Michigan Law Review, Vol. 95, No. 7 (June 1997), pp. 2167-2233


This article examines an important and recurring question that courts frequently resolve, but rarely analyze: whether taxing and spending measures should be viewed together when a state imposes a nondiscriminatory tax but also affords relief to some taxpayers through government spending. the answer to this question will often determine whether the state's actions violate constitutional strictures against discriminatory taxation. The taxing measure and the spending measure will generally pass muster if viewed in isolation. After all, courts rarely invalidate nondiscriminatory taxing measures on constitutional grounds. And true government spending measures, if considered alone, plainly fall outside the reach of constitutional restraints against discriminatory taxation. On the other hand, when taxing and spending measures are viewed together, they raise profound problems. In particular, the two measures often operate to produce precisely the result that the constitutional prohibitions against discriminatory taxation seek to avoid: the imposition of a greater burden in "practical effect" on a constitutionally protected class of taxpayers. These questions arise in a variety of contexts. Invoking the Commerce Clause, taxpayers have attacked nondiscriminatory levies imposed on an industry when the state has made payments related to the tax or granted reductions in other taxes only to the extent that industry members engage in intrastate trade. Invoking the intergovernmental tax immunity doctrine, taxpayers have challenged nondiscriminatory exactions imposed on federal and state retirement income when the state simultaneously has awarded increased pension benefits to state retirees. And invoking uniformity and equality provisions of state constitutions, taxpayers have attacked nondiscriminatory property taxes when the government has granted credits against the tax that have produced nonuniform effective rates. In each of these settings, the essential problem is the same: whether courts should view the state taxing and spending measures as an integrated whole or as independent components of the law for purposes of constitutional analysis. If the two measures are considered together, the entire scheme will violate the operative antidiscrimination rule, because payments made to the favored group will produce the prohibited disparity in effective tax burdens. If, on the other hand, the court considers the two measures separately, they will emerge unscathed from the constitutional attack. In Parts I, II, and III of this article, we analyze cases that have raised these sorts of tax discrimination issues under the dormant Commerce Clause, the intergovernmental-tax-immunity doctrine, and state uniformity and equality provisions. In Part IV, we step back from the cases and propose a systematic approach, applicable in all these doctrinal settings, for determining whether courts should "link" taxing and spending measures when evaluating their constitutionality. As our analysis of the existing authorities will show, courts have failed to recognize the commonality of these cases and the subtlety of the questions they present. Instead, courts have resolve the cases in an ad hoc fashion, relying at best on the conclusory shibboleth that "substance" should triumph over "form." What the law needs is a more informative and principled framework for addressing this broad set of questions. In this article, we offer such a framework in the hope that it will help courts as they are forced to apply the now-impoverished "law of linkage."