United States: Lunding: The Supreme Court Debates Discrimination ~ Part 2

The nature of alimony is a central question in the Lunding debate. As illustrated above, in considering the constitutionality of state law disallowances of exemptions or deductions to nonresident individuals, the law had heretofore made distinctions among personal exemptions, personal expenses, in-state business expenses or losses, and out-of-state business expenses. Discrimination by disallowing personal exemptions translated into a different rate structure for nonresidents, and was forbidden. Discrimination by disallowing deductions of a "purely personal" nature was upheld, particularly where the expense was clearly related to a different state -- the chief example being Mr. Goodwin's interest and taxes on his New Jersey home. Business expenses and losses unrelated to in-state business or income likewise could properly be denied to nonresidents, as a necessary and reasonable correlation to the state's inability to tax the nonresidents' income and gains from other state sources. Expenses "connected" with an in-state business were, however, required to be allowed to offset the nonresident's taxable in-state income.

While not clearly its stated rationale, the majority's decision in Lunding seems influenced by the notion that the alimony paid by Mr. Lunding was related to or connected with the income he derived from his New York law firm. The dissent characterized the majority's approach as a "'personal expense deduction' in lieu of 'income attribution' categorization of alimony..." (at 60), but clearly the majority attached some significance to the fact that alimony has a "correlation" to income.

This then raises the issue of how best to categorize alimony, and its relationship to a given state. Certainly as a practical matter alimony relates in many cases directly to the payer's earnings, and usually is paid primarily out of those earnings. The simple analysis of alimony as a division (some might say siphoning off) of earnings between individuals has a great deal of commonsense appeal. On closer scrutiny, however, the analysis is not so simple.

Clues to the nature of alimony are found both in the state laws to which the couple's divorce is subject, and in the federal income tax treatment of alimony. In Connecticut, where the Lundings resided, as in most other jurisdictions, settlement of the marital rights of husband and wife following the dissolution of a marriage can involve both a property settlement, under which the accumulated assets of the couple are divided, and an award of alimony and maintenance. The professional credentials of one party to the marriage are not property subject to division, Simmons v. Simmons, 244 Conn. 158 (1997). However, the future earnings capacity of that professional is something legitimately considered in awarding alimony.

Indeed, the decision in Simmons sounds very much like alimony is the wife's share of the husband's earnings, to be adjusted as his earnings change. "The primary aim of property distribution is to recognize that marriage is, among other things, 'a shared enterprise or joint undertaking in the nature of a partnership to which both spouses contribute -- directly and indirectly, financially and nonfinancially -- the fruits of which are distributable at divorce.'" Krafick v. Krafick, 234 Conn. 783 at 795 (1995). Alimony, by contrast, "is a proper means of sharing in the future earnings of a spouse..." Simmons, at 182, and "an appropriate method to take into account future earning capacity because it can be modified whenever there is a change in the circumstances of the parties that justifies the modification....The [husband] may become disabled, die or fail his medical boards and be precluded from the practice of medicine.He may choose an alternative career either within medicine or in an unrelated field or a career as a medical missionary, earning only a subsistence income. An award of alimony will allow a court to consider these changes if and when they occur." Id., at 184.

This articulation of alimony dovetails with the majority's treatment of alimony as having some relationship to the state in which the husband's earnings are sourced. There are, however, other factors to consider in analyzing the connection between alimony and a given state.

In his brief, Mr. Lunding noted that New York's statute "makes no distinction in its application between nonresidents who were married and divorced in New York or whose sole source of personal income is in New York and other nonresidents who were married or divorced elsewhere or whose personal income was generated from more than one State." Petitioner's brief at 11-12. If the appropriate tax analysis is to search for a legitimate state interest in advancing a particular social or governmental policy, then it may be correct to question what justification there is for a provision that disallows alimony based solely on the residence of the husband at the time it is paid.

In Lunding, this point did not advance too far, given that both the marriage and the divorce occurred entirely in Connecticut, and his former wife remained resident in Connecticut. As argued by New York State, Lunding's attempt to assert the Full Faith and Credit Clause as importing his Connecticut divorce into New York does seem a completely inappropriate basis for establishing a relationship between the alimony and the state. "[S]uch link is too attenuated to be constitutionally significant....Although the amount of alimony payments may have been based on Mr. Lunding's income from New York (and elsewhere), the origin of the claim giving rise to the alimony obligations was entirely unrelated to Mr. Lunding's income producing activities in New York." Respondent's brief at 30.

The facts of Mr. Lunding's family life may be irrelevant to the analysis of New York's statute, inasmuch as the statute took the sledgehammer approach and denied all nonresidents everything, without considering possible New York connections. Writing on a blank slate, however, a state might fare better if it were to link its denial (or allowance) of alimony more specifically to the couple's relationship to the state. The origin of a wife's claim might easily be in New York even if the husband has since moved out.

Absent such fine-tuning, and taking into account the factors courts consider in awarding alimony, alimony can indeed look like a wholly personal obligation best "sourced" to the husband's residence. Under Connecticut law, the amount of the wife's entitlement may depend on the husband's ability to pay, but clearly alimony is not her "partnership" share of the husband's earnings. Moreover, in fixing the amount of alimony the statute directs that the courts consider "the length of the marriage, the causes for the [divorce], the age, health, station, occupation, amount and sources of income, vocational skills, employability, estate and needs of each of the parties, and the [property settlement]." [Conn. Stat. section 46b-82]. If more alimony is paid because the husband has parted with less (out-of-state) property in the property settlement, does that not mean that the alimony relates not only to his in-state earnings but also to the out-of-state assets retained? If more alimony is paid as a result of the "causes" for the divorce, is that expense legitimately chargeable to the offender's in-state business activities? And what does it mean when, as in Simmons, more alimony is ordered because the wife is 56 and the medical degree earned by her 36-year-old husband was her "retirement plan"? Simmons, at 180.

Alimony is, therefore, almost as complex as its causes. As a result, while it is tempting to think of Lunding as "right" because alimony looks a lot like an offset to the husband's earnings, that is not necessarily the true nature of the payment.

The dissent referred to an analytical distinction between alimony as a personal, albeit deductible expense and a "conduit" theory of alimony. If a wife has a right to share in the husband's future earnings, and alimony is the payment of her share of those earnings over to her, should she be treated as having the same kind of income as the husband? Can New York claim that the former Mrs. Lunding has derived income from New York sources and must pay tax on that income notwithstanding her nonresidency here? While it is appealing in its symmetry, I think this theory should not stand.

In the first place, it is clear that not every expense paid in connection with a New York business produces New York income to the recipient. Thus, even if Lunding had been decided entirely on the basis that the alimony payments were related to New York earnings, this does not mean the alimony constitutes New York-source income to the payee, a person with no contacts to the state.

Moreover, as an income tax matter it is clear that alimony is its own kind of income; it does not retain the same character to the recipient as it had in the hands of the payer. Alimony paid out of the proceeds of capital gains transactions is still ordinary income to the wife; alimony paid out of rents does not give rise to passive income; alimony paid out of investment income is neither dividends nor interest in the wife's hands. The earnings of the husband may pay for the alimony, but they do not define its character. Accordingly, New York should not seek to use Mr. Lunding's victory to tax the WNs of the world.

As an income tax matter alimony really is a device for splitting income so as to enable the now separately filing individuals to use the tax rate structure in approximately the same way they did when married. The Supreme Court seems not to have focused on this nature of alimony. This is curious because, viewed as a rate-structure case, the outcome in Lunding seems clearly correct and supported by long-standing case law.

The federal deduction for alimony came into the code in 1942, in response to concerns that the then very high income tax rates (90 percent) might leave the husband incapable of satisfying both the IRS and the ex-wife. (See McIntyre and Pomp, former code section 22(u).) The deduction granted in 1942 was limited to the amount included in the wife's income under section 22(k), and achieved a correspondence with the"income splitting" then permitted to husbands and wives filing joint returns.

The role of the alimony deduction/income inclusion as preserving the ability of the former couple to take advantage of more favorable tax rate structures is now commonly understood. Without sections 71 and 215, the classic single-earner family would, following divorce, find itself with one unmarried person in a fairly high bracket and the other with no income at all. By granting the deduction, the code reduces the husband's taxable income and, in many cases, his rate of tax; if the alimony is treated as income to the wife, she starts out at the bottom of the rate ladder and enjoys the zero bracket, personal exemption, lower rate structure, or whatever other instrument of progressivity then exists in the code.

New York State likewise has a progressive income tax rate structure. Its refusal to allow nonresident husbands an alimony deduction could be framed as an attempt to tax them at a higher rate. If the purpose of New York's alimony deduction for residents was, as with the feds, to move the alimony to a lower rate bracket (or to a zero rate bracket if the payee were a nonresident), and if the denial of the deduction to nonresidents necessarily has the effect of taxing their alimony at a higher rate, the constitutional situation begins to resemble the personal exemption cases, where we know discriminatory statutes were unsustainable.

A simple example illustrates that the denial of an alimony deduction to a nonresident couple does in fact result in a higher New York tax burden than that imposed on a New York couple. The example is complicated by the obvious fact that affording Mr. Lunding a deduction while forgoing the complementary taxation of Mrs. Lunding's income clearly gives the nonresident couple a windfall, vis--vis the resident couple. But that windfall is attributable to Mrs. Lunding's nonresidence, and is not a necessary component of New York's denial of his alimony deduction. Indeed, if she were a resident, the burden on the couple would be even greater than on the purely New York couple. Therefore the desire to avoid the potential windfall does not justify a system that, by design, offers residents a tax rate break that is denied to nonresidents. If one assumes most couples are either both resident or both nonresident (as advocated by the dissent), New York's system clearly subjected the nonresident couple to a higher rate of tax.

For example, in 1990, Mr. Lunding earned $896,210 and paid $108,000 of alimony. From the facts of the case we know that he had remarried and filed a joint New York state income tax return for 1990. His former wife, it appears, was not a New York resident and did not file here. They are, therefore, the classic Box 4 nonresident couple, which in Science class appeared in the pre-Lunding era to be treated the same as the HRWR's.

Under the tax rates applicable in 1990, and assuming the pre-Lunding denial of an alimony deduction, the New York tax on $896,210 of taxable income was $69,859. An HRWR couple, however, would enjoy the benefits of income-splitting. HR would have taxable income of $896,210 less $108,000, or $788,210, and pay New York tax of $61,354. WR would have taxable income of $108,000, and pay tax of $8,146. The total tax burden on HR and WR would be $69,500, which is $359 less than Mr. Lunding's tax pre-Lunding. The effective rate of tax on the nonresident couple's income under New York's statutory scheme is 7.795 percent; the effective rate of tax on the resident couple is 7.755 percent.

If we assume both ex-spouses filed as single persons after the divorce, there also is a tax differential between taxing the nonresident husband on all the income, with no alimony deduction, and taxing both parties as if residents. The nonresident H pays $70,218, the resident ex-couple pays $61,712 plus $8,146, or $69,858.

The dollar amounts of these differences are not significant, but the principle may be. The principle that New York should not tax nonresidents at a higher rate is what rendered New York's denial of $1,000 or $2,000 of personal exemptions unconstitutional in Travis.

The nature of alimony, then, is not what really matters. What matters is the nature of the alimony deduction. The deduction clearly serves a long and well-documented purpose of keeping the wife's share of the couple's income eligible for a second run up the rate brackets. It is interesting to consider how the Lunding debate might have fared if this were its focus.

Ohio, Arkansas, California, Hawaii, Idaho, Illinois, Missouri, Montana, North Carolina, Utah, Vermont, West Virginia, and Wisconsin filed a brief amici curiae in the case "to urge the Court to affirm the decision of the New York Court of Appeals and to explain why the issue presented matters not just to New York but to her sister states as well." Amici brief at 1. Of these 13 states, six imposed some form of limitation on the deductibility of alimony paid by nonresidents. Amici brief at 11-12; Ginsburg dissent note 2.

The sister states made many of the same arguments as the taxpayer. They characterized the requirements of the Privileges and Immunities Clause as "modest," and the Constitution's ability to preclude discriminatory treatment of nonresidents as necessarily constrained by due process limitations on a state's ability to tax nonresidents. Characterizing alimony as an expense that is personal, and not incurred to generate in-state income, the amici urged the Court to uphold the statute as satisfying the relatively low standards of the Privileges and Immunities Clause, and warned that "[a] contrary approach would jeopardize innumerable State tax laws" (id., at 10), principally state disallowances of personal expenses (moving, medical, insurance, retirement contributions) to nonresidents.

The states also introduced the thought that "[t]oday, 39 States (including Connecticut) have an income tax, and each of them provides a deduction or credit to residents for income taxpayments to other states....The net effect of [allowing] the alimony deduction would not be tax relief, but a transfer of revenue to the State of residence. Far from furthering the goals of the privileges and immunities clause, such a constitutionally compelled tax structure would simply lead to a systematic shift of revenue out of the States where the taxpayers actually earned their income." Id., at 10. (Note that the revenue shift here is the opposite of Austin's.)

This "no harm -- no foul" argument has some surface appeal, but overall lacks constitutional probity. Obviously, there are states that have no income tax, meaning those citizens (and Lunding was one at the time) cannot take comfort in a home-state credit. Furthermore, a deduction is not the same as a credit, so citizens of deduction states also would face a net increase in tax burden under New York's rule. And rates of state income taxation are not uniform. If New York's tax rate exceeds that of the home state, again there is a burden on the nonresident. Thus, while the sisters made a good attempt at telling the Supreme Court not to meddle in the structure of taxation adopted by the various states, in the end their argument was not, and should not have been, a sufficient shield for New York's denial of the alimony deduction.

We now come to the heart of the discussion: what did the various judicial luminaries who opined on this case say, and why did they say it?

The first to analyze the constitutional validity of New York's disallowance of alimony deductions to nonresidents was New York's Appellate Division, in Friedsam (98 A.D. 2d 26 (1983)). The majority (reversed on statutory grounds by the Court of Appeals (see "History" section, supra)) disagreed with the state's contention that alimony is "purely personal" and thus "related solely to the nonresident's state." Id., at 28. The Third Department found "neither a State governmental policy expressing a reason for the disparity in treatment accorded nonresidents, nor any showings that the factor of residence has a legitimate connection with the allowance of the deduction." Id.

Federal alimony policy was based, they believed, on a desire for uniformity, and a decision to tax the recipient. New York, by contrast, advanced no state policy to support its denial of the deduction, nor any link between residency and deductibility. Presaging Mr. Lunding's suggestions to the Supreme Court, under New York's rule, "it makes no difference where an alimony recipient lives, where the marriage and divorce took place, where the awarding divorce court was situated, or whether the recipient is taxed by New York." Id., at 29.

For this court, therefore, the relevant criteria were:

• the policy basis the state offers for denying the deduction; and
• whether the denial of the deduction advances that policy.

In the court's view:

• New York had offered no rationale to support itsdiscriminatory rules; and
• the disallowance bore no necessary relationship to thesubstantive factors that might connect the alimony expense to the state.

The discriminatory statute was therefore unconstitutional.

The dissent in Friedsam took a completely different approach. In the view of Judge Levine, discriminatory taxation was sustainable if any of three criteria were met. Discrimination could be justified based on the fact that nonresidents were taxed only on New York-sourced income, or on the fact that expenses were personal and thus related to the state of residency, or as a necessary corollary to the advancement of an identified state social policy. The dissent disagreed with what he inferred as the majority's exclusive focus on a state social purpose, and instead found that New York's treatment of nonresidents' alimony was valid under all three constitutional tests. Thus, in his view, New York's discriminatory statute was legitimate because:

• the denial of alimony deduction is justified by the fact that nonresidents pay tax only on New York-source income;
• the alimony obligation related exclusively to Connecticut (the locus of the marriage, divorce, and both spouses); and
• the tax treatment could be traced to a valid "residence-related social policy...." Id., at 32.

Interestingly, this dissent offered one of the few attempts ever to articulate for the state a policy reason for limiting alimony deductions to nonresidents: "this State should be able validly to classify alimony payments for tax purposes in a manner which generally has the effect of furthering the sound policy objective of rewarding its residents for fulfilling their New York marital obligations." Id. He noted that, "in the vast majority of instances" the New York resident payer of alimony will have been in a New York marriage, and his wife will be a New York resident. While the match may not be perfect, "[t]he mere possibility that such residence-related social policy may not apply in some individual cases...is not sufficient to invalidate the statutory tax scheme [given the] wide latitude [States are afforded] in making classifications for tax purposes....So long as there is not an invidious discrimination, the validity of the tax in its general application is sufficient to sustain it...." Id.

Thus:

• a statute will survive challenge if it can be shown generally (if not perfectly) to advance a state policy; and
• New York's statute is legitimate because "most" residents had New York marriages and resident ex-wives, and it is fair to support the payment of alimony in such cases.

Overall:

• New York's loss may simply be attributable to a failure to advance any policy justification (which is different from rationales based on source taxation or "personal" expenses), however slim, for disfavoring nonresidents.

When Lunding came along, the state administrative law judge and the Tax Appeals Tribunal were, under the statute governing the Division of Tax Appeals, precluded from addressing the claim that Tax Law section 631(b)(6) was unconstitutional on its face. This issue, therefore, was not substantively addressed. The taxpayer further maintained, however, that under the doctrines of collateral estoppel and stare decisis, the tribunal was bound to follow the Appellate Division's holding in Friedsam and find section 631(b)(6) invalid as violating the Privileges and Immunities Clause.

Collateral estoppel was an easy call, inasmuch as Friedsam did not involve a specific statutory provision denying alimony deductions. On the subject of stare decisis, however, the tribunal felt moved to offer a brief explanation for its decision. According to the tribunal, "petitioners carefully craft their arguments in terms of a general issue, i.e., whether the disparate treatment accorded nonresident taxpayers as compared with resident taxpayers concerning the deductibility of alimony payments on their New York returns is constitutional." 1995-1 New York Tax Bases at 303. This, in the view of the tribunal, was not the question decided in Friedsam. Instead, Friedsam considered whether "the application of the general definition of adjusted gross income of a nonresident contained in Tax Law section 632 could constitutionally preclude a deduction for the alimony." Id. The tribunal thus suggested that, while the administrative interpretation invalidated in Friedsam might not be constitutional, the same discrimination might be constitutional if legislatively imposed. This raises an interesting question:

• Can the exact same kind of discrimination, with the exact same effects, be unconstitutional in some settings but constitutional in others?

The answer may well be yes. As noted in several decisions above, even overt discrimination is not per se unconstitutional. If a state has an evil purpose, clearly its discrimination must fall. If it is incapable of articulating any purpose, a purpose of protectionism is imputed, and again the statute will fall. But if the very same type of discrimination, with the very same effects, can rationally be justified by a legitimate state interest, then the discriminatory provision may be upheld. The tribunal therefore is correct in concluding that, just because one form of alimony denial was bad, this did not mean as a matter of law that all forms would fall.

Consider for example the hypothetical state of Connubial Rifts. Connubial has a high divorce rate. It has never allowed anyone a deduction for alimony. Connubial's legislature has, however, discerned a serious and widespread pattern of default in the payments of alimony ordered by Connubial's courts. Connubial does not have the practical ability to chase all the defaulting husbands, but it can exert some pressure over the husbands resident within its borders. Connubial therefore enacts a comprehensive alimony enforcement bill applicable to all citizens of Connubial, which includes contempt-of-court sanctions, civil penalties, liens and garnishment provisions, publication of deadbeats' names, etc. As a carrot among these sticks, Connubial also enacts a new tax provision allowing its citizens to deduct their alimony payments.

While Judge Levine tried, New York did not, and perhaps could not, muster any arguments in support of its facially discriminatory rule, and certainly none approaching Connubial's. New York either had no purpose or had an avowedly discriminatory purpose in enacting its statute. But Connubial's tax statute -- exactly the same in its effect -- is interwoven with a broader, and clearly legitimate, state purpose of ensuring its citizens' compliance with their alimony obligations. In the author's court, Connubial wins.

This also suggests that if any overtly discriminatory state tax law is intended to accomplish more than filling an immediate political need for a revenue-raiser, care should be taken to frame the genesis of the provision in broad policy terms. "Taxation Without Representation" is still taken very seriously.

From the tribunal, Lunding progressed to the Appellate Division, which held section 631(b)(6) unconstitutional on largely the same ground as that articulated in Friedsam. 218 A.D. 2d. 268 (1996). The court characterized Friedsam as rejecting the state's only proffered reason that alimony is personal and not related to income-producing activities in the state. See id., at 271. It further opined that "the addition of Tax Law section 631(b)(6)...does not alter or undermine our previous findings concerning the constitutionality of such practice...or present a 'compelling reason' to reach a different result on the identical legal issue....Our examination of the legislative history behind Tax Law Section 631(b)(6) reveals no stated reason or discussion addressing the rationale underlying a denial to only nonresidents of the alimony deduction authorized by the Internal Revenue Code...in proportion with their New York income." Id.

One interesting feature of this decision is that it looked to the federal alimony deduction, and to the court's perceived reasons for it, and faulted New York for failing to coordinate its tax rules with that policy. Specifically, "[s]ince Federal policy regarding the alimony deduction recognizes that tax consequences should rightly fall upon the recipients of the alimony, not the payors...and...pursuant to the statute before us the denial of the deduction to a nonresident taxpayer ignores, inter alia, where the recipient resides or whether the recipient is taxed in this State...it becomes clear that there exists no substantial reason for the disparate treatment...." Id., at 272. This court seems to have concluded that:

• the policy for a state tax provision can be assumed to be the same as the federal policy underlying a comparable federal tax statute, at least under a state income tax based largely on conformity; and
• the policy underlying the alimony deduction is the policy of matching, and consequently an alimony denial made without regard to the status of the wife is unconstitutional.

The Court of Appeals took an entirely different approach and one that, upon reflection, could be said to reflect the same hubris as the state in its failure to address the importance of explaining a legitimate state purpose behind a facially discriminatory tax provision. In an opinion authored by Chief Judge Kaye, with no dissents, the Court of Appeals dealt with the alimony issue almost as if it were too obvious to require a discussion. 89 N.Y. 2d 283 (1996).

The court "[began] with the familiar proposition that statutes -- the enactment of a coequal breach of government -- enjoy a presumption of constitutionality. [It should be noted here that, while co-equal with New York's Judicial Branch, the New York State Legislature is not co-equal with the U.S. Constitution]....'In taxation, even more than in other fields, legislatures possess the greatest freedom [but not unlimited freedom] in classification.'" Id., at 287, quoting from Austin, supra. The court cited the proposition that the Privileges andImmunities Clause was designed "to create a national economic union and establish a norm of comity" (id., at 288); noted Shaffer's upholding of Oklahoma's denial of out-of-state losses; and invoked Travis's blessing of the denial of deductions for personal expenses incurred by nonresidents. Travis's invalidation of the denial of the personal exemption was explained as based on the fact that "New York's proffered hope of reciprocity did not justify the statute's discriminatory effect." Id.

The court repeated the two-pronged "end and means" test for surviving Privileges and Immunities: there must be a substantial reason for discrimination, and the discrimination practiced must bear a substantial relationship to the state's objective. As with the New Jersey property taxes, mortgage interest, medical expenses, and life insurance premiums denied to that nonresident, the Court of Appeals took the three tests of Goodwin (and of the Friedsam dissent) and found two of them sufficient to sustain the disallowance of alimony here:

The disallowance of alimony "is fully justified in light of the disparate treatment of income: nonresidents are taxed only on income earned in New York, while residents are taxed on all income earned from whatever sources. Focusing on the practical effect and operation of the challenged tax it is clear that the advantage granted residents is offset by the additional burden of being taxed on all sources of income." Id., at 290.

"The disallowance is substantially justified by the fact that petitioner's alimony payments are. . . wholly linked to personal activities outside the State." Id., at 291.

As noted in the "Math" section, the court also cited the dubious "as if" factor as illustrative that "nonresidents are not denied all benefit of the alimony deduction." Id. And it noted that "there can be no serious arguments that petitioners' alimony deductions are legitimate business expenses." Id. On the basis of the foregoing:

[T]he approximate equality of tax treatment required by the Constitution is satisfied, and greater fine tuning in this tax scheme is not constitutionally mandated.

Id.

The importance of articulating a policy justification for a discriminatory statute (which is the third test in Goodwin, but apparently the only test for the Appellate Division) was essentially dismissed: "[P]etitioner's argument that the silence of [the] legislative history as to the substantial reasons behind the treatment of nonresidents' alimony deduction somehow preordains its unconstitutionality is without merit. Where, as here, substantial reasons for the disparity in tax treatment are apparent on the face of the statutory scheme, absence of a statement at the time of enactment will not invalidate the statute." Id. This contrasts with the Court of Appeals' treatment of moving expenses in Golden, which is characterized here as having held the denial of moving expenses to be unconstitutional "solely on the narrow ground that the Tax Commission in its answer and bill of particulars had offered only nonresidence as the explanation for the disallowance." Id., at 290.

The court's failure to address the obvious is unsatisfying. In both Friedsam and Lunding the Appellate Division had raised reasonable questions about factors potentially relevant to New York's treatment of alimony -- the situs of the marriage, the divorce, and the wife -- that are ignored under New York's facially discriminatory statute. The nature of the deductions with which alimony was compared by the Court of Appeals, and their lack of any clear relationship to New York, make them poor standards for resolving the more complex alimony issue.

Property taxes clearly are sitused by reference to the property taxed; interest expense can be traced and sitused to the property acquired; medical expenses are a current cost of providing medical care to the person of that nonresident; and life insurance insures that nonresident person's life for the benefit of persons who, in all likelihood, are nonresidents as well. The allowance of such classic tax expenditures at the federal level reflects a policy decision to encourage the related behavior as good for the stability and/or pocketbook of the country. Homeowners apparently are perceived to be more responsible citizens and thus offered tax incentives, and private insurance is incentivized as supplanting the need for public assistance.

If a state chooses to replicate these kinds of deductions, it seems fair to assume that the state has found the same self-interest in subsidizing such activities. And it seems more than fair that a state that derives no benefit from such activities need not subsidize them. The state of New York was not a better place because Mr. Goodwin owned a home in New Jersey, nor was its exposure to support Mr. Goodwin or his dependants reduced by his insurance. Goodwin, therefore, was an easier and different case.

The governmental interest in allowing an alimony deduction, by contrast, is different, and differently understood. It may have arisen from a concern about the husband's ability to pay, and while state taxes never approached the federal rate, if the motivation behind the alimony deduction is to enable the husband to pay alimony first, and pay tax only on what he has left, this governmental purpose should apply equally to residents and nonresidents. If the purpose of alimony is to tax the recipient, not the payer, then a state should at least allow nonresidents the deduction where the wife pays tax on the income. If the alimony deduction is designed to facilitate husbands' satisfaction of their obligations and ensure that their wives are not left without their due, one would expect the wife's residence, not the husband's, to drive the state's concerns. If alimony is a sharing of the husband's income, with the husband as "conduit," then the husband should be given a deduction and the wife taxed, regardless of the residency of either. And if, as I argue, alimony is a tax rate adjustment, then the state must at least offer the nonresident husband the same tax rate enjoyed by its resident couples.

Furthermore, the court's confusing reference to the "as if" portion of the formula not only failed (as described above) to correctly analyze the way the formula actually works, but alsofailed to acknowledge the relatively more favorable treatment New York already afforded nonresidents' personal expenses.

None of this nuance was on the radar screen in the Court of Appeals' decision, however. They found the policy reason for the disallowance "apparent on [its] face," and upheld the statute's validity under the Privileges and Immunities Clause.

The Court of Appeals likewise sustained Tax Law section 631(b)(6) as violating neither the Commerce Clause nor the Equal Protection Clause. Because those challenges were not addressed by the Supreme Court, the Court of Appeals had the last word here:

Nothing in the Fourteenth Amendment [Equal Protection] prevents the States from imposing unequal taxation on nonresidents, so long as the inequality is rationally related to the furtherance of a legitimate State interest

Id.

New York's treatment of alimony deductions is rationally related to its substantial policy of taxing only those gains realized and losses incurred by a nonresident in New York, while taxing residents on all income from whatever sources.

Id.

Further, the challenged treatment is rationally related to its policy of limiting a nonresident's deductions to those attributable to income-producing activities in New York.

Id.

No violation of equal protection. And, "[e]ven if this matter...were deemed to involve interstate commerce," id., no Commerce Clause violation either.³

And so, Mr. Lunding went to Washington. In a 6-3 decision, the Supreme Court reversed the Court of Appeals and decided Mr. Lunding was entitled to the pro rata alimony deduction he had claimed. Justice O'Connor wrote the opinion for the majority, which was joined by Justices Stevens, Scalia, Souter, Thomas, and Breyer. Justice Ginsburg wrote the dissent, in which Chief Justice Rehnquist and Justice Kennedy joined.

Certiorari was granted in Lunding, according to the majority, because the Court of Appeals' decision was in clear conflict with the Oregon Supreme Court's decision in Wood (which struck down the denial of nonresident alimony deductions but did not say why), and was "in tension with" Spencer, the South Carolina case on which the Supreme Court's even split had shed no light.

In its opening paragraph the majority stated that:

In closing it held that "[t]he State's failure to provide more than a cursory justification for section 631(b)(6) smacks of an effort to 'penalize the citizens of other States by subjecting them to heavier taxation merely because they are such citizens.'"

The dissent, by contrast, concluded that:

The majority opinion begins with a recitation of the high points of privileges-and-immunities jurisprudence: that citizens of each state should be on the same footing with citizens of other states and nonresidents should not be subject to more burdensome taxation; that equality is nonetheless not an absolute, and states have considerable discretion in formulating tax policies, including those that may incidentally discriminate; and that a state may defend against a charge of discrimination by showing a substantial reason for it, and a substantial relationship between the discriminatory treatment and the state's policy objective. The majority also noted, however, that the standard of review for tax distinctions drawn between residents and nonresidents is "more rigorous" than the review accorded tax distinctions between, for example, "forms of business organizations or different trades and professions." Citing Austin, supra. See also Trump v. Chu, supra. Under the Constitution and the various authorities invoked by the Court here, the rule is that:

Unsurprisingly, the dissent placed a somewhat different spin on the Court's mission. "[We] have previously held it sufficient under the Privileges and Immunities Clause that 'the State has secured a reasonably fair distribution of burdens, and that no intentional discrimination has been made against non-residents.'" Citing Travelers, supra. A facially discriminatory statute may nonetheless be valid if the system as a whole does not discriminate. Given the nature of this case as involving alimony -- a "choice of taxpayer" issue -- and allowing that "New York could legitimately assume that in most cases, as in the Lundings' case, payor and recipient will reside in the same State":

In essence, therefore, the majority saw a facially discriminatory statute and no solid explanation therefore, while the dissent, comparing the Boxes of couples (see "Science" section, supra) saw a system for the taxation of couples that (i) in most likely cases treated them comparably, and (ii) in the cases of noncomparable results, showed no pattern of favoritism.

Which is the better approach? Ordinarily, one would think the lack of a well-articulated reason for an obviously discriminatory rule would kill the rule. The dissent seems on target, however, in treating alimony as different, not for the reasons the majority articulates, but because of the essential nature of the alimony deduction as constituting only half of the tax picture. Clearly, federal code sections 71 and 215 are a matched set. Shouldn't the state tax pieces likewise be considered together? And if they are, hasn't the dissent proved that New York's rules do not give rise to any pattern of invidious discrimination against nonresidents per se?

The two camps' treatment of the privileges-and-immunities authority likewise reflects a fundamental disagreement as to the nature of this problem. Five principal authorities were cited in the opinions: the Supreme Court's decisions in Shaffer, Travis, Austin, and Travelers, and the Court of Appeals' decision in Goodwin.

Shaffer and its progeny clearly legitimize discrimination where it matches source-based income taxation. If out-of-state business income escapes the net because of due process constraints, then out-of-state business expenses and losses may likewise be ignored. The majority noted here, however, that Oklahoma had conceded the allowability of personal exemptions to the nonresident, and was challenging only the deductibility of out-of-state losses. Shaffer was therefore a straightforward case of disallowing deductions for business activities with no connection to the state. To the majority, Shaffer did not reach the question in Lunding.

The dissent characterized Shaffer and Travis as establishing "at least three principles": (1) State may impose a tax "of like character [to the residents' income] and not more onerous in...effect" on the income of nonresidents from property, business or occupations in the State; (2) states cannot deny nonresidents personal exemptions because "[d]enial of those exemptions...amounts to an across-the-board rate increase for nonresidents, a practice impermissible under longstanding constitutional interpretation"; and (3) a state may limit nonresidents' deductions to those "connected with income arising from sources within the taxing State," quoting Travis.

In the view of the dissent, "Shaffer and Travis plainly establish that States need not allow nonresidents to deduct out-of-state business expenses. The application of those cases to deductions for personal expenses, however, is less clear."

Indeed Travis, the case that seems to support everyone's position, was explained by the majority by noting that "[t]he record in Travis clarifies that many of the expenses and losses of nonresidents that New York law so limited were business-related, such as ordinary and necessary business expenses, depreciation on business assets, and depletion of natural resources such as oil, gas and timber." New York already allowed nonresidents pro rata deductions for a variety of "nonbusiness" expenses, so the disallowances truly at issue in Travis "essentially mirrored those at issue in Shaffer because they tied nonresidents' deductions to their in-state activities." In other words, the discrimination that was really upheld in Travis was not discrimination in the allowance of "personal" expenses, but source-based discrimination against business expenses that was justified by source-based limits on the taxation of income.

What was not tolerated in Travis, the majority agrees, was discrimination in the allowance of personal exemptions. That is unconstitutional, they say, because:

• the discrimination was intentional; and
• New York's rule cannot be justified by presuming that the laws of other states, and the income taxable therein, offset New York's discrimination.

For similar reasons, New Hampshire's "one-sided tax" failed in Austin, because:

• the Constitution requires a "rule of substantial equality of treatment for the citizens of the taxing State and nonresident taxpayers."

The majority distilled all of the law into its three basic points, which differ somewhat from the dissent's:

• States cannot deny nonresidents a general tax exemption provided to residents;
• "States may limit nonresident's deductions of business expenses and nonbusiness deductions based on the relationship between those expenses and in-state property or income" (emphasis added); and
• None of the authorities "can fairly be read as holding hat the Privileges and Immunities Clause permits States to categorically deny personal deductions to a nonresident...."

Analyzing the law as not permitting the denial of personal deductions per se, the majority looked to New York to explain itself. The state did not offer much. New York thought of alimony as "wholly linked to personal activities outside New York," citing the state's brief, and believed the deduction could be denied simply as a corollary of source-based taxation. The Court of Appeals clung hard to Goodwin as justifying its holding, but the majority noted that that case (and Friedsam) involved a statute that allowed deductions only for expenses connected to the state. In Lunding, by contrast, New York denied alimony "irrespective of whether those payments might somehow relate to New York-source income."

By refusing even to make an inquiry into the relatedness of alimony to the state, section 631(b)(6) departed from New York's own general standards for taxing nonresidents.

Furthermore, New York's previous policy had been to allow pro rata alimony deductions; that policy was reversed without explanation. The Court of Appeals itself stated in Friedsam thatthe state's policy and statutes favored parity in the allowance of deductions to nonresidents, but failed to articulate an explanation for why that policy no longer applied to Mr. Lunding. The invocation of 1959 testimony by New York's then-commissioner relating the denial of personal deductions to principles of source-based taxation was a valiant piece of research, but does not add much given New York's subsequent history of allowing itemized deductions pro rata. In the words of the majority, "[i]n the context of New York's overall scheme of nonresident taxation, section 631(b)(6) is an anomaly."

The majority also found wanting New York's argument that section 631(b)(6) was "consistent with New York's taxation of families generally." Respondent's brief at 14-15. However noble the goal of "income splitting," see 1942 Committee Report, 1942-2 Com. Bull. 409, that justification was eroded by New York's failure to consider the taxability of the wife. The argument that "extending the benefit of income splitting to nonresidents is inappropriate on tax policy grounds because nonresidents are taxed on only a slice of their income'...begs the question whether there is a substantial reason for the difference in treatment...." Quoting from Respondent's brief. In other words, one cannot sustain New York's statute by reference to the source-of-income limitations when there has been no analysis of the relationship of the alimony to New York, that relationship being articulated here primarily in terms of the taxability of the wife.

What is the right test for a New York relationship? Is alimony connected with New York because it is paid out of New York earnings? Because a New York court issued the order awarding alimony? Because New York was the "jurisdiction" of the marriage? Because the wife resides in New York? Of these factors, the only one addressed by the majority was the residence of the wife.

And here, the majority's concern was more with the different results found in the four different boxes than with drawing a factual connection between the expense and the state. In seeking a rational justification for New York's rule, the Court focused on how well New York's rule worked in splitting income (given that income-splitting was, in its view, the role of alimony). A rational income-splitting policy would tie the husband's deduction to the wife's income. New York did not do that, nor did it achieve any other rational tax policy. Box 3 (HRWN) got a windfall; Box 2 (HNWR) paid tax twice. (See p. 954.) New York failed to justify this.

Rather than faulting New York for failing to achieve perfect income splitting, the dissent would sustain New York's tax scheme based on broad assumptions as to the multistate whereabouts of ex-spouses. The dissent believed New York could legitimately assume that most ex-spouses continue to reside in the same state. It was further willing to assume that "alimony payments into and out of a State...are approximately in balance." Citing McIntyre and Pomp. On the basis of these assumptions that most couples occupied Boxes 1 and 4, and that Boxes 2 and 3 evened out, they felt New York had done a good enough job to justify its discrimination.

No evidence was cited to indicate that either assumption made by the dissent in Lunding was valid in 1987, nor is there any evidence the New York Legislature made an effort to ascertain whether either assumption was true. It is inappropriate for scholars, 10 years later, to try to salvage a discriminatorily motivated statute with unproven factual assumptions, and quite unfortunate that the dissent bought into this.

Perhaps most significantly, the majority and the dissent disagreed about the implications of the Lunding decision for other types of nonbusiness expenses. The dissent warned that the majority's allowance of Mr. Lunding's alimony meant that "Any and every personal deduction allowed to residents must be allowed to nonresidents in the proportion that New York income bears to the taxpayer's total income," and that "long-settled provisions and decisions have been overturned...beyond the capacity of any legislature to repair." This is a formidable charge. The majority apparently meant no inferences beyond the alimony issue, and took pains to distinguish alimony from other kinds of "personal" expenses. Alimony is not like business losses arising in another state, and is not like taxes or interest that are allocated to the state where the underlying asset is located. In the view of the Court:

The dissent thought differently:

Which is the correct approach? Is alimony an expense without a country, floating freely among the states where money is earned to pay it? Did Mr. Lunding correctly persuade the Court that "[m]oney is fungible, and until such time as it grows on trees the vast majority of citizens of this country must pay their expenses by earning through personal service"? Petitioner's reply brief, at 3. Or is alimony, by virtue of the origin of the claim and the highly personalized facts that inform its amount (duration of marriage; age; cause; children; property settlement) something too personal for any state other than one's domicile to recognize?

Did the 13 amici states say best: "New York has simply taken the view that alimony payments do not represent an income-earning expense related to New York, but represent a legalrequirement unique to social policies (specifically the marriage laws) of the State of the taxpayer's residence"? Amici brief at 3.

Is any of these the right question?

In the context of the rest of its decision, the majority's discussion of alimony was gratuitous, as well as off the mark. The majority offered plenty of grounds for its conclusion that New York had failed to meet its burden to save its facially discriminatory statute. Any statute that flatly denies some deduction to all nonresidents would likely fail constitutional scrutiny where, as here, the statute admitted of no analysis of the possibility of New York nexus, it clashed with the general, and previous, state tax scheme for nonresidents, it necessarily produced some clearly illogical results, and it was completely devoid of any legislative explanation. Moreover, the majority's description of alimony misses the most important point, which is (again) its effect on rates.

In the "Social Studies" section we considered the nature of the alimony deduction not as a mechanism for matching, but as effecting a lower overall rate of tax on the alimony. Instead of being taxed at the husband's marginal rate of tax, it enters the system as the wife's income, and derives the benefit of a second round of progressivity. That rate debate is not reflected in the Supreme Court opinions. The state raised it glancingly, claiming that alimony was different from flat exemptions as it is dependent upon an actual payment, and "does not affect New York's rate structure," a statement that seems incorrect. Respondent's brief at 22. Lunding also raised it in the end in his reply brief, citing to a 1927 Court of Appeals decision that struck as unconstitutional a sometimes-higher estate tax on nonresidents.⁴ But the Court did not take this approach, nor did it suggest any alternate means by which New York might address the tax gap from alimony paid to nonresidents.

What if, instead of denying the alimony deduction altogether, New York (1) permitted the deduction to all husbands when the wife is or elects to be taxed as a New York resident; and (2) permitted husbands to compute tax on the portion of alimony paid to a nonresident as if such alimony were income of a separate taxpayer? Alternatively, to eliminate the difficulties of proof and enforcement that occur when one person's tax liability depends on the status of another (now estranged) taxpayer, a state might simply modify taxable income to exclude alimony received, deny everyone an alimony deduction, and compute tax on the alimony portion of the husband's income under a separate-taxpayer rate structure; the husband would pay the tax on the alimony, but the amount of tax would be computed as if the wife were the taxpayer. Either of those approaches seems to avoid the discrimination of the old system, and should withstand constitutional scrutiny.

At this point, however, the characterization of the issue has shifted. The Supreme Court has analyzed the alimony deduction as something quasi-personal that should nonetheless be allowed to nonresidents on a pro rata basis. Because 48 percent of Mr. Lunding's income was New York-sourced, 48 percent of the alimony is deductible. "Deductible" here means it escapes the system altogether. What is the likelihood, this horse having left the barn, that New York has the will to try a more refined treatment of nonresident alimony, or that the Supreme Court would sustain it?

What the journey down the path of analyzing alimony as a deduction has done is reopen the entire question of the treatment of personal expense deductions. As candidly analyzed by the dissent, the broad language of Travis could be read to mean that nonresidents are constitutionally entitled to deduct only in-state business losses. "On the other hand, neither Shaffer nor Travis upheld a scheme denying nonresidents deductions for personal expenses." Citing Hellerstein and Hellerstein, 1347, n 165. Spencer had invalidated South Carolina's retaliatory denial of deductions for nonbusiness expenses, and while the divided Supreme Court's affirmance certainly was not precedential, see Arkansas Writers' Project Inc. v. Ragland, 481 U.S. 221 (1987), and the lower court's holding may have derived from a disdain of retaliation, this and Wood were indications of an intolerance for such discrimination.

On the spectrum ranging from personal exemptions to personal deductions to in- and out-of-state business deductions, before Lunding we knew that personal exemptions and in-state business expenses had to be allowed, and out-of-state business losses did not. After Lunding, it is unclear whether we know much more than this. The majority's dissection of Travis illustrated that personal expenses were not there in issue, and even if states are permitted (as in Travis) to limit personal expenses by proration, that does not answer the question of whether states might also deny them altogether.

The question of the law of personal deductions is made even more perplexing by both sides' treatment of a group of state court decisions that had permitted limitations on state allowances of personal deductions, and had not been taken up by the Supreme Court. The opinions (and the brief for the state) cited highest-level state tax cases involving grocery and medical rebates, sales tax deductions, deductions for medical expenses, home-state mortgage interest, and other similar expenses, where the disallowance had been upheld and the taxpayer's appeal had been dismissed by the Supreme Court for want of a substantial federal question. These, it was argued, are evidence that the law was that personal expenses could be denied altogether to nonresidents. In the view of the dissent, these cases formed part of a jurisprudence disallowing nonresidents' personal expenses that had been "long considered secure."

The majority, however, rejected "the State's suggestion that this Court's summary dismissals in several other cases shouldbe dispositive of the question presented in this case....Although we have noted that 'our summary dismissals are...to be taken as rulings on the merits in the sense that they rejected the specific challenges presented...and left undisturbed the judgment appealed from,' we have also explained that they do not 'have the same precedential value as does an opinion of this court after briefing and oral argument on the merits'....In any event, none of the cases on which the State relies involved the unique problem presented here, the complete denial of deductions for nonresidents' alimony payments."

So, either the Court had not thought it through before, or it had agreed with those cases but found this one different. It is quite possible that the other cases were indeed different, involving deductions where a residence-based policy is legitimate. But given the possible breadth of Lunding's implications, it would have been helpful to know more about what the majority now thinks of those cases.

In the dissent's view, Goodwin "exemplified...the lower court's [application of] Shaffer and Travis with equal force to both personal and business deductions." That too seems an oversimplification. Goodwin specifically analyzed the policy bases for the deductions at issue, and found them all properly residence-based. The dissent is correct that "[a] State need not...underwrite the social policy of the Nation." It is not correct to ignore the ongoing significance of the nature of the personal deduction to the constitutional analysis.

There emerges then a fundamentally different framing of the debate. In the majority's view, New York had an overtly and intentionally discriminatory rule for which no one had stepped up with an explanation. Their analysis is almost technical. The dissent, by contrast, sees a bigger picture, with a variety of state-sponsored benefits awarded to residents for whatever local reasons seemed relevant, and the Supreme Court now telling states they must do unto nonresidents as they have done unto their own. I do not think that is what the majority held. This is, however, a volatile area. See, e.g., Willson and Silverstein, "Taxpayer Challenges to Discriminatory State Taxes: The Likely Battlegrounds of Future Litigation," State Tax Notes, May 4, 1998, p. 1471. It would not be surprising to find Lunding used aggressively in future challenges to allegedly discriminatory state taxes. And it will probably be a long time, with many intervening state statutes and many more audits and trials, before the Brethren (see the "English" section, supra) speak to this again. This, I think, is the greatest significance of this decision.

There are, in closing, two other aspects of the debate that are of interest in the struggle to root out discrimination. The first is the question of the significance of other states' taxing schemes. As noted above, the amici states argued that most states had an income tax, with deduction and credit mechanisms, and the Supreme Court should leave it to them to decide how and where to tax alimony. The majority found no basis in the record for the amici's assertion, and noted in particular that in the year before the Court, Connecticut imposed no income tax on Mr. Lunding.

Interestingly, the dissent used the absence of a Connecticut income tax to make an entirely different point. "Compared to New York divorced spouses, in short, Lunding seeks a windfall, not an escape from double taxation, but a total exemption from New York's tax for the income in question." "Lunding, who seeks to escape any state tax on the income in question...is hardly a fit representative of the individuals who elicit the Court's concern." Ouch!

For the majority, Connecticut's absence of an income tax gave rise to a real potential burden on Mr. Lunding that made New York's discrimination important. For the dissent, Connecticut's failure to tax either Lunding or his ex-wife meant that the nonresident couple, as a whole, had an impermissible windfall. Which is the better way to look at things? The majority's wish that New York had at least limited its denial to nonresidents with nonresident (and thus nontaxed) spouses suggests they would have found such a scheme constitutional. That system probably would satisfy the dissent as well, for the Lundings would at least pay one tax.

But even if one could fashion a form of disallowance that brings both groups to agreement, is it appropriate to judge the constitutionality of New York's treatment of nonresidents by reference to their overall multistate tax posture? This starts to sound like discussions of internal and external consistency, and retaliatory taxation, and it becomes inextricably interwoven with the question of whether we are comparing husbands or ex-couples. On balance, however, the quotation from Austin seems correct: "the constitutionality of one State's statutes affecting nonresidents [cannot] depend upon the present configuration of the statutes of another State." 420 U.S. at 668.

The second question is the role of federal income tax policy in evaluating state tax discrimination. In the course of this debate the federal income taxation of alimony was invoked, not as binding, but as reflective of a federal policy that New York was justified in following. See, in particular, McIntyre and Pomp, supra. Code section 873(a) allows nonresidents deductions "only if and to the extent that they are connected with" income effectively connected with the conduct of a U.S. trade or business; one personal exemption is, however, allowed. Code section 873(b)(3). As discussed at length in McIntyre and Pomp's article, the policy of the federal government has long been to deny nonresidents alimony deductions, and this policy has not heretofore been challenged as violating our treaties' nondiscrimination provisions. If it works internationally, shouldn't it also work within our borders?

In the view of the majority, "the reasonableness of such a scheme on a national level is a different issue that does not implicate the Privileges and Immunities Clause guarantee that individuals may migrate between states to live and work." The meaning of this sentence is interesting to ponder. Obviously the federal government's tax regime has no significance under the Privileges and Immunities Clause. However, where one looksto the state to justify its discriminatory rules, is there no validation in being able to claim that New York's rule had no less policy justification than the federal rule? Is the Court saying that the justification for the federal rule is insufficient for a state, given that the incidence of cross-border commuting must be much greater within the nation than between nations?

The dissent, by contrast, opened its opinion with the observation that "New York and other states follow the Federal government's lead in according an income tax deduction to resident taxpayers only." The dissent considered New York's rule "a fair adoption, at the state level, of the current United States system." Does that simple statement mean that an overtly discriminatory tax rule can pass muster where others (or, notably, the feds) practice similar discrimination? That states should be held to no higher standard than their union? Perhaps it simply means that, in this world of imperfect unions and imperfect taxation, a system good enough on the national level should be upheld when followed by the states.

At the end of the day, a majority of the United States Supreme Court invalidated section 631(b)(6) as "a facially inequitable and essentially unsubstantiated taxing scheme that denies only nonresidents a deduction...which while surely a personal matter arguably bears some relationship to a taxpayer's overall earnings." In their view, alimony should be allowed to some extent by the source state of income, as having a constitutionally significant relationship to that income.

The dissent, by contrast, believed that the "notions of fairness driving the majority do not justify today's extraordinary resort to a Privileges and Immunities Clause 'the contours of which have [not] been precisely shaped by the process and wear of constant litigation and judicial interpretation.'"

In the author's view, Lunding reached the right result, but for the wrong reasons. Lunding was a case of discrimination in tax rate, and as such its treatment should have been simple. But this case took a different route, and the contrasting views expressed by formidable jurists along the way will no doubt influence the development of state taxation for some time to come.

3. Again, note Tamagni, supra. The Court of Appeals held in that case that a New Jersey domiciliary taxed by New York as a statutory resident, and thus taxed twice on income from intangibles, had no Commerce Clause claim because the problem of which he complained did not involve interstate commerce.

4. Smith v. Loughman, 245 N.Y. 486 (1927). Reply brief at 4-5.

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