The Federal Role in State Taxation: A Normative Approach‪.‬

INTRODUCTION States have considerable flexibility under the U.S. Constitution for imposing the taxes they choose. Generally, states are free to levy taxes without consideration of how other states are affected or without constraints imposed by the federal government, with two major exceptions. First, state taxes cannot run afoul of the dormant (or negative) Commerce Clause, as developed and interpreted by the U.S. Supreme Court. Second, Congress is constitutionally granted affirmative authority under the Commerce Clause to regulate interstate commerce, and it obtains most of its capacity to influence state taxes directly through this lever. (1)