Maryland cannot impose a form of double taxation on residents by not giving them credit for some taxes paid on income earned in other states, the U.S. Supreme Court ruled on Monday in a decision that could slash revenue collected in a number of states.
In a 5-4 ruling, the justices sided with taxpayers Brian and Karen Wynne in finding that Maryland's taxation policy violated the U.S. Constitution by discriminating against interstate commerce, upholding lower-court decisions favoring the couple.
Maryland offers a tax credit for income taxes paid by residents to other states. But it said the credits available to the Wynnes for their out-of-state income did not apply to the couple's county income tax.
The Wynnes were denied a full $84,550 tax credit based on their healthcare business that paid taxes in 39 states in 2006. The state said they owed around $25,000.
The ruling could reduce tax revenues collected by local jurisdictions in Maryland by up to $50 million a year, according to a brief filed by the U.S. Conference of Mayors and other groups that backed the state.
"That Maryland's existing tax unconstitutionally discriminates against interstate commerce is enough to decide this case," Justice Samuel Alito wrote on behalf of the majority.
The court was not divided on its usual ideological lines, with Alito joined in the majority by two fellow conservatives, John Roberts and Anthony Kennedy, as well as liberals Stephen Breyer and Sonia Sotomayor.
Most states already offer a full credit for taxes paid in other states. Among states that could be affected by the ruling are Wisconsin and North Carolina, according to a brief filed by the International Municipal Lawyers Association. Separately, New York City is one of a number of municipalities that impose income taxes and do not provide a full credit for taxes paid out of state, the association said.
Via: Newsmaz
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