Jensen: The Commerce Clause Doesn’t Override Rules Governing The Taxing Power

Erik M. Jensen (Case Western), The Commerce Clause Doesn’t Override Rules Governing the Taxing Power, 182 Tax Notes Fed. 1603 (Feb. 26, 2024):

In this article, Jensen challenges the argument that limitations on the taxing power in the Constitution can be ignored if a specific tax can be considered a regulation of commerce, and he examines the implications for Moore. ...

Libin Zhang has taken the position that the government missed the opportunity in Moore to argue — in briefs and during the December 5, 2023, oral argument — that the Supreme Court should uphold the mandatory repatriation tax (MRT) as a valid exercise of congressional power under the foreign commerce clause [Moore Implications From Forgetting the Foreign Commerce Clause, 182 Tax Notes Fed. 1031 (Feb. 5, 2024)].

That “clause” isn’t really a clause; it’s part of the commerce clause, which gives Congress the power “to regulate Commerce with Foreign Nations, and among the several States, and with the Indian tribes.” Zhang’s more general point is that “taxes justified by the commerce clause are not subject to the same constitutional limitations . . . that apply to taxes justified by other constitutional clauses.”

Indeed, Zhang says, “the courts have found taxes justified under the commerce clause which fail as taxes for want of uniformity as excise taxes, or apportionment as direct taxes, or because they were taxes on exports.” (Those three sets of limitations on the taxing power are set out in the footnote below.) If correct, that understanding would have permitted the Court in Moore to create a “limited holding” — lots of folks seem to want and expect a limited holding — “that would have avoided the thorny realization questions under the 16th Amendment and would have no implications for more domestic taxes such as a mark-to-market income tax or an annual wealth tax.”

I’m not convinced.

For a response, see Libin Zhang (Fried Frank, New York), Moore: Commerce Clause and Constitutional Tax Analysis, 189 Tax Notes Fed. 2203 (Mar. 18, 2024)