Pennsylvania v. New Jersey
49 L. Ed. 2d 124, 426 U.S. 660, 1976 U.S. LEXIS 68 (1976)
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Rule of Law:
A state does not have standing to sue another state in the Supreme Court's original jurisdiction for lost tax revenues when the alleged injury is self-inflicted as a result of the plaintiff state's own tax credit laws.
Facts:
- New Jersey enacted the Transportation Benefits Tax Act, which taxed the New Jersey-derived income of nonresidents.
- New Jersey did not tax the domestic income of its own residents.
- Pennsylvania, the home state of many people working in New Jersey, permitted its residents to take a tax credit for income taxes they paid to other states, including New Jersey.
- As a result of this tax credit system, Pennsylvania's treasury lost revenue it would have otherwise collected from its residents working in New Jersey.
- In a similar, prior situation, New Hampshire had a Commuters Income Tax that taxed the income of nonresidents, which the Supreme Court found unconstitutional in Austin v. New Hampshire.
- Maine, Massachusetts, and Vermont, whose residents worked in New Hampshire, also provided tax credits for taxes paid to New Hampshire, resulting in a diversion of tax revenue from their treasuries to New Hampshire's.
Procedural Posture:
- Pennsylvania filed a motion for leave to file a bill of complaint against New Jersey directly in the U.S. Supreme Court, invoking the Court's original jurisdiction.
- Maine, Massachusetts, and Vermont jointly filed a similar motion for leave to file a bill of complaint against New Hampshire directly in the U.S. Supreme Court.
- The Supreme Court consolidated the cases to consider whether to grant the motions and allow the suits to proceed.
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Issue:
Does a state have standing to bring a claim against another state under the Supreme Court's original jurisdiction when the defendant state's tax on nonresidents causes the plaintiff state to lose tax revenue due to the plaintiff state's own policy of granting residents a tax credit for taxes paid to other states?
Opinions:
Majority - Per Curiam
No, a state does not have standing to sue another state under these circumstances. To invoke the Court's original jurisdiction, a plaintiff state must demonstrate that its injury was directly caused by the actions of the defendant state. Here, the injuries to the plaintiff states' treasuries were self-inflicted, resulting from their own legislative decisions to grant tax credits to their residents. Nothing compelled the plaintiff states to offer these credits, and they remain free to repeal them. The Privileges and Immunities and Equal Protection Clauses protect people, not states. Furthermore, Pennsylvania's claim as parens patriae on behalf of its citizens fails because it is not protecting a sovereign interest but is merely litigating a collection of its citizens' private claims for tax refunds.
Concurring - Blackmun
No. The Court's conclusion is correct and validates the reasoning of his lone dissent in the prior related case, Austin v. New Hampshire. The crux of the issue is the statutes of the plaintiff states (Maine, Pennsylvania, etc.), not the statutes of the defendant states (New Hampshire, New Jersey). The plaintiff states' own legislatures gave the defendant states the option to divert tax revenue by creating a tax credit system, and the defendant states simply accepted that invitation. The complaining states are therefore really complaining about their own laws and should address the issue in their own legislatures.
Analysis:
This decision significantly clarifies the standing requirements for a state to sue another state under the Supreme Court's original jurisdiction, particularly in tax disputes. The Court established that an injury is not redressable if it is 'self-inflicted,' meaning it arises from the plaintiff state's own legislative choices rather than as a direct result of the defendant state's actions. This holding prevents states from using the Supreme Court to resolve fiscal problems of their own making and reinforces the principle that constitutional protections like the Privileges and Immunities Clause are for individuals, not state governments. The ruling also narrowly construes parens patriae standing, preventing states from acting as a mere collection agency for the private financial claims of their citizens.
