Dormant Commerce Clause

Based on Wikipedia: Dormant Commerce Clause

In 1787, the men drafting the Constitution had a problem. They'd just fought a revolution against a distant empire that taxed them without representation. But now, barely a decade into independence, the thirteen states were doing something remarkably similar to each other.

New York was taxing goods from New Jersey. Virginia was taxing goods from Maryland. States along major rivers were charging tolls to anyone who wanted to float cargo through their territory. The new nation, supposedly united, was splintering into thirteen little economic fiefdoms, each trying to enrich itself at its neighbors' expense.

The solution they came up with was elegant: give Congress the power to regulate commerce "among the several states." This is the Commerce Clause, and it's one of the most important phrases in the Constitution.

But here's the fascinating thing. The Founders were so worried about states waging economic warfare that they didn't just want Congress to have the power to regulate interstate commerce. Some of them believed that the mere existence of this federal power should, by itself, prevent states from interfering with trade between states—even if Congress never actually passed any laws on the subject.

This idea—that the Commerce Clause contains a hidden "thou shalt not" directed at the states—is what lawyers call the Dormant Commerce Clause. Or sometimes the Negative Commerce Clause. The power is "dormant" in the sense that it's sleeping, waiting for Congress to wake it up. But even while it sleeps, it still has force.

The Constitutional Debate That Started It All

On September 15, 1787, just two days before the Constitutional Convention would finish its work in Philadelphia, the delegates got into an argument about lighthouses.

Specifically, they were debating whether states should be allowed to charge "duties of tonnage"—essentially fees based on how much cargo a ship was carrying—without getting permission from Congress first. The idea was that states might need this money to clear their harbors and build lighthouses. Practical stuff.

James Madison disagreed. He thought that once you gave Congress the power to regulate commerce, you had to give it completely. Commerce, he argued, "was in its nature indivisible and ought to be wholly under one authority." You couldn't split it up. If states could charge their own fees on shipping, they'd be regulating commerce too, and the whole thing would become a mess.

Roger Sherman saw it differently. He thought the federal commerce power was like the federal tax power—something that could be shared. The federal government's power was "supreme," sure, but that just meant it could override state regulations when they conflicted. There was no reason states couldn't have their own rules running alongside federal ones, as long as they didn't clash.

The Convention ultimately sided with Madison on the specific question of tonnage duties, explicitly forbidding states from imposing them without congressional consent. But the larger debate—whether the commerce power is exclusive to the federal government or shared with the states—would take another two centuries to work out.

In many ways, we're still working it out today.

Chief Justice Marshall Plants a Seed

The word "dormant" in connection with the Commerce Clause first appeared in the opinions of Chief Justice John Marshall, the man who essentially invented American constitutional law.

In 1824, Marshall heard the case of Gibbons versus Ogden, a dispute between two steamboat operators about who had the right to ferry passengers across the Hudson River between New York and New Jersey. New York had granted a monopoly to one operator; the other had a federal license. The question was whether state law or federal law controlled.

Marshall ruled for the federal license holder, but in doing so, he mused about something larger. The power to regulate interstate commerce, he wrote, "can never be exercised by the people themselves, but must be placed in the hands of agents, or lie dormant." It has to go somewhere—to Congress, or to no one. The states, by implication, couldn't exercise it at all.

Justice William Johnson, writing separately, went even further. The Constitution, he declared, was "altogether in favor of the exclusive grants to Congress of power over commerce."

A few years later, in a case about a dam across a creek in Delaware, Marshall used the phrase more directly. The state law authorizing the dam, he wrote, could not "be considered as repugnant to the power to regulate commerce in its dormant state."

There it was. The dormant state. Even when Congress hasn't acted, even when the federal commerce power is asleep, it still has some kind of force.

The Modern Doctrine Takes Shape

If Marshall was suggesting that the commerce power belongs exclusively to Congress, the doctrine that eventually developed was more nuanced than that.

The turning point came in 1851, in a case called Cooley versus Board of Wardens. The question was whether Pennsylvania could require ships entering the port of Philadelphia to hire local pilots. Justice Benjamin Curtis, writing for the Court, rejected both extremes. You couldn't say that the commerce power required exclusive federal legislation in all cases, he wrote, because different subjects call for different treatment. Some things—like pilotage rules for local harbors—might be perfectly appropriate for state regulation. Others might not be.

This was the birth of what we might call the "it depends" school of Commerce Clause interpretation. And from that seed grew the modern doctrine.

The first time the Supreme Court actually struck down a state law under the Dormant Commerce Clause came in 1873, in a case involving the Reading Railroad and Pennsylvania. But the real action was still to come.

How It Works Today

The modern Dormant Commerce Clause analysis works like a two-step dance.

Step one: Does the state law discriminate against interstate commerce?

In this context, "discrimination" has a specific meaning. It means treating in-state and out-of-state businesses differently—in a way that helps the locals and hurts the outsiders. If a law does this on its face, or if that's its purpose, or if that's its practical effect, it's discriminatory.

Discriminatory laws are almost always unconstitutional. The courts apply what they call a "virtually per se rule of invalidity." The state can only save its law by proving two things: that there's a legitimate local purpose, and that there's no other way to achieve that purpose without discriminating. This is an extremely hard burden to meet. Most states don't even try.

Why so strict? Because the whole point of the Commerce Clause was to prevent exactly this kind of economic protectionism. As Justice Anthony Kennedy once explained, the rule against discrimination exists "to prohibit state or municipal laws whose object is local economic protectionism, laws that would excite those jealousies and retaliatory measures the Constitution was designed to prevent."

The Founders remembered what it was like when states were at each other's economic throats. The Constitution was supposed to end that. The Dormant Commerce Clause is, in a sense, the enforcement mechanism for that promise.

When the Law Doesn't Discriminate

Step two kicks in when a law doesn't discriminate—at least not obviously.

Maybe the state passed a health or safety regulation that applies to everyone equally. Maybe it's a consumer protection law. Maybe it's an environmental rule. These laws might still affect interstate commerce, but not because they're trying to favor the home team.

For these laws, the courts use a more forgiving approach called the Pike balancing test, named after a 1970 case involving an Arizona requirement that cantaloupes be packed in-state before shipping.

Under Pike, a court weighs the burden on interstate commerce against the local benefits of the law. If the burden is "clearly excessive in relation to the putative local benefits," the law fails. But if the balance tips the other way—if the local benefits outweigh the interstate burden—the law survives.

This is much easier for states to win. The Pike test is something like the rational basis test that courts use in other constitutional contexts. If the state has a legitimate reason and the law is reasonably related to achieving it, the law usually stands.

Some Examples Make It Clearer

Michigan passes a law requiring that food labels specifically identify certain animal parts if they're present in the product. Does this violate the Dormant Commerce Clause?

No. The law applies equally to food produced in Michigan and food imported from other states. There's no discrimination. Michigan isn't trying to help Michigan food producers at the expense of out-of-state competitors. It's just trying to inform consumers. That's a legitimate local concern, and the effect on interstate commerce is incidental.

Now imagine Michigan passed a law saying that only imported food had to carry these labels. Michigan-produced food could skip them. That would be blatant discrimination, and it would almost certainly be struck down.

Here's another example. California requires that milk sold in the state contain a certain percentage of milk solids—a higher percentage than federal law requires. This makes life harder for out-of-state dairy producers who have to meet California's stricter standard. Does it violate the Dormant Commerce Clause?

No. California's rule applies equally to California milk and imported milk. Wisconsin dairy farmers have to meet the standard, but so do California dairy farmers. There's no favoritism. California is just setting a quality floor, and everyone has to clear it.

The Tax Angle

The Dormant Commerce Clause doesn't just apply to regulations. It also applies to taxes.

Over the years, the Supreme Court has consistently held that the Commerce Clause contains "a further, negative command prohibiting certain state taxation even when Congress has failed to legislate on the subject." In other words, states can't use their tax codes to discriminate against interstate commerce any more than they can use their regulatory codes.

This came up dramatically in a 2015 case from Maryland. Maryland had an unusual practice: it taxed all personal income earned within Maryland's borders, and it also taxed all personal income earned by Maryland residents anywhere in the world. So if you were a Maryland resident working in Virginia, Maryland would tax your Virginia income. Virginia would also tax it. And Maryland wouldn't give you a credit for the taxes you paid to Virginia.

This created a kind of double taxation that only hit people who worked across state lines. If you lived and worked entirely in Maryland, you paid Maryland taxes once. If you lived in Maryland but worked in Virginia, you paid taxes to both states on the same income.

The Supreme Court said this was a Dormant Commerce Clause violation. The tax structure discriminated against interstate economic activity. It made it more expensive to work across state lines than to work within them. That's exactly the kind of barrier to interstate commerce the Constitution was designed to prevent.

The Fight Over Formalism

For decades, courts tried to use formal categories to decide which state taxes were permissible and which weren't. They would ask questions like: Is this a "privilege tax" or a "franchise tax"? Is it imposed on the gross receipts from interstate commerce, or merely measured by those receipts?

These distinctions seem silly, and they were. The same economic burden could be constitutional or unconstitutional depending on what you called it.

The absurdity reached its peak in two cases known as Railway Express I and Railway Express II. In the first case, Virginia imposed a tax on businesses operating within the state, framing it as a "business privilege tax" on the privilege of doing business in interstate commerce. The Supreme Court struck it down.

So Virginia went back to the drawing board. It passed essentially the same tax with the same economic effect, but called it a "franchise tax" on "intangible property" in the form of "going concern value" as measured by gross receipts.

The Court upheld the reworded statute. The economic impact was identical. Only the label had changed.

This kind of formalism—where labels matter more than reality—eventually collapsed under its own weight. In 1977, in a case called Complete Auto Transit versus Brady, the Supreme Court finally threw out the old approach. What matters now is the actual effect of the tax, not what the state decides to call it.

Why This Matters for AI and Elections

At first glance, a legal doctrine about interstate commerce and state taxation might seem far removed from artificial intelligence and its influence on elections. But the connection runs deeper than you might think.

The Dormant Commerce Clause embodies a fundamental principle: that the national interest sometimes requires limiting what states can do, even when Congress hasn't specifically told them to stop. The federal structure creates a presumption against economic balkanization, against states retreating into isolation and trying to protect their own at everyone else's expense.

The same tension plays out in technology regulation. When states try to regulate AI systems, or social media platforms, or digital advertising, they run into questions about whether those regulations discriminate against interstate commerce. A California law that effectively requires companies to change their AI models nationwide might burden interstate commerce differently than a law that only affects in-state users. Where's the line?

And when AI companies spend hundreds of millions of dollars trying to influence state and federal elections, they're operating in an arena that the Founders also worried about: the relationship between economic power and political power. The Commerce Clause was designed to prevent states from waging economic warfare against each other. But it was also part of a larger project to create a genuinely national economy—one where interests could organize and operate at a national scale.

Whether that's a feature or a bug depends on your perspective.

The Doctrine's Critics

Not everyone loves the Dormant Commerce Clause. Justice Antonin Scalia was perhaps its most prominent critic, arguing that courts had invented a doctrine that doesn't actually appear in the Constitution's text. The Commerce Clause gives Congress the power to regulate commerce among the states. It doesn't explicitly say anything about what states can't do when Congress is silent.

Scalia thought the whole doctrine was judicial overreach—judges finding constitutional commands where the Constitution itself is quiet.

But defenders of the doctrine point out that the Constitution's structure implies certain things even when it doesn't state them explicitly. If the Founders gave Congress power over interstate commerce, they presumably did so because they thought national uniformity in commerce was important. That purpose would be frustrated if states could freely interfere with interstate trade whenever Congress happened not to be paying attention.

The debate continues. But for now, the Dormant Commerce Clause remains a major constraint on state power—a sleeping giant that wakes up whenever a state tries to wall itself off from the national economy.

The Bigger Picture

At its heart, the Dormant Commerce Clause is about a choice the Founders made. They could have created a loose confederation where each state controlled its own economic destiny. That's what they tried under the Articles of Confederation, and it was a disaster. States taxed each other's goods. They imposed tariffs on imports from their neighbors. The "United States" was united in name only.

So they chose something different. They chose to create a single national market, where goods and services could flow freely across state lines without running a gauntlet of local taxes and regulations designed to protect incumbent businesses.

The Commerce Clause was the mechanism for that choice. And the Dormant Commerce Clause is the doctrine courts have developed to enforce it—to make sure that states don't slip back into the economic balkanization that nearly destroyed the young nation.

It's not a perfect doctrine. The line between legitimate local regulation and illegitimate protectionism is sometimes hard to draw. Courts have to make judgment calls about whether laws are really about health and safety or are really about favoring local businesses. Reasonable people can disagree.

But the principle is clear. In America, we don't get to retreat behind our state borders and pretend the rest of the country doesn't exist. We're in this together. The sleeping power of the Commerce Clause makes sure we remember that.