Question

Question 1: Austin v. New Hampshire (P&I Clause) New Hampshire, which levies no personal income taxes, adopted an income tax that effectively applied only to nonresidents. The Commuters Income Tax was imposed on the income of nonresidents earned in New Hampshire. The state also levied a tax on residents income earned outside the state, but immediately nullified its effect through another provision that exempted such income from tax. Does the New Hampshire Commuters Income Tax violate the Privileges and Immunities Clause? Why or why not?

Question 2: Michelin Tire Corp v. Wages (I&E Clause) Michelin stored tires and tubes imported from France and Nova Scotia in a warehouse in Georgia while they were awaiting distribution to franchised dealers throughout the Southeast. The county assessed ad valorem property taxes against the tires and tubes, and the taxpayer challenged the assessment under the Import-Export Clause. What was the ruling of the Court and why?

Answer 1

(1) The Privileges and Immunity clause of US Constitution states that no state shall treat the the citizens of another state in discriminatory manner. This clause also includes right of interstate travel.

In the above case New Hampshire levied commuter income tax only on the income of non residents earned in New Hampshire but no such tax was levied on residents. Even if tax was levied on income of residents earned outside state , it was nullified by providing exemption.

This commuter income tax is therefore a pure violation of the Privileges and Immunities Clause, since the tax is solely on the income of non residents and they are not even provided any exemptions with respect to same and the discrimination is visible.

(2) In the case of Michelin Tire Corp v. Wages , the county had imposed ad valorem property taxes on the tires and tubes held in warehouse while Michilan tire corp claimed that the such tax should not be imposed.

The court in the above case held that such imposition of tax was valid.

The court furthur stated that the Import - Export clause was adopted by to give the federal government a source of revenue and a superior position to regulate foreign trade. The property tax was consistent with the import-export clause because (a) it did not interfere with the government's regulation of foreign trade (b) did not deprive the government of its rights to imposts and duties on imports and (c) it also did not interfere in the free flow of goods.

Here it taxed only the use of property and it was not based on the origin of goods