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Lessons From Wynne: Why New York City's Internally Consistent Income Tax Nonetheless Violates the Dormant Commerce Clause

In Comptroller of the Treasury of Maryland v. Wynne, the United States Supreme Court held unconstitutional Maryland’s refusal to allow a taxpayer to credit income taxes paid to other states against a purportedly local income tax. This holding could have important consequences for similar income tax schemes, namely New York’s. This Note analyzes the New York City income tax in light of Wynne. Specifically, this Note evaluates the constitutionality of the New York City income tax when viewed in tandem with the State income tax (of which it is a part) in response to an “as applied” challenge to the law. It concludes that the State’s refusal to allow taxpayers a credit for income taxes paid to other states against the New York City income tax is unconstitutional. 
 
Part I of this Note examines the history and roots of the dormant Commerce Clause doctrine. Part II narrows the discussion to the Court’s application of the dormant Commerce Clause to state taxation of interstate commerce. Part III explains the intense opposition to the dormant Commerce Clause by a minority of justices on the Court. Part IV analyzes Wynne with an emphasis on its application to the New York income tax statute. Part V explains that while the New York City income tax is internally consistent and non-discriminatory when viewed in isolation, that description is irrelevant to the constitutional analysis. This Part demonstrates that the New York City income tax is an integral part of the New York State income tax despite its label, which misleads the non-discrimination inquiry. 
 
Through examining the Court’s discrimination case law and the relevant scholarly literature, this Note concludes that the internally consistent New York City income tax, when viewed in tandem with the New York State income tax (of which it is an organic part), nonetheless discriminates against interstate commerce and therefore violates the dormant Commerce Clause. This Note also analyzes general principles of international taxation and the Court’s teaching in the sales and use tax context to determine that a residence state must grant a credit for income taxes paid to a source state to alleviate any resulting double taxation.