Unanimous Supreme Court Dismisses Cuno Case

May 15, 2006

In a unanimous 9-0 ruling, the U.S. Supreme Court this morning ruled that the plaintiffs in Cuno v. DaimlerChrysler did not have federal standing to bring a lawsuit over the constitutionality of Ohio’s investment tax credit. In writing for the unanimous Court, Chief Justice Roberts said:

“(B)ecause state budgets frequently contain an array of tax and spending provisions, any number of which may be challenged on a variety of bases, affording state taxpayers standing to press such challenges simply because their tax burden gives them an interest in the state treasury would interpose the federal courts as virtually continuing monitors of the wisdom and soundness of state fiscal administration, contrary to the more modest role Article III envisions for federal courts.”

Indeed, this mirrors one of the arguments we made in our second amicus brief in the case, where we warned against making the federal courts the forum for generalized state tax policy grievances.

While state courts will continue to hear claims against tax incentives on a variety of grounds (some more compelling than others), the Sixth Circuit’s opinion in Cuno–which took an axe to a problem that requires a scalpel–is now partially vacated. This ruling is a victory for the concept of tax competition and for those state lawmakers who want to make their state’s tax system more competitive–even if we don’t always agree with their chosen means to reach that end.

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