## Facts

- New Hampshire enacted a “Commuters Income Tax” imposing a 4% tax (above a \$2,000 threshold) on income earned in New Hampshire by nonresidents, with a reduction if the taxpayer’s home state would impose a lower tax on the same income.
- New Hampshire imposed no general earned-income tax on its residents’ wages, whether earned in-state or out-of-state.
- Maine residents who worked in New Hampshire were assessed the commuter tax for the 1970 tax year and received a credit against Maine income tax for taxes paid to New Hampshire.
- The Maine commuters challenged the tax as unconstitutional discrimination against nonresidents in their ability to earn a livelihood in New Hampshire.
- The New Hampshire Supreme Court upheld the tax; the U.S. Supreme Court noted probable jurisdiction and reviewed the judgment.

## Issues

1. Whether New Hampshire’s commuter income tax, which applies only to nonresidents’ New Hampshire-earned wages and lacks a roughly comparable burden on residents, violates the Privileges and Immunities Clause of Article IV, § 2.

## Decision

- The U.S. Supreme Court reversed.
- The Court held that the commuter tax violated the Privileges and Immunities Clause because it imposed an income-tax burden exclusively on nonresidents without an approximately offsetting tax imposed only on residents.
- The Court rejected New Hampshire’s argument that the discrimination was cured because nonresidents could receive credits from their home states, reasoning that a state may not justify discriminatory taxation by relying on another state’s tax choices.
- The Court emphasized that allowing the tax to stand would invite interstate retaliation and undermine interstate comity.

## Legal Principles

- Article IV’s Privileges and Immunities Clause requires “substantial equality of treatment” between residents and nonresidents with respect to taxation affecting fundamental economic activity, including earning wages.
- A state may not single out nonresidents for a special tax burden on in-state earnings unless it provides a substantial justification closely related to the differential treatment.
- The constitutionality of one state’s tax affecting nonresidents cannot depend on the current configuration of another state’s tax laws, including whether the home state grants tax credits.
- A tax that falls exclusively on nonresidents and is not even approximately offset by taxes imposed on residents fails the substantial-equality requirement and is unconstitutional.

## Conclusion

New Hampshire’s commuter income tax unconstitutionally discriminated against nonresidents by taxing only their New Hampshire-earned wages while leaving residents’ wage income untaxed, and the state could not rely on other states’ tax credits to defend that discrimination under the Privileges and Immunities Clause.


Austin v. New Hampshire, 420 U.S. 656 (1975)