Bradley W. Joondeph (Santa Clara University – School of Law) has posted The States' Multiple Taxation of Personal Income (Case Western Reserve Law Review, Vol. 71, No. 1, 2020) on SSRN. Here is the abstract:
The common conception is that the multiple state taxation of personal income—the taxing of the same increment of a particular taxpayer’s income by more than one state—violates the dormant Commerce Clause. But this position does not bear serious scrutiny. As the Supreme Court’s decisions acknowledge, the states’ lawful exercise of their sovereign taxing powers often exposes taxpayers to duplicative state tax burdens. First, the Constitution permits states to use differing rules for determining where income is earned, and these inconsistencies inevitably lead to overlap in the attribution of that income. Second, the Constitution grants states the authority to tax income on the basis of both residency and source, which means that income earned in any state by a nonresident is subject to being taxed twice by different states. Thus, taxpayers engaged in interstate commerce are often exposed to duplicative state-level income taxes—a burden not borne by persons confining their economic activity to one state. Yet, this state of affairs does not offend the Commerce Clause. Properly understood, multiple taxation itself is not a constitutional problem. But state tax schemes that produce multiple taxation are frequently unconstitutional, as they often violate one of the two fundamental limits on states’ taxing authority: (1) that states may only tax income over which they have lawful jurisdiction; and (2) that states may not impose taxes that discriminate against interstate commerce. And this understanding of the role of multiple taxation in constitutional analysis—disentangled from the deeper constitutional principles that constrain a state’s authority to tax income—answers an important question left open by the Supreme Court’s recent decision in Comptroller of the Treasury of Maryland v. Wynne. Specifically, a state’s nondiscriminatory personal income tax on the entirety of its residents’ income—absent any provision protecting taxpayers from duplicative burdens when other states tax that same income—is fully consistent with the dormant Commerce Clause.