I had the pleasure of attending the oral argument in DaimlerChrysler v. Cuno this morning. The crowd was like a “who’s who” in state taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. law and policy. It was definitely the closest the tax world will ever come to a rock concert (without the noise, of course).
DaimlerChrysler went first, represented by former U.S. Solicitor General Ted Olsen. He spent about 10 minutes talking about standing, and tried to spend time discussing the merits. The justices wanted to come back to the standing issue, however, and he barely got any time to discuss the merits. Olsen is a suave presenter, and he was never tripped up by any of the questions, handling them all with ease.
Next up was Ohio Solicitor Douglas Cole. He also spent a few minutes answering questions about standing, but spent the bulk of his time on the merits. At the end of his presentation, Justice Stevens asked whether a subsidy equivalent to the Ohio tax creditA tax credit is a provision that reduces a taxpayer’s final tax bill, dollar-for-dollar. A tax credit differs from deductions and exemptions, which reduce taxable income, rather than the taxpayer’s tax bill directly. would violate the Commerce Clause. Cole answered that, though the Court has intimated in the past that there is a distinction between the two, the two are identical economically speaking.
Finally, Peter Enrich spoke, representing the respondents in the case. He spent about 15 minutes answering standing questions, and another 15 answering questions about the merits. At one point, Justice Scalia asked: “under your theory, wouldn’t a state with a lower tax rate discriminate against interstate commerce?” Chief Justice Roberts and Justice Souter joined the fray at this point, and they were both obviously concerned about the breadth of Enrich’s argument.
At one point, Souter said that if a company chooses to locate somewhere else, “that’s not discrimination, that’s a free choice.”
Roberts later asked Enrich whether state homestead property taxA property tax is primarily levied on immovable property like land and buildings, as well as on tangible personal property that is movable, like vehicles and equipment. Property taxes are the single largest source of state and local revenue in the U.S. and help fund schools, roads, police, and other services. credits would be unconstitutional under his theory. Enrich hesitated, but admitted that there would be problems with them under his theory.
Finally, late in Enrich’s argument, Scalia noted that political controversy over tax incentives, saying “Let the people fight it out. Why should that be an issue that the court should decide?”
We should know by this summer how the Court will dispose of the case. It was nice to see several members of the Court (from diverse philosophical perspectives) struggle with the implications of Enrich’s theory against investment tax credits. That has always been our chief concern about the Cuno case, and the bulk of our amicus briefs urged the justices to wrestle with the broader implications of the Cuno ruling.
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