During argument Monday in a Commerce Clause challenge to a state practice of making income from in-state municipal bonds tax-exempt, Supreme Court Justice Stephen Breyer considered whether the bond market is more like garbage collection or the milk industry. In a second case involving state taxation, Justice David Souter asked whether Congress, in a statute prohibiting tax discrimination against railroads, “was engaging in Pontius Pilate’s exercise, ‘what is truth?’”
In Department of Revenue of Kentucky v. Davis, Kentucky taxpayers George and Katherine Davis filed suit alleging that the state violates the Commerce Clause by exempting from taxation interest income from Kentucky municipal bonds while taxing income from out-of-state bonds.
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