some other fix. The Court left it to Maryland to choose the specific remedy, so long as the fix removes the discriminatory double taxation.
What this does not decide
The Court did not decide how Maryland must fix its tax scheme, only that the current version is unconstitutional; it left open other approaches Maryland might adopt, such as eliminating the special nonresident tax instead of adding a county-tax credit, without ruling on the constitutionality of any specific alternative.
Concurrences and dissents
Dissent — Justice Scalia
Justice Scalia joined the principal dissent's application of precedent but wrote separately to argue that the entire dormant Commerce Clause doctrine is a judicial invention with no textual basis, calling it a 'judicial fraud.' He would uphold any tax unless it discriminates on its face or is indistinguishable from a previously invalidated tax, and found Maryland's tax met neither condition.
Dissent — Justice Thomas
Justice Thomas reiterated his view that the dormant Commerce Clause has no basis in the constitutional text and cannot support striking down state laws. He pointed to early state income tax schemes existing at the founding that offered no credits for taxes paid elsewhere, arguing it is implausible the Constitution's ratifiers understood the Commerce Clause to conflict with such laws.
Dissent — Justice Ginsburg
Justice Ginsburg argued that a state's home-based authority to tax all of a resident's income, wherever earned, does not have to yield to another state's source-based tax on the same income, since both are independently lawful. She contended the majority's 'internal consistency' test does not actually cure the double taxation it condemns and that this is fundamentally a tax-policy tradeoff best left to legislatures.
How the Court got there
The legal reasoning, step by step
- The Court applied the dormant Commerce Clause, an unwritten but long-recognized limit that stops states from discriminating against economic activity simply because it crosses state lines, even though the Constitution's text only grants Congress power to regulate interstate commerce.
- It found this case controlled by earlier decisions striking down state taxes that could result in income being taxed twice and that favored in-state economic activity over interstate activity, rejecting Maryland's argument that those cases involved corporations and gross receipts rather than individuals and net income.
- The Court applied the 'internal consistency' test, which asks whether interstate commerce would be taxed at a higher rate than intrastate commerce if every state adopted the same tax structure, to isolate discriminatory effects from mere differences between states' tax policies.
- Applying that test, the Court found that if every state copied Maryland's system, a resident earning income out of state would pay tax twice while a resident earning all income locally would pay only once, meaning the scheme is inherently discriminatory rather than merely the product of overlapping state policies.
- The Court concluded that this inherent discrimination made Maryland's tax operate like a tariff on interstate economic activity, the paradigm example of an unconstitutional burden on interstate commerce, regardless of whether Maryland collected more or less total revenue as a result.
Doctrinal impact
Cases affected by this decision
Reaffirms J. D. Adams Mfg. Co. v. Storen (304 U. S. 307)
Relied on as controlling authority that taxes risking double taxation of interstate income are unconstitutional.
Reaffirms Gwin, White & Prince, Inc. v. Henneford (305 U. S. 434)
Relied on as precedent invalidating a tax scheme discriminating against interstate commerce.
Reaffirms Central Greyhound Lines, Inc. v. Mealey (334 U. S. 653)
Relied on as precedent striking down a tax imposing an unfair burden on interstate commerce.
Distinguishes Shaffer v. Carter (252 U. S. 37)
The Court said this earlier case did not actually address the double-taxation argument at issue here.
Distinguishes West Publishing Co. v. McColgan (328 U. S. 823)
The Court said this summary affirmance involved a nondiscriminatory tax, unlike Maryland's scheme.