There is a debate about how innovative are Tesla’s new cars, but the company is indeed trying to do something new in the way it sells them. Tesla wants to sell directly to consumers without the use of dealers. Unfortunately, however, many states are trying to prevent direct sales. These laws are outrageous exercises in economic protectionism in favor of special interests.
When it comes to keeping down the costs of distribution, a manufacturer is the consumer’s BFF. Both the manufacturer’s and the consumer’s interest is the same—having the most efficient and cost-effective form of distribution. An efficient distribution allows the manufacturer to sell more cars, because the total cost of the product is lower. It also benefits the consumer, because the distribution is incidental to the enjoyment he or she gets from the product.
Some legislators argue that dealers are necessary because they can provide important services to consumers. But the manufacturer takes the level of service into account when deciding whether to sell directly. Optimal service helps the manufacturer’s bottom line as well, because it gains a reputation for cars that are well serviced and thus last a long time.
Huzzah: the Supreme Court has finally decided Comptroller v. Wynne, the second-oldest case on its docket. Huzzah again: by a 5-4 majority, the justices managed to get it right. States can tax income earned by residents in interstate commerce; but can they tax it twice, consistent with the dormant Commerce Clause doctrine?
Here’s a quick update on two pending Supreme Court items, both of huge interest to a vast range of commercial actors and actually the country. Non-event: still no decision in Comptroller v. Wynne, a “dormant” Commerce Clause case over the double taxation of income earned in interstate commerce. Next to Zivotofsky v. Kerry, the Jerusalem passport case, Wynne is the only case still open from the Court’s November arguments. As I wailed here and here, the Court’s highly unusual cert grant in Wynne—to a state court, in a case involving no lower court splits and on a ruling that affirmed the…
The Wall Street Journal, among other news outlets, reports that egg prices in California have risen sharply and are way out of line with prices elsewhere in the West. In 2008, California voters passed an initiative requiring chickens to have much, much bigger cages. California egg farmers protested about the attendant disadvantages. In 2010, the California legislature enacted a law requiring the layers of imported eggs—some four billion per year—to have equally spacious accommodations. The hens have since taken out home improvement loans and installed wall-to-wall carpets. For poorly understood reasons, however, there are fewer of them, and therefore fewer eggs, and therefore…
Herewith (as promised) a brief comment on brother Rappaport’s splendid earlier post on the “exclusive” Commerce Clause. Here’s the key paragraph:
It is too bad that Congress does not have the exclusive commerce power, because I believe it would be better than the original meaning. An exclusive power would make it less likely that the states would have agreed to the New Deal expanded, concurrent commerce power. Thus, the exclusive power would have been unlikely to have been expanded into the broad scope that the current commerce power has. With a more limited scope, the federal government would have limited authority, as would the states. There would not be two governments exercising the same authority and neither would have complete power to create cartels. This arrangement came close to being followed in the pre New Deal era, when the Court came pretty close to recognizing a limited federal Commerce Power that was largely exclusive. But it is now, sadly from a policy perspective, gone with the wind.
I think there’s pretty powerful evidence to the effect that the Founders did mean the Commerce Clause to be exclusive; it’s just that their idea of what constitutes “commerce among the several states” was so much narrower that ours.
Mike Rappaport’s latest post on the dormant Commerce Clause makes an excellent and hugely important point. (It has to do with a potentially exclusive Commerce Clause, and how that plays out in a statutory setting.) I swear I’ll get around to commenting on it, the minute I come up for air. For now, as previously threatened, a link to an exchange of views on the Supreme Court’s forthcoming (November 12) argument in Comptroller v. Wynne, published by the Vanderbilt Law Review En Banc. As previously described, Maryland imposes local taxes on residents’ income wherever earned, without crediting taxes already paid to other…
Mike Ramsey has another post about the Dormant Commerce Clause (DCC), following up on my previous post and this post by Mike Greve. Mike Ramsey attempts to set forth the strongest arguments against the DCC, with which I agree. There is no good original meaning argument for the DCC.
There is, however, a somewhat stronger argument for an exclusive Commerce Power. Unlike the DCC, one could conceivably conclude that the Commerce Clause provides exclusive authority to the federal government to regulate interstate commerce. That would differ from the DCC because the exclusive authority would take away from the states all authority to regulate interstate commerce, not just the power to discriminate against interstate commerce.
While Chief Justice Marshall toyed with this argument, and there us something textually to be said for it, I still don’t think it works for three reasons. First, the Commerce Clause does not say that it is exclusive and one would not normally infer from the language that the power was exclusive. Second, as Mike Ramsey notes, the Constitution seems to provide for exclusive power by doing so expressly, as when it states that Congress shall have the power “to exercise exclusive legislation in all cases whatsoever” over the District of Columbia. Third, the Constitution seems to recognize that the states can pass laws involving interstate and foreign commerce, as it provides that “no state shall, without the Consent of the Congress, lay any Imposes or Duties on Imports or Exports, except what may be absolutely necessary for executing its inspection laws” (although there is a complicated counterargument involving this provision).
1. In McCulloch, the Supreme Court held that federal institutions such as the Bank of the United States were immune from discriminatory state taxes. I have long been skeptical of this opinion. The federal government has the power to immunize federal institutions and so an argument for a constitutional immunity is extremely weak. That said, there is a reasonably strong argument that the federal statute establishing the bank preempted the state tax.
2. I do not believe that the Constitution’s original meaning supports the Dormant Commerce Clause. It is possible that some of the work may be done by the Privileges and Immunities Clause of Article IV, but only some of it. While there are articles attempting to ground a Dormant Commerce Clause in the original meaning, I have not found them persuasive.
3. I believe the Dormant Commerce Clause doctrine is beneficial and therefore I would be disappointed from a policy perspective if it were overturned. By contrast, I do not think desirable policy would be harmed if the immunity portion of McCulloch were overturned, because Congress would step in.
4. While Congress would surely, in the absence of the McCulloch immunity, preempt state laws that interfered with federal institutions, it is less clear that it would act to prohibit states from taking actions that interfered with interstate commerce. But I believe it is much more likely than Mike Greve does. It may be, as Mike says, that “No tax coordination rule has ever come from Congress (let alone the states themselves).” But that does not mean, as Mike says, that “The argument against the dormant Commerce Clause is an argument for unchecked state aggression.”