JUSTICES SEEM TO LEAN TOWARD
KENTUCKY IN DAVIS CASE
Supreme Court justices seemed skeptical over a couple’s claim that Kentucky violates the Constitution by taxing out-of-state bonds while exempting interest earned by in-state bonds.
The plaintiffs in the lawsuit, Kentucky v. Davis, are a retired couple who argue that Kentucky’s policy violates the dormant commerce clause of the Constitution, which allows only Congress to erect barriers to interstate commerce. Most justices, however, seemed to doubt that claim.
“If it’s kind of a close question, leave it for Congress,” said Chief Justice John Roberts. “It’s never shown the slightest interest in addressing state tax exemption.”
A decision upholding the Davis’ claim would roil the $2.6-trillion municipal bond market, which also seemed to weigh on justices.
“We have an enormous market” in muni bonds that has been created over many years, said Justice David H. Souter. “That seems to me a very good reason for giving a nod” to the states, he said
However, other justices were sympathetic with the Davis’ argument. Justice Samuel Alito said a ruling for Kentucky would render the court’s dormant commerce clause case law “utterly incoherent,” while Justice Anthony Kennedy said it’s undoubtedly a case of “explicit discrimination.”
A decision in the case is expected in a few months.
In “friend of the court” briefs, the financial community and every other state supports Kentucky’s bid to uphold current practices.
11/08/07
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