Abstract

The Supreme Court‘s 2008 decision in Department of Revenue v. Davis all but exempted from dormant Commerce Clause scrutiny a potentially broad swath of state regulations, those that can be labeled as favoring "a traditional government function." In Davis, the Court evaluated whether a scheme that taxed Kentucky citizens on interest earned from out-of-state municipal bonds, but not on in-state municipal bonds, was valid under the Commerce Clause. The Court upheld the tax scheme, primarily on the grounds that regulations favoring traditional government functions are not susceptible to the same level of scrutiny as those favoring private interests when determining whether a regulation discriminates against interstate commerce. The Davis opinion could have serious implications for the future of the national market and interstate commerce by giving state regulations sanctuary from Commerce Clause analysis even when those regulations are protectionist of intrastate economic interests. This Note will evaluate the tax scheme at issue in Davis under traditional dormant Commerce Clause scrutiny. In doing so, it will demonstrate that the tax scheme did not discriminate against interstate commerce, because the costs of the regulation were born by the citizens of the state itself. Therefore, application of a traditional government functions exemption becomes unnecessary. This Note asserts that the Davis exemption for traditional government functions needlessly erodes the dormant Commerce Clause doctrine.

Keywords

Municipal bonds, Dormant commerce clause (Constitutional law), Income tax exemptions, Kentucky Department of Revenue v. Davis 553 U.S. 328 (2008), Interstate commerce, Kentucky, Revenue v. Davis