Maryland Loses the Wynne Case in the U.S. Supreme Court

Today the U.S. Supreme Court issued its decision in the "Wynne" case. The decision will cost Maryland and its counties hundreds of millions of dollars now and long into the future. It is a fiscal disaster for the state and counties.

Maryland has a State tax on income and also a County tax on income. When some of that income comes from money earned by Maryland residents outside the State, Maryland gives the taxpayers a credit on the State tax but not the County tax. The Supreme Court ruled today that this is unconstitutional, a violation of the "negative" or "dormant" Commerce Clause of the federal Constitution.

The basic reason is that, according to the Supreme Court's majority opinion today, the federal Constitution prohibits states from taxing residents in a way that impedes interstate commerce. Maryland's tax scheme made it more economical to earn money in-state rather than out-of-state, and the Court would not allow that.

This decision is estimated to cost Maryland about $200 million in refunds for taxes collected unconstitutionally in the past, and over $40 per year from now on. Montgomery County is estimated to lose about $115 in refunds and about $24 million per year in the future. These are huge losses, and it might make a raise in property taxes unavoidable.

The Supreme Court decision was 5-4, but with an unusual mix, unlike the usual liberals vs. conservatives. The majority opinion was written by Justice Samuel Alito and it was joined by Chief Justice Roberts, Anthony Kennedy, Stephen Breyer (!), and Sonia Sotomeyer (!). The main dissent, which would have helped Maryland, was written by Justice Ruth Bader Ginsberg and was joined in by Antonin Scalia (!) and Elena Kagen.