West Lynn Creamery v. Healy (93-141), 512 U.S. 186 (1994).
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No. 93-141


on writ of certiorari to the supreme judicial court of massachusetts

[June 17, 1994]

Justice Scalia , with whom Justice Thomas joins,

The purpose of the negative Commerce Clause, we have often said, is to create a national market. It does not follow from that, however, and we have never held, that every state law which obstructs a national market violates the Commerce Clause. Yet that is what the Court says today. It seems to have canvassed the entire corpus of negative Commerce Clause opinions, culled out every free market snippet of reasoning, and melded them into the sweeping principle that the Constitution is violated by any state law or regulation that "artificially encourag[es] in state production even when the same goods could be produced at lower cost in other States."

Ante, at 6. See also ante, at 7 (the law here is unconstitutional because it "neutraliz[es] the advantage possessed by lower cost out of state producers"); ante, at 8 (price order is unconstitutional because it allows in state producers "who produce at higher cost to sell at or below the price charged by lower cost out of state producers"); ante, at 10 (a state program is unconstitutional where it " `neutralizes advantages belonging to the place of origin' ") (quoting Baldwin v. G. A. F. Seelig, Inc., 294 U.S. 511, 527 (1935)); ante, at 19 ("Preservation of local industry by protecting it from the rigors of interstate competition is the hallmark of the economic protectionism that the Commerce Clause prohibits").

As the Court seems to appreciate by its eagerness expressly to reserve the question of the constitutionality of subsidies for in state industry, ante, at 12 and n. 15, this expansive view of the Commerce Clause calls into question a wide variety of state laws that have hitherto been thought permissible. It seems to me that a State subsidy would clearly be invalid under any formulation of the Court's guiding principle identified above. The Court guardedly asserts that a "pure subsidy funded out of general revenue ordinarily imposes no burden on interstate commerce, but merely assists local business," ante, at 13 (emphasis added), but under its analysis that must be taken to be true only because most local businesses (e.g., the local hardware store) are not competing with businesses out of State. The Court notes that, in funding this subsidy, Massachusetts has taxed milk produced in other States, and thus "not only assists local farmers, but burdens interstate commerce." Ibid. But the same could be said of almost all subsidies funded from general state revenues, which almost invariably include monies from use taxes on out of state products. And even where the funding does not come in any part from taxes on out of state goods, "merely assist[ing]" in state businesses, ibid., unquestionablyneutralizes advantages possessed by out of state enterprises. Such subsidies, particularly where they are in the form of cash or (what comes to the same thing) tax forgiveness, are often admitted to have as their purpose--indeed, are nationally advertised as having as their purpose--making it more profitable to conduct business in state than elsewhere, i.e., distorting normal market incentives.

The Court's guiding principle also appears to call into question many garden variety state laws heretofore permissible under the negative Commerce Clause. A state law, for example, which requires, contrary to the industry practice, the use of recyclable packaging materials, favors local non exporting producers, who do not have to establish an additional, separate packaging operation for in state sales. If the Court's analysis is to be believed, such a law would be unconstitutional without regard to whether disruption of the "national market" is the real purpose of the restriction, and without the need to "balance" the importance of the state interests thereby pursued, see Pike v. Bruce Church, Inc., 397 U.S. 137 (1970). These results would greatly extend the negative Commerce Clause beyond its current scope. If the Court does not intend these consequences, and does not want to foster needless litigation concerning them, it should not have adopted its expansive rationale. Another basis for deciding the case is available, which I proceed to discuss.

"The historical record provides no grounds for reading the Commerce Clause to be other than what it says--an authorization for Congress to regulate commerce." Tyler Pipe Industries, Inc. v. Washington State Dept. of Revenue, 483 U.S. 232, 263 (1987) (Scalia, J., concurring in part and dissenting in part). Nonetheless, we formally adopted the doctrine of the negative CommerceClause 121 years ago, see Case of the State Freight Tax, 15 Wall. 232 (1873), and since then have decided a vast number of negative Commerce Clause cases, engendering considerable reliance interests. As a result, I will, on stare decisis grounds, enforce a self executing "negative" Commerce Clause in two situations: (1) against a state law that facially discriminates against interstate commerce, and (2) against a state law that is indistinguishable from a type of law previously held unconstitutional by this Court. See Itel Containers Int'l Corp. v. Huddleston, 507 U. S. ___, ___ ___ and nn. 1, 2 (1993) (slip op., at 1-2 and nn. 1, 2) (Scalia, J., concurring in judgment) (collecting cases). Applying this approach--or at least the second part of it--is not always easy, since once one gets beyond facial discrimination our negative Commerce Clause jurisprudence becomes (and long has been) a "quagmire." Northwestern States Portland Cement Co. v. Minnesota, 358 U.S. 450, 458 (1959). See generally D. Currie, The Constitution in the Supreme Court: The First Hundred Years 1789-1888, pp. 168-181, 222-236, 330-342, 403-416 (1985). The object should be, however, to produce a clear rule that honors the holdings of our past decisions but declines to extend the rationale that produced those decisions any further. See American Trucking Assns., Inc. v. Scheiner, 483 U.S. 266, 305-306 (1987) (Scalia, J., dissenting).

There at least four possible devices that would enable a State to produce the economic effect that Massachusetts has produced here: (1) a discriminatory tax upon the industry, imposing a higher liability on out of state members than on their in state competitors; (2) a tax upon the industry that is nondiscriminatory in its assessment, but that has an "exemption" or "credit" for in state members; (3) a nondiscriminatory tax upon the industry, the revenues from which are placed into a segregated fund, which fund is disbursed as "rebates" or "subsidies" to in state members of the industry (thesituation at issue in this case); and (4) with or without nondiscriminatory taxation of the industry, a subsidy for the in state members of the industry, funded from the State's general revenues. It is long settled that the first of these methodologies is unconstitutional under the negative Commerce Clause. See, e.g., Guy v. Baltimore, 100 U.S. 434, 443 (1880). The second of them, "exemption" from or "credit" against a "neutral" tax, is no different in principle from the first, and has likewise been held invalid. See Maryland v. Louisiana, 451 U.S. 725, 756 (1981); Westinghouse Electric Corp. v. Tully, 466 U.S. 388, 399-400, and n. 9 (1984). The fourth methodology, application of a state subsidy from general revenues, is so far removed from what we have hitherto held to be unconstitutional, that prohibiting it must be regarded as an extension of our negative Commerce Clause jurisprudence and therefore, to me, unacceptable. See New Energy Co. of Indiana v. Limbach, 486 U.S. 269, 278 (1988). Indeed, in my view our negative Commerce Clause cases have already approved the use of such subsidies. See Hughes v. Alexandria Scrap Corp., 426 U.S. 794, 809-810 (1976).

The issue before us in the present case is whether the third of these methodologies must fall. Although the question is close, I conclude it would not be a principled point at which to disembark from the negative Commerce Clause train. The only difference between methodology (2) (discriminatory "exemption" from nondiscriminatory tax) and methodology (3) (discriminatory refund of nondiscriminatory tax) is that the money is taken and returned rather than simply left with the favored in state taxpayer in the first place. The difference between (3) and (4), on the other hand, is the difference between assisting in state industry through discriminatory taxation, and assisting in state industry by other means.

I would therefore allow a State to subsidize its domestic industry so long as it does so from nondiscriminatory taxes that go into the State's general revenue fund. Perhaps, as some commentators contend, that line comports with an important economic reality: a State is less likely to maintain a subsidy when its citizens perceive that the money (in the general fund) is available for any number of competing, non protectionist, purposes. See Coenen, Untangling the Market Participant Exemption to the Dormant Commerce Clause, 88 Mich. L. Rev. 395, 479 (1989); Collins, Economic Union as a Constitutional Value, 63 N. Y. U. L. Rev. 43, 103 (1988); Gergen, The Selfish State and the Market, 66 Tex. L. Rev. 1097, 1138 (1988); see also ante, at 14, and n. 17. That is not, however, the basis for my position, for as The Chief Justice explains, "[a]nalysis of interest group participation in the political process may serve many useful purposes, but serving as a basis for interpreting the dormant Commerce Clause is not one of them." Post, at 4 (dissenting opinion). Instead, I draw the line where I do because it is a clear, rational line at the limits of our extant negative Commerce Clause jurisprudence.