Bradley W. Joondeph  (Santa Clara; Google Scholar), Congress's Authority To Regulate State And Local Taxation, 79 Tax Law. ___ (2026):

The current consensus is that Congress can generally regulate how state and local governments impose taxes. The Supreme Court has never squarely so held, but the justices have declared as much several times. If we take this as a given, the relevant question is whether there are any practical constraints on this power. This Article contends that the Constitution must constrain Congress’s regulation of how states raise revenue: there must exist a structural principle of federalism that limits this authority (going beyond the current constraints on Congress’s power to regulate the states themselves, which concern commandeering, states sovereign immunity, and equal state sovereignty).

Given the constitutional values at stake, this principle should center on two essential criteria. The first is the federal statute's impact on the states’ taxing powers, with respect to both their capacity to raise revenue and their discretion to determine how. And here, the law surrounding Congress’s authority to attach conditions to federal spending can point us in the right direction. In that context, the states’ choices must remain genuinely voluntary. The limit on Congress’s authority to regulate state taxation should be similar: what matters is whether Congress has left the states with the practical capacity to chart their own financial course—not in every detail, but in the main. The second criterion is the purpose of the statute. The Framers granted Congress the commerce power principally to preclude state regulation or taxation that harmed neighboring states or the nation as a whole. Thus, Congress is on much surer constitutional footing when it regulates state taxes to address these coordination or collective action problems: to protect interstate commerce from real harm attributable to protectionist, overlapping, or inconsistent state tax schemes.

If this is correct, it likely means that most of the 20-odd statutes Congress has enacted to date restricting states taxes are constitutional—but also that some existing federal statutes are potentially problematic. Perhaps more important, it means that a range of statutes Congress could foreseeably enact in the near future would raise serious constitutional concerns. States have recently considered a range of innovative exactions, from ad valorem wealth taxes to income taxes on unrealized investment gains. An ideologically opposed Congress might seek to snuff out these state-level innovations, for reasons that have little (or nothing) to do with protecting interstate commerce from disadvantage. But these new taxes could prove essential to the states' revenue raising capacities. Indeed, these innovations may be vital to their practical ability to remain meaningful, independent centers of governmental power.

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