METROPOLITAN LIFE INSURANCE CO. ET AL. v. WARD ET AL.
No. 83-1274
SUPREME COURT OF THE UNITED STATES
Argued October 31, 1984—Decided March 26, 1985
470 U.S. 869
Matthew J. Zinn argued the cause for appellants. With him on the briefs was Steven Reed.
Warren B. Lightfoot argued the cause for appellees. With him on the brief for appellee Ward were E. Mabry Rogers and Phillip E. Stano. Robert W. Bradford, Jr., and Harry Cole filed a brief for appellees American Educators Life Insurance Co. et al.*
*Briefs of amici curiae urging reversal were filed for the State of Connecticut et al. by Dennis J. Roberts II, Attorney General of Rhode Island, Frances X. Bellotti, Attorney General of Massachusetts, Gregory H. Smith, Attorney General of New Hampshire, Joseph I. Lieberman, Attorney General of Connecticut, Elliot F. Gerson, Deputy Attorney General, and John G. Haines, Assistant Attorney General; and for the Life Insurance Council of New York by Peter J. Flanagan.
Briefs of amici curiae urging affirmance were filed for the State of Alaska et al. by Anthony Celebrezze, Jr., Attorney General of Ohio, and Connie J. Harris, Assistant Attorney General, Dave Frohnmayer, Attorney General of Oregon, William F. Gary, Deputy Attorney General, and James E. Mountain, Jr., Solicitor General, Jim Mattox, Attorney General of Texas, and Henry H. Robinson, Assistant Attorney General; for the State of Illinois by Neil F. Hartigan, Attorney General, and Patricia Rosen and Kathryn A. Spalding, Assistant Attorneys General; for Allstate Insurance Co. et al. by Duane C. Quaini; for the Florida Association of Domestic Insurance Companies, Inc., et al. by Robert W. Perkins and Samuel R. Neel III.
This case presents the question whether Alabama‘s domestic preference tax statute,
I
Since 1955,1 the State of Alabama has granted a preference to its domestic insurance companies by imposing a substantially lower gross premiums tax rate on them than on out-of-state (foreign) companies.2 Under the current statutory provisions, foreign life insurance companies pay a tax on their gross premiums received from business conducted in Alabama at a rate of three percent, and foreign companies selling other types of insurance pay at a rate of four percent.
Alabama‘s domestic preference tax statute does provide that foreign companies may reduce the differential in gross premiums taxes by investing prescribed percentages of their worldwide assets in specified Alabama assets and securities.
II
Appellants, a group of insurance companies incorporated outside of the State of Alabama, filed claims with the Alabama Department of Insurance in 1981, contending that the domestic preference tax statute, as applied to them, violated the Equal Protection Clause. They sought refunds of taxes paid for the tax years 1977 through 1980. The Commissioner of Insurance denied all of their claims on July 8, 1981.
After their motion for a new trial was denied, appellants appealed to the Court of Civil Appeals. It affirmed the Circuit Court‘s rulings as to the existence of the two legitimate state purposes, but remanded for an evidentiary hearing on the issue of rational relationship, concluding that summary judgment was inappropriate on that question because the evidence was in conflict. 437 So. 2d 535 (1983). Appellants petitioned the Supreme Court of Alabama for certiorari on the affirmance of the legitimate state purpose issue, and the State and the intervenors petitioned for review of
III
Prior to our decision in Western & Southern Life Ins. Co. v. State Board of Equalization of California, supra, the jurisprudence of the applicability of the Equal Protection Clause to discriminatory tax statutes had a somewhat checkered history. Lincoln National Life Ins. Co. v. Read, 325 U. S. 673 (1945), held that so-called “privilege” taxes, required to be paid by a foreign corporation before it would be permitted to do business within a State, were immune from equal protection challenge. That case stood in stark contrast, however, to the Court‘s prior decisions in Southern R. Co. v. Greene, 216 U. S. 400 (1910), and Hanover Fire Ins. Co. v. Harding, 272 U. S. 494 (1926), as well as to later decisions, in which the Court had recognized that the Equal Protection Clause placed limits on other forms of discriminatory taxation imposed on out-of-state corporations solely because of their residence. See, e. g., WHYY, Inc. v. Glassboro, 393 U. S. 117 (1968); Allied Stores of Ohio, Inc. v. Bowers, 358 U. S. 522 (1959); Wheeling Steel Corp. v. Glander, 337 U. S. 562 (1949).
In Western & Southern, supra, we reviewed all of these cases for the purpose of deciding whether to permit an equal
Because appellants waived their right to an evidentiary hearing on the issue whether the classification in the Alabama domestic preference tax statute bears a rational relation to the two purposes upheld by the Circuit Court, the only question before us is whether those purposes are legitimate.5
(1)
The first of the purposes found by the trial court to be a legitimate reason for the statute‘s classification between foreign and domestic corporations is that it encourages the formation of new domestic insurance companies in Alabama. The State, agreeing with the Court of Civil Appeals, contends that this Court has long held that the promotion of domestic industry, in and of itself, is a legitimate state purpose that will survive equal protection scrutiny. In so contending, it relies on a series of cases, including Western & Southern, that are said to have upheld discriminatory taxes. See Bacchus Imports, Ltd. v. Dias, 468 U. S. 263 (1984); Pike v. Bruce Church, Inc., 397 U. S. 137 (1970); Allied Stores of Ohio, Inc. v. Bowers, supra; Parker v. Brown, 317 U. S. 341 (1943); Carmichael v. Southern Coal & Coke Co., 301 U. S. 495 (1937); Board of Education v. Illinois, 203 U. S. 553 (1906).
The cases cited lend little or no support to the State‘s contention.6 In Western & Southern, the case principally relied upon, we did not hold as a general rule that promotion of domestic industry is a legitimate state purpose under equal protection analysis. Rather, we held that California‘s pur-
The validity of the view that a State may not constitutionally favor its own residents by taxing foreign corporations at a higher rate solely because of their residence is confirmed by a long line of this Court‘s cases so holding. WHYY, Inc. v. Glassboro, 393 U. S., at 119-120; Wheeling Steel Corp. v. Glander, 337 U. S., at 571; Hanover Fire Ins. Co. v. Harding, 272 U. S., at 511; Southern R. Co. v. Greene, 216 U. S., at 417. See Reserve Life Ins. Co. v. Bowers, 380 U. S. 258 (1965) (per curiam). As the Court stated in Hanover Fire Ins. Co., with respect to general tax burdens on business, “the foreign corporation stands equal, and is to be classified with domestic corporations of the same kind.” 272 U. S., at 511. In all of these cases, the discriminatory tax was imposed by the State on foreign corporations doing business within the State solely because of their residence, presumably to promote domestic industry within the State.7
The State contends that Allied Stores of Ohio, Inc. v. Bowers, supra, shows that this principle has not always held true. In that case, a domestic merchandiser challenged on equal protection grounds an Ohio statute that exempted foreign corporations from a tax on the value of merchandise held for storage within the State. The Court upheld the tax, finding that the purpose of encouraging foreign companies to build warehouses within Ohio was a legitimate state purpose. The State contends that this case shows that promotion of domestic business is a legitimate state purpose under equal protection analysis.
We disagree with the State‘s interpretation of Allied Stores and find that the case is not inconsistent with the other cases on which we rely. We agree with the holding of Allied Stores that a State‘s goal of bringing in new business is legitimate and often admirable. Allied Stores does not, however, hold that promotion of domestic business by discriminating against foreign corporations is legitimate. The case involves instead a statute that encourages nonresidents—who are not competitors of residents—to build warehouses within the State. The discriminatory tax involved did not favor residents by burdening outsiders; rather, it granted the
(2)
The State argues nonetheless that it is impermissible to view a discriminatory tax such as the one at issue here as violative of the Equal Protection Clause. This approach, it contends, amounts to no more than “Commerce Clause rhetoric in equal protection clothing.” Brief for Appellee Ward 22. The State maintains that because Congress, in enacting the McCarran-Ferguson Act,
The two constitutional provisions perform different functions in the analysis of the permissible scope of a State‘s power—one protects interstate commerce, and the other protects persons9 from unconstitutional discrimination by the States. See Bethlehem Motors Corp. v. Flynt, 256 U. S. 421, 423-424 (1921). The effect of the statute at issue here is to place a discriminatory tax burden on foreign insurers who desire to do business within the State, thereby also incidentally placing a burden on interstate commerce. Equal protection restraints are applicable even though the effect of the discrimination in this case is similar to the type of burden with which the Commerce Clause also would be concerned. We reaffirmed the importance of the Equal Protection Clause in the insurance context in Western & Southern and see no reason now for reassessing that view.
B
The second purpose found by the courts below to be legitimate was the encouragement of capital investment in the Alabama assets and governmental securities specified in the statute. We do not agree that this is a legitimate state purpose when furthered by discrimination. Domestic insurers remain entitled to the more favorable rate of tax regardless of whether they invest in Alabama assets. Moreover, the investment incentive provision of the Alabama statute does not enable foreign insurance companies to eliminate the discriminatory effect of the statute. No matter how much of
IV
We conclude that neither of the two purposes furthered by the Alabama domestic preference tax statute and addressed by the Circuit Court for Montgomery County, see supra, at 873, is legitimate under the Equal Protection Clause to justify the imposition of the discriminatory tax at issue here. The judgment of the Alabama Supreme Court accordingly is reversed, and the case is remanded for further proceedings not inconsistent with this opinion.
It is so ordered.
JUSTICE O‘CONNOR, with whom JUSTICE BRENNAN, JUSTICE MARSHALL, and JUSTICE REHNQUIST join, dissenting.
This case presents a simple question: Is it legitimate for a State to use its taxing power to promote a domestic insurance industry and to encourage capital investment within its borders? In a holding that can only be characterized as astonishing, the Court determines that these purposes are illegitimate. This holding is unsupported by precedent and subtly distorts the constitutional balance, threatening the freedom of both state and federal legislative bodies to fashion appropriate classifications in economic legislation. Because I disagree with both the Court‘s method of analysis and its conclusion, I respectfully dissent.
I
Alabama‘s legislature has chosen to impose a higher tax on out-of-state insurance companies and insurance companies incorporated in Alabama that do not maintain their principal
Our precedents impose a heavy burden on those who challenge local economic regulation solely on Equal Protection Clause grounds. In this context, our long-established jurisprudence requires us to defer to a legislature‘s judgment if the classification is rationally related to a legitimate state purpose. Yet the Court evades this careful framework for analysis, melding the proper two-step inquiry regarding the State‘s purpose and the classification‘s relationship to that purpose into a single unarticulated judgment. This tactic enables the Court to characterize state goals that have been legitimated by Congress itself as improper solely because it disagrees with the concededly rational means of differential taxation selected by the legislature. This unorthodox approach leads to further error. The Court gives only the most cursory attention to the factual and legal bases supporting the State‘s purposes and ignores both precedent
The Court overlooks the unequivocal language of our prior decisions. “Unless a classification trammels fundamental personal rights or is drawn upon inherently suspect distinctions such as race, religion, or alienage, our decisions presume the constitutionality of the statutory discriminations and require only that the classification challenged be rationally related to a legitimate state interest.” New Orleans v. Dukes, 427 U. S. 297, 303 (1976). See, e. g., Lehnhausen v. Lake Shore Auto Parts Co., 410 U. S. 356 (1973). Judicial deference is strongest where a tax classification is alleged to infringe the right to equal protection. “[I]n taxation, even more than in other fields, legislatures possess the greatest freedom in classification.” Madden v. Kentucky, 309 U. S. 83, 88 (1940). “Where the public interest is served one business may be left untaxed and another taxed, in order to promote the one or to restrict or suppress the other.” Carmichael v. Southern Coal & Coke Co., 301 U. S. 495, 512 (1937) (citations omitted). As the Court emphatically noted in Allied Stores of Ohio, Inc. v. Bowers, 358 U. S. 522, 528 (1959) (citations omitted):
“[I]t has repeatedly been held and appears to be entirely settled that a statute which encourages the location within the State of needed and useful industries by exempting them, though not also others, from its taxes is not arbitrary and does not violate the Equal Protection Clause of the Fourteenth Amendment. Similarly, it has long been settled that a classification, though discriminatory, is not arbitrary or violative of the Equal Protection Clause of the Fourteenth Amendment if any
state of facts reasonably can be conceived that would sustain it.”
See also Western & Southern Life Ins. Co. v. State Board of Equalization of California, supra, at 674; Minnesota v. Clover Leaf Creamery Co., 449 U. S. 456, 464 (1981).
Appellants waived their right to an evidentiary hearing and conceded that Alabama‘s classification was rationally related to its purposes of encouraging the formation of domestic insurance companies and bringing needed services and capital to the State. Thus the only issue in dispute is the legitimacy of these purposes. Yet it is obviously legitimate for a State to seek to promote local business and attract capital investment, and surely those purposes animate a wide range of legislation in all 50 States.
The majority evades the obvious by refusing to acknowledge the factual background bearing on the legitimacy of the State‘s purpose or to address the many collateral public benefits advanced by Alabama. Instead, the Court dismisses appellees’ arguments by merely stating that they were not ruled on by the courts below. Ante, at 875-876, n. 5. In point of fact, the full range of purposes documented before this Court was also argued and documented before the Alabama Circuit Court. See Record, Vols. 6-8. That court found ”at least two purposes, in addition to raising revenue: (1) encouraging the formation of new insurance companies in Alabama, and (2) encouraging capital investment by foreign insurance companies in the Alabama assets and governmental securities set forth in the statute.” App. to Juris. Statement 20a-21a (emphasis added). As appellants concede, these purposes are simply a step in achieving the “larger set of purposes [whose] premise . . . is that domestic insurance companies, on the whole, benefit the state in ways which foreign companies do not.” Brief for Appellants 31.
In any event, it is settled law that the appellee may assert any argument in support of the judgment in his favor, regardless of whether it was relied upon by the court below.
Appellees claim that Alabama‘s insurance tax, in addition to raising revenue and promoting investment, promotes the formation of new domestic insurance companies and enables them to compete with the many large multistate insurers that currently occupy some 75% to 85% of the Alabama insurance market. App. 80. Economic studies submitted by the State document differences between the two classes of insurers that are directly relevant to the well-being of Alabama‘s citizens. See id., at 46-129. Foreign insurers typically concentrate on affluent, high volume, urban markets and offer standardized national policies. In contrast, domestic insurers such as intervenors American Educators Life Insurance Company and Booker T. Washington Life Insurance Company are more likely to serve Alabama‘s rural areas, and to write low-cost industrial and burial policies not offered by the larger national companies.11 Additionally, appellees argue
Ignoring these policy considerations, the Court insists that Alabama seeks only to benefit local business, a purpose the Court labels invidious. Yet if the classification chosen by the State can be shown actually to promote the public welfare, this is strong evidence of a legitimate state purpose. See Note, Taxing Out-of-State Corporations After Western & Southern: An Equal Protection Analysis, 34 Stan. L. Rev. 877, 896 (1982). In this regard, Justice Frankfurter wisely observed:
“[T]he great divide in the [equal protection] decisions lies in the difference between emphasizing the actualities or the abstractions of legislation.
“. . . To recognize marked differences that exist in fact is living law; to disregard practical differences and concentrate on some abstract identities is lifeless logic.” Morey v. Doud, 354 U. S. 457, 472 (1957) (dissenting).
A thoughtful look at the “actualities of [this] legislation” compels the conclusion that the State‘s goals are legitimate by any test.
II
The policy of favoring local concerns in state regulation and taxation of insurance, which the majority condemns as illegitimate, is not merely a recent invention of the States. The States initiated regulation of the business of insurance as early as 1851. See Report of the Comptroller General,
The drafters of the Act were sensitive to the same concerns Alabama now vainly seeks to bring to this Court‘s attention: the greater responsiveness of local insurance companies to local conditions, the different insurance needs of rural and industrial States, the special advantages and constraints of state-by-state regulation, and the importance of insurance license fees and taxes as a major source of state revenues. See, e. g., Hearings on S. 1362 before the Senate Subcommittee on the Judiciary, 78th Cong., 1st Sess., 3, 10, 16-17 (1943) (letter of Gov. Sharpe of South Dakota stressing role of domestic insurers that provide “poor man” and rural policies adapted to farming concerns); 90 Cong. Rec. 6564 (1944) (remarks of Rep. Vorhis). “As this Court observed shortly afterward, ‘[o]bviously Congress’ purpose was broadly to give support to the existing and future state systems for regulating and taxing the business of insurance.’ Prudential Insurance Co. v. Benjamin, 328 U.S. 408, 429 (1946).” St. Paul Fire & Marine Insurance Co. v. Barry, supra, at 539.
The majority opinion correctly notes that Congress did not intend the McCarran-Ferguson Act to give the States
Any doubt that Congress’ intent encompassed taxes that discriminate in favor of local insurers was dispelled in Prudential Insurance Co. v. Benjamin, 328 U.S. 408 (1946). Cf. Note, Congressional Consent to Discriminatory State Legislation, 45 Colum. L. Rev. 927 (1945) (discussing the issues of constitutional power posed by the Act). There a foreign insurer challenged a tax on annual gross premiums imposed on foreign but not domestic insurers as a condition for renewal of its license to do business. Congress, the foreign insurer argued, was powerless to sanction the tax at issue because “the commerce clause ‘by its own force’ forbids discriminatory state taxation.” 328 U.S., at 426. A unanimous Court rejected the argument that exacting a 3% gross premium tax from foreign insurers was invalid as “somehow technically of an inherently discriminatory character.” Id., at 432. The Court concluded that the McCarran-Ferguson Act‘s effect was “clearly to sustain the exaction and that this can be done without violating any constitutional provision.” Id., at 427 (emphasis added).
Benjamin expressly noted that nothing in the Equal Protection Clause forbade the State to enact a law such as the tax at issue. Id., at 438, and n. 50. In this regard the Court relied in part on Hanover Fire Ins. Co. v. Harding, 272 U.S. 494 (1926), a decision that explicitly recognized that differential taxation of revenues of foreign corporations may not be arbitrary or without reasonable basis. See Western & Southern Life Ins. Co. v. State Board of Equalization of California, 451 U.S., at 664, n. 17. The Commerce Clause, Benjamin emphasized, is not a “one-way street” but encompasses congressional power “to discriminate against interstate commerce and in favor of local trade,” “subject only to the restrictions placed upon its authority by other constitutional provisions.” 328 U.S., at 434. Where the States and Congress have acted in concert to effect a policy favoring local concerns, their action must be upheld unless it unequivocally exceeds “some explicit and compelling limitation imposed by a constitutional provision or provisions designed and intended to outlaw the action taken entirely from our constitutional framework.” Id., at 435-436.
Our more recent decision in Western & Southern in no way undermines the force of the analysis in Benjamin. Western & Southern confirms that differential premium taxes are not immune from review as “privilege” taxes, but it also teaches that the Constitution requires only that discrimination between domestic and foreign corporations bear a rational relationship to a legitimate state purpose. Benjamin clearly recognized that differentially taxing foreign insurers to promote a local insurance industry was a legitimate state purpose completely consonant with Congress’ purpose in the McCarran-Ferguson Act.
The contemporary realities of insurance regulation and taxation continue to justify a uniquely local perspective. Insurance regulation and taxation must serve local social policies including assuring the solvency and reliability of companies doing business in the State and providing special protection for those who might be denied insurance in a free market, such as the urban poor, small businesses, and family farms. GAO Report 10-13; State Insurance Regulation, Hearing before the Subcommittee on Antitrust, Monopoly
State insurance commissions vary widely in manpower and expertise. GAO Report 14. In practice, the State of incorporation exercises primary oversight of the solvency of its insurers. Id., at 36-38. See generally Dunne, Risk, Reality, and Reason in Financial Services Deregulation: A State Legislative Perspective, 2 J. Ins. Reg. 342 (1984) (prepared by the Conference of Insurance Legislators). See, e. g.,
Many have sharply criticized this piecemeal system, see, e. g., GAO Report i-iii; Schmalz, The Insurance Exemption: Can it be Modified Successfully?, 48 ABA Antitrust L. J. 579 (1979), but Congress has resisted suggestions that it modify the McCarran-Ferguson Act to permit greater federal intervention. See GAO Report 1; Insurance Regulation, supra. This Court cannot ignore the exigencies of contemporary insurance regulation outlined above simply because it might prefer uniform federal regulation. Given the distinctions in ease of regulation and services rendered by foreign and domestic insurers, we cannot dismiss as illegitimate the State‘s goal of promoting a healthy local insurance industry sensitive to regional differences and composed of companies that agree to subordinate themselves to the Alabama Commissioner‘s control and to maintain a principal place of business within Alabama‘s borders. Though economists might dispute the efficacy of Alabama‘s tax, “[p]arties challenging legislation under the Equal Protection Clause cannot prevail so long as ‘it is evident from all the considerations presented to [the legislature], and those of which we may take judicial notice, that the question is at least debatable.‘” Western & Southern Life Ins. Co. v. State Board of Equalization of California, 451 U.S., at 674, quoting United States v. Carolene Products Co., 304 U.S. 144, 154 (1938). Moreover, appellants waived their right to challenge the tax measure‘s effectiveness.
III
Despite abundant evidence of a legitimate state purpose, the majority condemns Alabama‘s tax as “purely and completely discriminatory” and “the very sort of parochial discrimination that the Equal Protection Clause was intended to prevent.” Ante, at 878. Apparently, the majority views any favoritism of domestic commercial entities as inherently
A State may use its taxing power to entice useful foreign industry, see Allied Stores of Ohio, Inc. v. Bowers, 358 U.S., at 528, or to make residence within its boundaries more attractive, see Zobel v. Williams, 457 U.S. 55, 67-68 (1982) (BRENNAN, J., concurring). Though such measures might run afoul of the Commerce Clause, “[n]o one disputes that a State may enact laws pursuant to its police powers that have the purpose and effect of encouraging domestic industry.” Bacchus Imports, Ltd. v. Dias, 468 U.S. 263, 271 (1984); Western & Southern Life Ins. Co. v. State Board of Equalization of California, supra, at 668. Cf. Edgar v. MITE Corp., 457 U.S. 624, 646 (1982) (POWELL, J., concurring in part) (noting State‘s interest in protecting regionally based corporations from acquisition by foreign corporations).
The majority‘s attempts to distinguish these precedents are unconvincing. First the majority suggests that a state purpose might be legitimate for purposes of the Commerce Clause but somehow illegitimate for purposes of the Equal Protection Clause. No basis is advanced for this theory because no basis exists. The test of a legitimate state purpose must be whether it addresses valid state concerns. To suggest that the purpose‘s legitimacy, chameleon-like, changes according to the constitutional clause cited in the complaint is merely another pretext to escape the clear message of this Court‘s precedents.
Next the majority asserts that “a State may not constitutionally favor its own residents by taxing foreign corporations at a higher rate solely because of their residence,” citing cases that rejected discriminatory ad valorem property taxes,
In fact, the Court noted in several of these opinions that foreign corporations may validly be taxed at a higher rate if the classification is based on some relevant distinction. No such distinction, however, had been demonstrated or even alleged. See WHYY, Inc. v. Glassboro, supra, at 120 (“This is not a case in which the exemption was withheld by reason of the foreign corporation‘s failure or inability to benefit the State in the same measure as do domestic nonprofit corporations“); Wheeling Steel Corp. v. Glander, supra, at 572 (“[T]he inequality is not because of the slightest difference in Ohio‘s relation to the decisive transaction“); Southern R. Co. v. Greene, supra, at 416-417 (parties conceded that the business of the foreign and domestic corporations was precisely the same).2 Lacking the threshold requirement of an articu-
Notes
In treating these cases as apposite authority, the majority again closes its eyes to the facts. Alabama does not tax at a higher rate solely on the basis of residence; it taxes insurers, domestic as well as foreign, who do not maintain a principal place of business or substantial assets in Alabama, based on conceded distinctions in the contributions of these insurers as a class to the State‘s insurance objectives. The majority obscures the issue by observing that a given “foreign insurance company doing the same type and volume of business in Alabama as a domestic company” will pay a higher tax. Ante, at 871-872. Under our precedents, tax classifications need merely “res[t] upon some reasonable consideration of difference or policy.” Allied Stores of Ohio, Inc. v. Bowers,
IV
Because Alabama‘s classification bears a rational relationship to a legitimate purpose, our precedents demand that it be sustained. The Court avoids this clear directive by a remarkable evasive tactic. It simply declares that the ends of promoting a domestic insurance industry and attracting investments to the State when accomplished through the means of discriminatory taxation are not legitimate state purposes. This bold assertion marks a drastic and unfortunate departure from established equal protection doctrine. By collapsing the two prongs of the rational basis test into one, the Court arrives at the ultimate issue—whether the means are constitutional—without ever engaging in the deferential inquiry we have adopted as a brake on judicial impeachment of legislative policy choices. In addition to unleashing an undisciplined form of Equal Protection Clause scrutiny, the Court‘s approach today has serious implications for the authority of Congress under the Commerce Clause. Groping for some basis for this radical departure from equal protection analysis, the Court draws heavily on JUSTICE BRENNAN‘S concurring opinion in Allied Stores of Ohio, Inc. v. Bowers, supra, at 530, as support for its argument that “the Equal Protection Clause forbids a State to discriminate in favor of its own residents solely by burdening ‘the residents of other state members of our federation.‘” Ante, at 878, quoting 358 U.S., at 533.
As noted in Western & Southern, JUSTICE BRENNAN‘S interpretation has not been adopted by the Court, “which
Western & Southern established that a State may validly tax out-of-state corporations at a higher rate if its goal is to promote the ability of its domestic businesses to compete in interstate markets. Nevertheless, the Court today concludes that the converse policy is forbidden, striking down legislation whose purpose is to encourage the intrastate activities of local business concerns by permitting them to compete effectively on their home turf. In essence, the Court declares: “We will excuse an unequal burden on foreign
“Courts should be careful not to extend [the express] prohibitions [of the Constitution] beyond their obvious meaning by reading into them conceptions of public policy that the particular Court may happen to entertain.” Tyson & Brother v. Banton, 273 U.S. 418, 445-446 (1927) (Holmes, J., dissenting, joined by Brandeis, J.).
Ignoring the wisdom of this observation, the Court fashions its own brand of economic equal protection. In so doing, it supplants a legislative policy endorsed by both Congress and the individual States that explicitly sanctioned the very parochialism in regulation and taxation of insurance that the Court‘s decision holds illegitimate. This newly unveiled power of the Equal Protection Clause would come as a surprise to the Congress that passed the McCarran-Ferguson Act and the Court that sustained the Act against constitutional attack. In the McCarran-Ferguson Act, Congress
The doctrine adopted by the majority threatens the freedom not only of the States but also of the Federal Government to formulate economic policy. The dangers in discerning in the Equal Protection Clause a prohibition against barriers to interstate business irrespective of the Commerce Clause should be self-evident. The Commerce Clause is a flexible tool of economic policy that Congress may use as it sees fit, letting it lie dormant or invoking it to limit as well as promote the free flow of commerce. Doctrines of equal protection are constitutional limits that constrain the acts of federal and state legislatures alike. See, e. g., Califano v. Webster, 430 U.S. 313 (1977); Cohen, Congressional Power to Validate Unconstitutional State Laws: A Forgotten Solution to an Old Enigma, 35 Stan. L. Rev. 387, 400-413 (1983). The Court‘s analysis casts a shadow over numerous congressional enactments that adopted as federal policy “the type of parochial favoritism” the Court today finds unconstitutional. White v. Massachusetts Council of Construction Employers, Inc., supra, at 213. Contrary to the reasoning in Benjamin, the Court today indicates the Equal Protection Clause stands as an independent barrier if courts should determine that either Congress or a State has ventured the “wrong” direction down what has become, by judicial fiat, the one-way street of the Commerce Clause. Nothing in the Constitution or our past decisions supports forcing such an economic straitjacket on the federal system.
V
Today‘s opinion charts an ominous course. I can only hope this unfortunate adventure away from the safety of our precedents will be an isolated episode. I had thought the Court had finally accepted that
“the judiciary may not sit as a superlegislature to judge the wisdom or desirability of legislative policy deter-
minations made in areas that neither affect fundamental rights nor proceed along suspect lines; in the local economic sphere, it is only the invidious discrimination, the wholly arbitrary act, which cannot stand consistently with the Fourteenth Amendment.” New Orleans v. Dukes, 427 U.S., at 303-304 (citations omitted).
Because I believe that the Alabama law at issue here serves legitimate state purposes through concededly rational means, and thus is neither invidious nor arbitrary, I would affirm the court below. I respectfully dissent.
than a summary affirmance, which has precedential value only as to “the precise issues necessarily presented and necessarily decided.” Mandel v. Bradley, 432 U.S. 173, 176 (1977). Decisions without opinion may not be equated with “an opinion by this Court treating the question on the merits.” See Edelman v. Jordan, 415 U.S. 651, 670-671 (1974). “Indeed, upon fuller consideration of an issue under plenary review, the Court has not hesitated to discard a rule which a line of summary affirmances may appear to have established.” Fusari v. Steinberg, 419 U.S. 379, 392 (1975) (BURGER, C. J., concurring).