Observers of the state and local tax world regularly note the seemingly irresponsible actions so often taken by state revenue agencies, by state courts, and by state legislatures — a few recent examples of states acting badly are set forth below. In many ways federal law has encouraged these types of actions by placing limited checks on the states. The federal Tax Injunction Act (TIA) and the common law comity doctrine keep federal courts off the states’ backs. Also, the Supreme Court’s South Dakota v. Wayfair Inc. decision and its Murphy v. National Collegiate Athletic Association decision, in which state legislatures were freed from congressional restraints regarding the enactment of state gambling statutes, will likely encourage states to push back on virtually any federal effort in the interstate tax arena. Adding fuel to this fire, most of the states are now, in Franchise Tax Board v. Hyatt, seeking freedom from another check on their actions, by asking the Supreme Court to overturn precedent allowing state government actors to be sued in sister state courts (this is similar to Massachusetts’s efforts in Crutchfield Corp. v. Harding). State victories in these cases would surely fan the flames of unchecked state behavior into a veritable conflagration. There is, however, the glimmer of a fire extinguisher at the end of the tunnel — Congress could establish stronger federal checks on state tax actions by opening the federal courts to interstate taxpayers.

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