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Keywords

discriminationclass actionappellantdeclaratory judgment
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Austin v. New Hampshire, 420 U.S. 656, 95 S.Ct. 1191, 43 L.Ed.2d 530

Facts

The appellants, residents of Maine, were employed in New Hampshire and subject to the New Hampshire Commuters Income Tax, which taxed nonresidents' income earned in New Hampshire above $2,000 at a rate of 4%. The tax included provisions that exempted New Hampshire residents from taxation on income earned outside the state, while nonresidents were taxed without similar exemptions. The appellants filed a class action for a declaratory judgment, arguing that the tax violated their constitutional rights.

Appellants are residents of Maine who were employed in New Hampshire during the 1970 tax year and as such were subject to the New Hampshire Commuters Income Tax.

Issue

Did the New Hampshire Commuters Income Tax violate the Privileges and Immunities and Equal Protection Clauses of the U.S. Constitution by imposing a higher tax burden on nonresidents compared to residents?

Did the New Hampshire Commuters Income Tax violate the Privileges and Immunities and Equal Protection Clauses of the U.S. Constitution by imposing a higher tax burden on nonresidents compared to residents?

Rule

The Privileges and Immunities Clause of Art. IV, s 2, cl. 1 requires substantial equality of treatment for citizens of the taxing State and nonresident taxpayers, prohibiting discrimination against nonresidents in taxation.

The Privileges and Immunities Clause of Art. IV, s 2, cl. 1 provides: ‘The Citizens of each State shall be entitled to all Privileges and Immunities of Citizens in the several States.’

Analysis

The Court found that the New Hampshire Commuters Income Tax imposed a tax solely on nonresidents' income without offsetting taxes on residents, thus violating the principle of substantial equality. The argument that the tax's burden was not more onerous on nonresidents due to tax credits from their home states was rejected, as it did not align with the comity principles required by the Privileges and Immunities Clause.

The overwhelming fact, as the State concedes, is that the tax falls exclusively on the income of nonresidents; and it is not offset even approximately by other taxes imposed upon residents alone.

Conclusion

The U.S. Supreme Court reversed the New Hampshire Supreme Court's decision, holding that the New Hampshire Commuters Income Tax violated the Privileges and Immunities Clause by discriminating against nonresidents.

Held: Under the rule requiring substantial equality of treatment for the citizens of the taxing State and nonresident taxpayers, the New Hampshire Commuters Income Tax violates the Privileges and Immunities Clause.

Who won?

The residents of Maine prevailed in the case because the U.S. Supreme Court found that the New Hampshire tax discriminated against them, violating their constitutional rights.

The residents of Maine prevailed in the case because the U.S. Supreme Court found that the New Hampshire tax discriminated against them, violating their constitutional rights.

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