Petition — GLASER v. SALORIO (Nos. 83-596, 83-353)

83-596 ws | fame]

I THE | CT 6 1993

Supreme Court of the United ae :

Octoser Term, 1983 ivaens on

SIDNEY GLASER, Director of the Division of Taxation,

Department of the Treasury of the State of New Jersey,

Cross Petitioner,

v.

JOHN SALORIO, ROBERT COE and

JOLN D. McGARR, JR.,

Cross Respondents.

On Cross Petition for a Writ of Certiorari to the

Supreme Court of New Jersey

CROSS PETITION FOR A WRIT OF CERTIORARI TO

THE SUPREME COURT OF NEW JERSEY

Inwoy I. Krretman,

Attorney General of New J ersey,

Attorney for Cross Petitioner, Sidney

Glaser, Director of the Division of

Taxation, Department of the Treasury

of the State of New Jersey,

Richard J. Hughes Justice Complex

T — New J 08625.

renton, ew Jersey

(609) 292-4925

Micuaet R. Cote,

Assistant Attorney General,

Of Counsel.

Mary R. Hamm,

Anprea M. Srixowrrz,

— Attorneys General,

n the Cross Petition.

Adams Press Corp., 50 Park Place, Newark, New Jersey 07102—(201) 623-8611

Questions Presented

1. Can two states enter into an agreement to coordinate

their laws relating to the taxation of individuals who

work in one of the states and reside in the other without

securing congressional approval pursuant to the Compact

Clause of the United States Constitution (Art. I, $10, Cl.

3)?

2. Is the cbjective of the Privileges and Immunities

Clause of Article IV of the United States Constitution of

maintaining harmonious interstate relations satisfied by

the 1962 agreement between the States of New York and

New Jersey which establishes a system for coordinating

the tax laws of the two states by which tax revenues from

individuals who reside in one state and earn their income

in the other are equitably apportioned and the imposition

of double taxation avoided?

3. When viewed as part of New Jersey’s entire taxing

scheme and the benefits received by New York commuters,

does the New Jersey emergency transportation tax, con-

sistently with the Privileges and Immunities Clause of

Article IV of the United States Constitution, fairly ap-

portion to New York commuters the costs incurred by New

Jersey in the construction, maintenance and operation of

interstate transportation facilities servicing that group?

QUESTIONS PRESENTED ..

ST a Se

JURISDICTION

STATUTORY AND CONSTITUTIONAL Provisions INVOLVED

STATEMENT °F THE CASE .

REASONS FOR GRANTING THE Cross PETITION:

Point I—If the Court grants the writ of cer-

tiorari to consider the claim of the petitioners-

cross respondents that the prospective nature

of the judgment below undermines the principle

of stare decisis, it should grant the cross peti-

tion in order to be able to review the entire

case

Point II—The decision of the Supreme Court of

New Jersey, that the 1962 Agreement between

New York and New Jersey is unenforceable

against the cross respondents because it did

not receive congressional approval pursuant

to Article I, Section 10, Clause 3 of the United

States Constitution, is irreconcilable with the

Court’s decision in United States Steel Corp.

v. Multistate Tax Commission, 434 U.S. 452

(1978)

13

15

TABLE OF GONTENTS lii

PAGE

Point I1J—The Emergency Transportation Tax

is consistent with the principles of federalism

which the Privileges and Immunities Clause of

Article IV is designed to serve, because it is

imposed and collected pursuant to a 1962

Agreement between the States of New York

and New Jersey which provides for the coordi-

nation of the tax laws of the two states by

equitably apportioning tax revenues from in-

dividuals who reside in one State and earn

their income in the other ................-..cccccccocssesssoses 18

Point iV—When viewed as part of New Jer-

sey’s entire taxing scheme and in conjunction

with the benefits derived by New York com-

muters, the Emergency Transportation Tax is

consistent with the Privileges and Immuni-

ties Clause of Article IV because New Jer-

sey residents pay subs‘antial other state taxes

which nonresidents do not pay 25

ConcLusion 30

APPENDIX:

A—Opinion of the Supreme Court of New Jer-

sey, dated March 26, 1980 la

B—Opinion of the Superior Court of New Jer-

sey, Chancery Division, dated October 24,

1978 (as amended October 31, 1978 and

November 8, 1978) 38a

C—<Accord of May 6, 1962 between the States of

New York and New Jersey 6la

iv TABLE OF AUTHORITIES

PAGE

Table of Authorities

Cases Cited

Austin v. New Hampshire, 420 U.S. 656 (1975) ........ 20, 27

Blonder-Tongue Labs v. University Foundation, 402

U.S. 313 (1971) 19

Bode v. Barrett, 344 U.S. 583 (1953) .. : 18

Central R.R., In re, 485 F.2d 208 (3rd Cir. 1973)

(en bane) cert. den. sub nom. Timpany v. New

Jersey, 414 U.S. 1131 (1974) 3

Cox Broadcasting Corporation v. Cohn, 420 U.S. 469

(1975) 10

General American Tank Car v. Day, 270 U.S. 367

(1926) 26

Gregg Dyeing Co. v. Query, 286 U.S. 472 (1932) ........ 26

Hicklin v. Orbeck, 437 U.S. 518 (1978) 20

Hughes Tool Co. v. Trans World Airlines, 409 U.S.

363 (1973), reh. den. 410 U.S. 975 2

Interstate Busses Corp v. Blodgett, 276 U.S. 245

(1927) 27

Lemon v. Kurtzman (Lemon II), 411 U.S. 192 (1973)..12, 13

Lawrence v. State Tax Commission, 286 U.S. 276

(1932) 21

Marketstreet Railway Company v. Railroad Commis-

sion of State of California, 324 U.S. 548 (1945) .. 10

Maryland v. Baltimore Radio Show, 338 U.S. 912

(1950) y)

New York v. New Jersey, 429 U.S. 810 (1976) .......... .. 17, 24

TABLE OF AUTHORITIES v

PAGK

Pennsylvania v. New Jersey, 426 U.S. 660 (1976) .... 7,20

Safeway Trails, Inc. v. Furman, 41 N. J. 467 (1964)

appeal dism’d and cert. den. 379 U.S. 14 (1964) .... 27

Salorio v. Glaser, United States Supreme Court

Docket No. 83-353 1

Toomer v. Witsell, 334 U.S. 385 (1948) .. 24

Travelers’ Insurance Company v. Connecticut, 185

U.S. 364 (1901) 25

United States Steel Corp. v. Multistate Tax Commis-

om, GE UD. G68 COTO) dct 10, 15-17

Vlandis v. Kline, 412 U.S. 441 (1973) .................--.00-- 29

United States Constitution Cited

Article 1, Section 10, Clause 3 ..... 2, 15, 16

Article IV, Section 2, Clause 1 ol 2, 8, 14, 18,

19, 21, 24, 25

Statutes Cited

N.J.L. 1962, Ch. 70 6, 22, 23

N.J.S.A. 54A:1-1 et seq. 1

N.J.S.A. 54:8A-1 et seq. 7

N.J.S.A. 54:8A-1 to 57 (New Jersey Emergency

Transportation Tax Act) 2,3

N.J.S.A. 54:8A-2 +

N.J.S.A. 54:8A-5(c) 3

N.J.S.A. 54:8A-16(A) 4

vi TABLE OF AUTHORITIES

PAGE

N.J.S.A. 54:8A-16(B) ee Oe

N.J.S.A. 54:8A-20(b) (2) +

N.J.S.A. 54:8A4-58 7

New York Personal Income Tax Law 7

1960 N.Y. Sess. Laws, Ch. 563, New York Tax Law

Sec. 640 (McKinney) (repealed) +

1962 N.Y. Sess. Laws, Ch. 2 : 4, 22

28 U.S.C.:

Sec. 1257 10

Sec. 1257(3) 1

Rule Cited

Rules of the Supreme Court of the United States:

Rule 19.5 1

NO. 83-

IN THE

Supreme Court of the United States

Ocruszz Term, 1983

SIDNEY GLASER, Director of the Division of Taxation,

Department of the Treasury of the State of New Jersey,

Cross Petitioner,

v.

JOHN SALORIO, ROBERT COE and

JOHN D. McGARR, JR.,

Cross Respondents.

On Cross Petition for a Writ of Certiorari to the

Supreme Court of New Jersey

»™

<&

CROSS PETITION FOR A WRIT OF CERTIORARI TO

THE SUPREME COURT OF NEW JERSEY

The cross petitioner, Director of the Division of Taxa-

tion, Department of the Treasury of the State of New Jer-

sey, respectfully prays that a writ of certiorari issue to re-

view the opinions and orders of tlie Supreme Court of New

Jersey entered on June 8, 1983 and March 26, 1980.

Opinions Below

The opinion of the Supreme Court of New Jersey has

been officially reported at 93 N.J. 447, —— A.2d ——

(1983), and also is reproduced in Appendix A to the cross

respondents’ petition for certiorari in this matter (Salo-

rio v. Glaser, United States Supreme Court Docket No.

83-353). The opinion of the Superior Court of New Jer-

sey, Chancery Division, which is not officially reported,

has been reproduced in Appendix B to the petition for

certiorari.

The 1980 opinion of the Supreme Court of New Jersey

is officially reported at 82 N.J. 482, 414 A.2d 943 (1980),

and has been reproduced in Appendix A to this cross-

petition for certiorari. The prior opinion of the Superior

Court of New Jersey, Chancery Division, which is not

officially reported, has been reproduced in Appendix B to

this cross-petition for certiorari.

Jurisdiction

The judgment of the Supreme Court of New Jersey

which is the subject of this cross petition was entered on

June 8, 1983. It followed a remand ensuing from an

earlier opinion of the court dated March 26, 1980. The

petition for certiorari was received on September 6, 1983,

and this cross petition is filed within 30 days of that date,

pursuant to Rule 19.5, Rules of the Supreme Court of

the United States.

The cross petition invokes the jurisdiction of the Court

pursuant to 28 U.S.C. §1257(3). In arguing that the tax

is consistent with the Privileges and Immunities Clause

of Article IV, because it is imposed and collected pursuant

to an agreement between the States of New York and

New Jersey (Points II and III) and in arguing that other

taxes which New Jersey residents pay should be taken into

account in determining the validity of the ETT (Point

IV), the cross petitioner is petitioning from the earlier

opinion of the Supreme Court of New Jersey. The earlier

opinion of the New Jersey court was a final decision on

these issues, but did not terminate the litigation. The

cross petitioner, in its initial cross petition for a writ of

certiorari to this Court from the earlier decision of the

Supreme Court of New Jersey (Supreme Court Docket

No. 80-123), raised the issue of the agreement between the

States of New York and New Jersey. The Court’s denial

of the cross petition in the earlier proceeding (449 U.S.

874 (1980)) does not imply a rejection of the State’s posi-

tion on the merits. Hughes Tool Co. v. Trans World Air-

lines, 409 U.S. 363, 365 n. (1973), reh. den. 410 U.S. 975;

Maryland vy. Baltimore Radio Show, 338 U.S. 912, 919

(1950).

Statutory and Constitutional Provisions Involved

New Jersey Emergency Transportation Tax Act, N.J.

S.A. 54:8A-1 to 57.

Reported in Appendix D to the cross respondents’ peti-

tion for certiorari.

United States Constitution, Art. IV, §2, el. 1

The Citizens of each State shall be entiled to all

Privileges and Immunities of Citizens in the several

States.

United States Constitution, Art. I, §10, el. 3.

No State shall, without the Consent of Congress,

... enter into any Agreement or Compact with an-

other State...

Statement of the Case

The New Jersey tax structure relies very heavily upon

property taxes, which are among the highest in the nation

(Pa 33).* Since real property taxes for the most part are

paid only by residents, nonresidents who commute to New

Jersey traditionally have not contributed materially to State

revenues even though they derive substantial benefits from

the New Jersey transportation system and from other

State services. One of the public services which has placed

heavy stress upon the fiscal resources of the State has been

the transportation of interstate commuters. See, e.g., In re

Central R.R., 485 F.2d 208 (3rd Cir. 1973) (en banc) cert.

den. sub nom. Timpany v. New Jersey, 414 U.S. 1131 (1974).

In 1961, following extensive studies and hearings on the

transportation problem in the North Jersey-New York

metropolitan afea, (see Appendix A at 9 to 10), New

Jersey enacted the Emergency Transportation Tax Act.

N.J.S.A. 54:8A-1 et seq. The ETT is an income tax on

individuals who use interstate transportation facilities.

The imposition of the tax is expressly contingent upon an

annual certification by the New Jersey Commissioner of

Transportation to the State Treasurer of the existence of

a “critical transportation problem” between New Jersey

and a bordering state. N.J.S.A. 54:8A-5(c). The extent of

the transportation problem existing in the New York-New

Jersey metropolitan area was fully documented by the

cross petitioner’s experts in the second trial court proceed-

ing. Over seven million people travel from home to work

every weekday in this area, 2,250,000 of these in northern

New Jersey (Pa 273). The transportation problem is ag-

gravated by the extraordinarily high density of the points

*The reference is to the cross respondents’ appendix in the

Supreme Court of New Jersey.

4

of origin and destination and by the limited number of

river crossings between the two States (Da 2 to Da 10°

and see App. B to cross respondents’ petition for certiorari

at 32-3). ETT revenues are used exclusively to finance pro-

jects designed to alleviate the transportation problems in

this area, N.J.S.A. 54:8A-20(b)(2) and see App. A at 15.

When enacted, the ETT in effect applied only to New Jer-

sey residents commuting to work in New York. App. A at

12. While the ETT was imposed upon individuals resid-

ing in either New York or New Jersey and deriving income

in the other state (N.J.S.A. 54:8A-2), the Act allowed a

credit to nonresidents for taxes paid to another jurisdic-

tion if the jurisdiction allowed a similar credit to New

Jersey residents. N.J.S.A. 54:8A-16(A). The New York

personal income tax, which was imposed at the same rate

as the ETT, provided for a similar nonresident credit

(1960 N.Y. Sess. Laws, Ch. 563, New York Tax Law $640

(McKinney) (repealed) ) so that New Jersey residents com-

muting to New York were allowed a credit against their

New York tax liability for the ETT.

Apparently dissatisfied with the loss of revenue result-

ing from the nonresident credit contained in its personal

income tax law, New York repealed the nonresident credit

provision and amended the credit allowed to New York

residents. 1962 N.Y. Sess. Laws, Ch. 2, approved January

15, 1962. Since allowance of the nonresident credit in the

ETT is contingent upon reciprocal treatment of New Jer-

sey residents, the repeal of the New York nonresident

credit had the effect of subjecting New York residents to

the ETT. The net result was to render New Jersey resi-

dents liable for both the New York personal income tax

and the ETT on their income derived from New York and

*The reference is to the cross petitioner’s appendix in the

Supreme Court of New Jersey.

to render New York residents liable for only the ETT on

their income derived from New Jersey.

Discussions between New Jersey and New York to resolve

the tax controversy eventually culminiated in an agree-

ment or accord between the two States Appendix C. The

heart of the Accord was that by means of reciprocal legis-

lation, each State would tax residents of the other while

granting their own residents a credit for taxes paid to the

other State. Appendix C at 61, 62, 66-67.

The terms of the Accord between the States were an-

nounced by Governors Rockefeller and Hughes on May 6,

1962 in the following Executive Statement:

Governor Richard J. Hughes of New Jersey and

Governor Nelson A. Rockefeller of New York an-

nounced today that they had reached an understand-

ing in regard to the administration and enforcement

of the personal income tax laws of their respective

States as they affect residents of the other State.

Governor Rockefeller announced that New York,

under legislation enacted at the 1962 legislative ses-

sion, will allow its residents a credit against their

.few York State personal income taxes for income

taxes paid to New Jersey under the New Jersey

Emergency Transportation Act enacted in 1961, as

amended.

Governor Hughes announced that he would submit

to the New Jersey Legislature on Monday legisla-

tion which will grant to New Jersey residents a

credit against the New Jersey Emergency Transpor-

tation Tax for income taxes paid to the State of New

York under New York’s personal income tax law, as

amended in 1962.

In addition, it was agreed that neither State would

contest nor participate in contesting the right of the

other to levy and collect taxes imposed by the two

laws on residents of the other; and that each State

would assist and cooperate with the other in the ad-

ministration and enforcement thereof so as to assure

to the citizens of each who are directly involved the

greatest degree of certainty as to their responsibili-

ties under the two laws.

The Governors expressed the belief that this agree-

ment will clarify for the New York and New Jersey

commuters their status in regard to the income tax

laws of the two States and will insure certainty in

the application and administration of such laws.

The Governors stated that they are taking this ac-

tion in the interest of promoting interstate coopera-

tion and pledged their continued cooperation in other

matters affecting their citizens who live in one state

and work in the other. Noting the progress that has

been made recently in such matters as the Hudson

and Manhattan Railroad, the World Trade Center,

and the program for an integrated regional trans-

portation network, the Governors expressed their

confidence of still further progress through similiar

joint action, conducted in a spirit of harmony, co-

operation and good will [App. C at 66 to 67].

Following this executive action, the New Jersey Legis-

lature enacted Chapter 70 of the Laws of 1962, which was

made expressly retroactive to all taxable years beginning

on or after January 1, 1961. This provision affords a credit

to New Jersey residents against the ETT for any income

tax imposed by another “critical area State” (i.e., New

York). N.J.S.A. 54:8A-16(B). Thus, due to the retroactive

amendment of the New York Personal Income Tax Law re-

pealing the nonresident credit and the subsequent amend-

ment of the ETT granting a credit to New Jersey residents

for taxes paid to New York, the ETT is now paid by New

York residents working in New Jersey.

The reciprocal crediting provisions in the ETT Act and

the New York Personal Income Tax Law remain in effect

today. Neither State has taken action to rescind the 1962

Accord. New York, however, despite its undertaking in

the Accord not to contest or participate in contesting New

Jersey’s right to levy the ETT, in 1977 sought leave to file

a complaint in this Court against New Jersey alleging that

the ETT violated the Privileges and Immunities Clause. Cit-

ing Pennsylvania v. New Jersey, 426 U.S. 660 (1976), the

Court denied New York’s motion.* New York v. New Jer-

sey, 429 U.S. 810 (1976). The Court, however did not reach

the effect of the 1962 Accord.

*In Pennsylvania v. New Jersey, 426 U.S. 660 (1976), the

Court had held in a brief per curiam opinion that Pennsylvania

could not maintain an original action against New Jersey to con-

test the validity of the transportation benefits tax (N.J.S.A.

54:8A-58 et seg.), a tax similar in material respects to the

ETT, which New Jersey imposed upon Pennsylvania residents

commuting to New Jersey. Any harm to Pennsylvania’s fisc

could be remedied by the elimination of the credit which Pen-

nsylvania granted to its residents for payments of the transporta-

tion benefits tax, and the suit was not maintainable by Pennsylvania

as parens patriae because Pennsylvania was asserting a collectivity

of private suits and no sovereign state interest was implicated.

Shortly after the enactment of the New Jersey gross income tax

(N.J.S.A. 54A:1-1 et seqg.), New Jersey and Pennsylvania entered

into a reciprocal personal income tax agreement. Under the agree-

ment, each State taxes its own residents who are employed in the

other but does not tax residents of the other State employed

within the taxing State. The agreement is currently in force and

is not, so far as the State of New Jersey is aware, being challenged

in any court.

Following New York’s unsuccessful attempt—in viola-

tion of the Accord—to challenge the ETT by an original

action against New Jersey, three individual New York com-

muters commenced this lawsuit in 1977 in the Superior

Court of New Jersey. They sought a declaration that the

ETT was unconstitutional, a final injunction against fur-

ther withholding, a declaration that they need not file fur-

ther ETT returns or pay further ETT, and a refund of

“all monies withheld or paid under the Commuter Tax to

date” (Pa 2).

Following certain procedural motions, cross motions for

summary judgment and extensive depositions, on October

24, 1978, the trial court issued a comprehensive opinion up-

holding the constitutionality of the ETT, Appendix B at

53 to 56. The court found that there was indeed a trans-

portation crisis in northern New Jersey, that the “im-

pact of the tax upon residents and non-residents bears a

close relation to the challenge of correcting the traffic and

commuting problems” (Appendix B at 54), and concluded

that the ETT did not violate the Privileges and Immuni-

ties Clause or the Equal Protection Clause of the United

States Constitution. The court also found that New York

and New Jersey had entered into a reciprocal agreement,

consistent with the principles of interstate comity embodied

in the Privileges and Immunities Clause of Article IV, pur-

suant to which the ETT and its companion legislation in

New York had been enacted and remained in effect. In

finding the existence of such a mutual undertaking between

the States the trial court stated:

In the 1962 Act and thereafter, these two sover-

eign states by compact, by arrangement, by agree-

ment, by attitude and by legislation set up an ar-

rangement whereby they agreed on a taxing method

which would govern commuters. New York accepted

the 1961 legislation and what developed later. It

arranged for certain credits to be given residents of

both New York and New Jersey. New York saw to

it that its residents did not pay anything extra by

virtue of their working in New Jersey. New Jersey

took the same attitude.

... [T]here is no question in this Court’s mind

that the 1962 accord between the two states and the

actions and inactions of the parties thereafter

through 1975 represented a reciprocal understand-

ing, compact or the like between the legislative and

executive branches of these two states... [App B

at 55].

On appeal to the Supreme Court of New Jersey, that

court, as an initial matter, ruled that the cross respond-

ents had standing and that New York State was not the

real party in interest in the law suit. The court went on to

uphold the ETT as consistent with the Equal Protection

™lause, but, concluding that the record before it was insuf-

ficient to determine whether or not the ETT violated the

Privileges and Immunities Clause, remanded the case to

the trial court. Responding to the cross-petitioner’s argu-

ment that New Jersey residents pay substantial other taxes

which should be taken into account in determining the con-

stitutionality of the ETT under the Privileges and Im-

munities Clause, the court prohibited the inclusion of any

tax in the comparison “unless its scope is restricted to col-

lections for transportation services, the asserted ground of

justification for the ETT” (Appendix A at 25). The

Supreme Court of New Jersey further held that the 1962

Accord between the States of New York and New Jersey

was not an enforceable agreement. In the court’s view, if

if the Accord were interpreted to “bind New York’s

10

power over the extension of tax credits to its residents,”

(Appendix A at 30), New York would be relinquishing

a portion of its sovereign power. Under its reading of the

rule of United States Steel Corp. v. Multistate Tax Com-

mission, 434 U.S. 452 (1978), such an agreement would re-

quire the consent of Congress.

While the remand order of the New Jersey Supreme

Court was clearly not a final judgment from which a

party may appeal pursuant to 28 U.S.C. §1257 (see

Marketstreet Railway Company vy. Railroad Commission

of State of California, 324 U.S. 548, 551 (1945) and Cox

Broadcasting Corporation v. Cohn, 420 U.S. 469, 477

(1975) ), cross respondents nevertheless sought review of

that order in this Court. Cross petitioner moved to dis-

miss and simultaneously cross-petitioned for a writ of

certiorari on the ground that the portion of the New Jer-

sey Supreme Court’s opinion which concluded that the

Accord between the States of New York and New Jer-

sey was unenforceable was incorrect under this Court’s

decision in United States Steel Corp. v. Multistate Tax

Commission, supra. Cross petitioner further urged that

the Accord was consistent with the goals of the Privi-

leges and Immunities Clause because it provided for

a system of coordinating the tax laws of the two

States respecting interstate commuters and avoided

double taxation of those commuters. On October 6, 1980,

this Court dismissed cross respondents’ appeal for want

of jurisdiction (449 U.S. 804) and on the same date de-

nied the State’s cross petition for certiorari. 449 U.S.

874.

On remand, cross petitioner, with the assistance of ex-

perts in the transportation field, developed extensive evi-

dence on the exact nature of the transportation problem,

the extent to which New York commuters contribute to

11

it, the benefits they derive from New Jersey’s expendi-

tures for transportation facilities, and net ETT collec-

tions over the twenty-year history of the tax. Cross

respondents produced experts’ opinions themselves, pur-

porting to refute the State’s evidence. In May, 1981 the

remand hearing mandated by the New Jersey Supreme

Court was held before the trial court. After hearing,

the trial court concluded that in light of the New York

commuters’ contribution to the interstate transportation

problem, the costs 1nposed by New York commuters on

the State’s transportation facilities, and the transporta-

tion benefits they received from ETT expenditures, the

ETT did not offend the Privileges and Immunities Clause.

Indeed, the trial court concluded that $182.9 million of

State transportation expenditures were properly allocable

to the New York commuters over the twenty-year his-

tory of the ETT Appendix B to cross respondents’

petition for certiorari at 36. Moreover, the trial court

concluded that these substantial expenditures by the State

on behalf of New York commuters produced benefits be-

yond the mathematical dollar value of the expenditures.

Those benefits consist in savings in time and user costs

attributable primarily to uew highway construction and

widening, highway resurfacing, operational improvements,

safety improvements, maintenance and drainage, and,

in the transit area, savings in time and costs.

Cross respondents again moved for direct certification

to the Supreme Court of New Jersey, and on June 8, 1983

that court, reversing the trial court, concluded that the

ETT violated the Privileges and Immunities Clause be-

cause the burden of the ETT on New York residents was

not substantially related to the burden which those resi-

dents placed upon New Jersey’s transportation facilities.

Appendix A to cross respondents’ petition for certiorari

at 14. Of net ETT collections amounting to approxi-

12

mately $381 million over the history of the tax, approxi-

mately $182 million of costs incurred by the State for

transportation facilities were, in the court’s view, prop-

erly allocable to the New York commuters, an amount

slightly less than 50% of the total tax. Jbid. While the

State’s expenditures on behalf of New Yorkers were sub-

stantial, it was the court’s conclusion that the costs in-

curred were of a sufficient level of disproportion to total

collections (a ratio of roughly 2 to 1) so as to offend

the Privileges and Immunities Clause. Tlie court’s analy-

sis was restricted to a comparison of the ETT assess-

ment against transportation costs caused by New York-

ers. The court in its earlier opinion had refused to

include within the analysis other factors, such as the

overall tax burden on New Jersey residents as compared

to the ETT burden on New York commuters, or the costs

of the entirety of governmental services made available

to New Yorkers as contrasted with transportation serv-

ices only. App. A at 25. While granting cross respond-

ents the declaratory relief which they sought, the court,

citing Lemon v. Kurtzman (Lemon II), 411 U.S. 192

(1973), granted prospective relief only, denying refunds

of ETT and ruling that its decision would take effect

with respect to income earned on or after January 1,

1984.*

* A complete statement regarding the portion of the New Jersey

court’s opinion dealing with the remedy afforded the cross re-

spondents is contained in the cross petitioner’s brief in opposition

to the petition for certiorari in this action. However, for present

purposes, suffice it to say that the individual New York com-

muter is not affected one wit by the New Jersey Supreme Court’s

decision. Because of the credit mechanisms involved, taxes not

paid to New Jersey by such taxpayers must be paid to New York

State.

13

While detailing no individualized harm to themselves

by reason of the decis'on of the Supreme Court of New

Jersey, cross respondents nevertheless have petitioned

this Court for a writ of certiorari to review that portion

of the lower court’s judgment denying them recovery of

ETT paid. As a basis for granting the writ they allege

that the principle of stare decisis is threatened by the

ruling of the New Jersey court.

REASONS FOR GRANTING THE CROSS PETITION

POINT I

If the Court grants the writ of certiorari to consider

the claim of the petitioners-cross respondents that the

prospective nature of the judgment below undermines

the principle of stare decisis, it should grant the cross

petition in order to be able to review the entire case.

As indicated in the State’s brief in opposition to the peti-

tion for certiorari, it is the position of the cross petitioner

that the judgment of the Supreme Court of New Jersey be-

low does not undermine the principle of stare decisis but

rather is fully consistent with the principles laid down in

Lemon v. Kurtzman, swpra, and the application of federal

equitable remedies. Furthermore, cross respondents’ ab-

stract concern for the principle of stare decisis is not a

sufficient ground for invoking this Court’s jurisdiction when

cross respondents assert no individualized constitutional

(or indeed practical) harm. However, in the event the

Court determines that the prospective nature of the judg-

ment below is inconsistent with the principles of Lemon v.

Kurtzman and concludes further that cross respondents’

concern over the principle of stare decisis presents a sub-

stantial constitutional question, it is imperative that the

14

Court consider the entire case rather than solely the issues

raised by the petition for certiorari. The petition ques-

tions only the appropriateness of the remedy adopted by

the Supreme Court of New Jersey, but the appropriate-

ness of the remedy is an issue only »i the lower court was

correct in invalidating the ETT. Tuus, before reaching the

question of the relief afforded by the lower court, the

Court should determine whether that question is even pres-

ent in the case by considering the substantive validity of

the tax. In order to determine the validity of the tax,

the Court must resolve the issues presented in the «ross

petition, including the enforceability and effect vf the

1962 Accord between New York and New Jersey.

It would require no further expenditure of this Court’s

resources to consider the cross petition in the event the

petition is granted. The record and case authority upon

which the cross petitioner would rely in urging the validity

of the ETT are fully developed in the existing record. The

record documents the 1962 Accord establishing that the

States of New Jersey and New York entered into an agree-

ment in order to resolve a controversey between them re-

lating to the taxation of interstate commuters and that the

Accord results in no economic harm to those commuters.

The record further shows that in the context of New Jer-

sey’s entire taxing scheme, the ETT is consistent with the

Privileges and Immunities Clause because New York com-

muters do not pay more than their fair share of New Jer-

sey taxes. There is no inequity in the taxes paid by non-

residents under the ETT compared with the overall taxes

paid by New Jersey residents; nor is there inequity in

terms of a comparison of total services provided (not just

transportation services) and the total tax imposed.

In short, it is the position of the State that there is

ample credible evidence in the record to support the con-

clusion that the ETT is consistent with the Privileges and

Immunities Clause of Article IV.

15

POINT II

The decision of the Supreme Court of New Jersey,

that the 1962 Agreement between New York and New

Jersey is unenforceable against the cross respondents

because it did not receive congressional approval pur-

suant to Article I, §10, Cl. 3 of the United States Con-

stitution, is irreconcilable with the Court’s decision

in United States Steel Corp. vy. Multistate Tax Com-

mission, 434 U.S. 452 (1978).

As an initial point, it is clear, and the trial court in its

initial opinion so held, that there was in fact an agreement

between the States of New York and New Jersey respect-

ing their mutual taxation of interstate commuters. The

trial court stated:

In the 1962 Act and thereafter, these two sover-

eign states by compact, by arrangement, by agree-

ment, by attitude and by legislation set up an ar-

rangement whereby they agreed on a taxing method

which would govern commuters... .

[T]here is no question in this Court’s mind that

the 1962 accord between the two states and the ac

tions and inactions of the parties thereafter through

1975 represented a reciprocal understanding, com-

pact or the like between the legislative and execu-

tive branches of these two states [Appendix B at

55].

There is substantial evidence in the record to support

these findings of the State trial court. Thus, the joint state-

ment of Governors Hughes and Rockefeller commences:

Governor Richard J. Hughes of New Jersey and

Governor Nelson A. Rockefeller of New York have

16

announced that the Executive Departments of their

respective States have reached an understanding in

regard to the operation and administration of the

income tax laws of the two states.

The Governors declared that it has been agreed

that [there follows a list of undertakings by the

State of New York and the State of New Jersey.]

[App. C at 61; emphasis supplied].

In United States Steel Corp. vy, Multistate Tax Com-

mission, supra, the Court squarely held that reciprocal

legislation between two or more States providing for

the apportionment or allocation of taxes payable by tax-

payers with multistate contacts may be validly enacted

without the consent of Congress pursuant to the Com-

pact Clause of the United States Constitution (Art. I,

§10, cl. 3). The compact which was upheld was re-

markably similar in subject matter and purposes to the

Accord at issue here. Both agreements seek interstate

coordination of tax policy respecting taxpayers with ties

to more than one State, in the interests of equity and

convenience. Specifically, the four stated purposes of

the Multistate Tax Compact are equally applicable to

the 1962 Accord: equitable apportionment, uniformity in

state tax systems, convenience, and the avoidance of dup-

licative tax liability. Id. at 456.

The Court in United States Steel Corp. v. Multistate

Tax Commission reiterated the established doctrine that

the strictures of the Compact Clause apply only to those

interstate agreements that transfer state sovereignty “in

a way that encroaches upon the supremacy of the United

States.” Jd. at 472. The Court found that an agreement

by which the States seek to coordinate the operation of

their tax laws with respect to taxpayers with multistate

contacts does not in any way enroach upon the sovereignty

17

of the United States and therefore does not require con-

gressional approval. In light of the close similarities

in purposes and effect between the compact upheld in

United States Steel Corp. v. Multistate Tax Commission,

supra, and the 1962 Accord between New York and New

Jersey, the Supreme Court of New Jersey should have

recognized in its initial opinion in this case that the

1962 Accord could be fully effective withont congressional

approval,

The court, however, held that the 1962 Accord was

unenforceable without the consent of Congress because,

“if the 1962 Accord were interpreted to bind New York’s

power over the extension of tax credit [sic] to its resi-

dents, it would involve an impermissible relinquishment of

that state’s sovereign power...” (App. A at 30). In

the court’s view this was an impermissible result under

the rule of United States Steel Corp. v. Multistate Tax

Tax Commission absent the approval of Congress.

However, in holding that because “. . . no [congression-

al] approval was given, the Accord cannot be relied on

hy the State here as an enforceable agreement”, the court

confused the question whether New York is free to with-

draw from the 1962 agreement (which it has never done)

with the question whether the agreement is binding upon

taxpayers such as the cross respondents so long as it

remains in effect. The power of New York to withdraw

from the 1962 Accord is not in issue in this case. (As

noted, New York has continued to make credits available

pursuant to the Accord.)

Rather, the question is whether the agreement is bind-

ing upon taxpayers so long as it remains in effect. And

on this latter question, the Court in United States Steel

Corp. v. Multistate Tax Commission squarely held that

two or more states may enter into an agreement relat-

18

ing to the apportionment of tax revenues which would

be binding upon taxpayers without securing congressional

approval. See also, Bode v. Barrett, 344 U.S. 583, 586

(1953) (Illinois highway use tax exemption for nonresi-

dents does not require congressional approval where the

states of the nonresidents reciprocally grant similar tax

exemptions to citizens of Illinois). Therefore, the Su-

preme Court of New Jersey was simply wrong in con-

cluding that the 1962 Accord is unenforceable against

the cross respondents because not enacted in conformity

with the Compact Clause.

POINT III

The Emergency Transportation Tax is consistent with

the principles of federalism which the Privileges and

Immunities Clause of Article IV is designed to serve,

because it is imposed and collected pursuant to a 1962

Agreement between the States of New York and New

Jersey which provides for the coordination of the tax

laws of the two states by equitably apportioning tax

revenues from individuals who reside in one State

and earn their income in the other.*

A reciprocal arrangement between two States to fairly

allocate the financial burdens of government between citi-

zens who reside in one State and work in the other, with-

* While the trial court in its initial opinion of October 24, 1978

concluded that the 1962 Accord between the States of New Jersey

and New York satisfied the obligations of the Privileges and Im-

munities Clause (App. B at 55 to 56), the Supreme Court of New

Jersey did not reach this issue in its first opinion because it ruled

that the 1962 Accord was unenforceable under the Compact

(Footnote continued on following page)

19

out imposing any additional overall tax burden on an in-

dividual simply because he chooses to work outside the

State where he resides, is fully consistent with the ob-

jectives sought to be achieved by the Privileges and Im-

munities Clause of Article IV. This provision, “. .. which

‘appears in the so-called States’ Relations Article, the

same Article that embraces the Full Faith and Credit

Clause, the Extradition Clause ... the provisions for the

admission of new States, the Territory and Property

(Footnote continued from preceding page)

Clause. App. A at 30 to 31. However, while the court held

in its second opinion that the ETT, standing alone, is inconsistent

with the Privileges and Immunities Clause, it strongly implied

that had it not in its earlier opinion “questioned the validity of

the accord under the Compact Clause” (App. to cross respondents’

petition for certiorari at 18), it would have sustained the ETT as

based on an agreement granting reciprocally favorable treatment

to nonresidents. /bid. Thus, the issue of the effect of the 1962

Accord on the validity of the ETT was passed upon by the court

below and should be considered by this Court. In any event, the

failure of a court below to explicitly rule on an issue does not

raise a question of the Court’s jurisdiction. If, as is the case

here, the issue is significant and has been fully briefed and argued

by the parties, the Court may reach the issue. See Blonder-Tongue

Labs v. University Foundation, 402 U.S. 313, 320 n.6 (1971).

Cross petitioner’s position is that the Privileges and Immunities

Clause is directed to unilateral discrimination by one State against

the citizens of another, not to a mutual undertaking by two sover-

eigns to fairly and equitably apportion taxes as between themselves

without disadvantaging citizens of either state. Thus, the Court

in Austin itself notes:

Neither Travis nor the present case should be taken in

any way to denigrate the value of reciprocity in such

matters. The evil at which they are aimed is the unilateral

imposition of a disadvantage upon nonresidents, not recip-

rocally favorable treatment of nonresidents by States that

coordinate their tax laws [420 U.S. at 668, n.12].

20

Clause, and the Guarantee Clause,’ Baldwin y. Montana

Fish and Game Comm’n, 436 U.S. 371, 379 (1978), ‘estab-

lishes a norm of comity’ Austin vy. New Hampshire, 420

U.S. 656, 660 (1975), that is to prevail among the States

with respect to their treatment of each other’s residents.”

Hicklin vy. Orbeck, 437 U.S. 518, 523-524 (1978). The

opinion of the Court in Austin vy. New Hampshire, supra,

reaffirmed the view that the primary purpose of this Clause

was the maintenance of proper relations between sov-

ereign States in a federal union:

The Privileges and Immunities Clause, by making

noncitizenship or nonresidence an improper basis for

locating a special burden, implicates not only the in-

dividual’s right to nondiscriminatory treatment but

also, perhaps more so, the structural balance essen-

tial to the concept of federalism [420 U.S. at 662].

Therefore, while invalidating New Hampshire’s unilateral

action in imposing a tax on Maine residents—described in

Pennsylvania v. New Jersey, supra at 662, as a “beggar-

thy-neighbor tax”—the Court was careful to point out

that the Privileges and Immunities Clause would not re-

quire the invalidation of a tax on nonresidents which was

part of a reciprocal arrangement between the State of

domicile and the State of employment:

Neither Travis nor the present case should be

taken in any way to denigrate the vr 'ue of recipro-

city in such matters. The evil at » ich they are

aimed is the unilateral imposition of a disadvantage

upon nonresider‘:, not reciprocally favorable treat-

21

ment of nonresidents by States that coordinate their

tax laws [420 U.S. at 667, n. 12].°

Therefore, it is clear that the Privileges and Immunities

Clause of Article IV does not preclude sovereign States in

the federal system, each acting in the interests of its own

citizens, from entering into agreements which establish a

fair system for the imposition of taxes upon citizens with

multistate contacts.

The trial court found as a fact that the States of New

York and New Jersey had entered into a reciprocal ar-

rangement in 1962 regarding the taxation of individuals

who reside in one of the States and work in the other. It

*The cross respondents have argued previously that this quo-

tation does not support the validity of the ETT because the ETT

does not accord them “favorable treatment”. This argument is falla-

cious for several reasons. First, it is strongly arguable that the

agreement does assure individuals in cross réspondents’ situation

more favorable tax treatment than they otherwise might receive.

Since the State of New York may constitutionally subject cross

respondents to tax on the full amount of their income wherever

earned (Lawrence v. State Tax Commission, 286 U.S. 276, 280-281

(1932) ) and it is not disputed that cross respondents may be taxed

pursuant to the New Jersey Gross Income Tax Act to the full ex-

tent of their New Jersey income, cross respondents have an ex-

posure to double taxation on their New Jersey income which the

agreement between the states serves to avoid. Furthermore, if the

avoidance of possible double taxation is not recognized as “‘favor-

able treatment”, it is still clear that the ETT does not impose any

disadvantage upon cross respondents but rather, at worst, simply

has a neutral effect upon them, since the amount of taxes which

they pay to New Jersey under the ETT is identical to what they

otherwise would be required to pay New York. A reciprocal ar-

rangement which has a neutral effect on the overall tax obligations

of a nonresident who works in another state is fully consistent with

the principle of federalism which the Privileges and Immunities

Clause of Article IV was designed to serve.

22

found that “[t]here was in 1962 and there continued there-

after an arrangement between the States of New York and

New Jersey, their governors and their legislators which

accepted as valid the tax situation now being challenged”

(App. B at 50); “... that the 1962 Accord between the

two states and the actions and inactions of the parties

thereafter through 1975 represented a reciprocal under-

standing, compact or the like between the legislative and

executive branches of these two states” (App. B at 55);

and that “[njeither governor has taken formal action to

rescind the limited part of the accord not dependent on

legislative action, nor have they even made a statement

which would challenge the validity of the arrangement”

(App. B at 56).

There is more than sufficient evidence in the record to

support the trial court’s findings. When New Jersey first

enacted the Emergency Transportation Tax Act in 1961,

the incidence of the tax fell exclusively upon New Jersey

residents. New York was dissatisfied with the fiscal conse-

quences of the reciprocal crediting provisions of the ETT

and the New York personal income tax, so appropriate

steps were initiated to reverse the incidence of the taxes of

the respective States. The New York Legislature enacted

chapter 2 of the Laws of 1962 by which it repealed the tax

credit previously afforded nonresidents for taxes paid to

their State of residence and at the same time extended a

credit to its own residents for taxes paid to the State in

which they worked. By chapter 70 of the Laws of 1962, the

New Jersey Legislature enacted similar complementary

amendments to the ETT. The praciical effect of these

legislative enactments by the two States was to change the

interstate taxing system of New York and New Jersey from

one in which each State imposed a tax on its own residents

to one in which each State imposed a tax on the residents

23

of the other State who commuted to work in the taxing

State.

This reciprocal action by the legislatures of the two

States set the essential framework for the May 6, 1962

agreement between Governors Rockefeller and Hughes.

Paragraph 2 of the Agreement is an announcement by Gov-

ernor Rockefeller “. . . that New York, under legislation

enacted at the 1962 legislative session, will allow its resi-

dents a credit against their New York State personal in-

come taxes for income taxes paid to New Jersey under the

New Jersey Emergency Transportation Tax Act enacted

in 1961, as amended” (App. C at 66) (emphasis added).

Similarly, paragraph 3 of the agreement announced the in-

tent of Governor Hughes to submit to the New Jersey

Legislature the bill which was enacted less than a month

later as chapter 70. Complementary to those basic legisla-

tive provisions, the remaining paragraphs of the agree-

ment set forth mutual agreements by the States not to par-

ticipate in contesting the taxes imposed by the two

laws and to assist and cooperate in the administration and

enforcement of the two laws. Therefore, the 1962 Accord

represented a solemn reciprocal undertaking between the

legislative and executive branches of the respective states.

Furthermore, this agreement remains intact today. The

New York Legislature has not sought to repeal the tax

credit extended to its residents for taxes paid to New Jer-

sey, and the New Jersey Legislature has adhered to New

Jersey’s essential obligation under the 1962 Accord by con-

tinuing in effect the credit afforded its residents for taxes

paid to New York. Similarly, neither governor has taken

formal action to rescind the limited part of the Accord not

dependent on legislative action. Therefore, assuming that

either State could unilaterally withdraw from the 1962

24

Accord, the plain fact is that neither State has attempted

to do so.*

The cross respondents seek to circumvent the provisions

of the 1962 Accord by arguing that this case involves indi-

vidual rights which are beyond the power of the States to

address by reciprocal executive and legislative action. How-

ever, the Privileges and Immunities Clause is found in

Article IV of the Constitution dealing with relations among

states. “The primary purpose of this clause, like the

clauses between which it is located—those relating to full

faith and credit and to interstate extradition of fugitives

from justice—was to help fuse into one Nation a collec-

tion of independent, sovereign States.” Toomer v. Witsell,

334 U.S. 385, 395 (1948). The legal import of the 1962 Ac-

cord is not that a State in concert with another State may

limit the constitutional rights of an individual. Rather, the

Accord represents a practical solution by the legislatures

and executiv 2s of New York and New Jersey to the problem

of taxing individuals who work in one of the States and

reside in the other, without increasing the total tax burden

of the cross respovdents or of any other commuters simi-

larly situated. Therefore, if the Court gran‘s the petition

for certiorari, it also should grant the cross petition in

* As noted, however, while New York has not attempted to with-

draw from the Accord, it has breached it, first by seeking a judgment

from this Court that the New Jersey taxing scheme was uncon-

stitutional (New York v. New Jersey, 429 U.S. 810 (1976)) and

then by encouraging and financing this lawsuit (see letter to cross

respondent McGarf} from New York budget director at Da 1)

in violation of itsyundertaking not to contest nor participate in

contesting New Jerfey’s right to levy the ETT. However, neither

the enforceability 9f this provision in the 1962 Accord nor the

appropriate remediés for its breach are issues in this litigation.

The only issue here is the effect of this agreement on the in-

dividual taxpayer, sb long as it remains in effect.

25

order to consider the effect of the 1962 Accord upon the

ETT’s conformity with the principles of federalism which

the Privileges and Immunities Clause of Article IV was

designed to serve.

POINT IV

When viewed as part of New Jersey’s entire taxing

scheme and in conjunction with the benefits derived

by New York commuters, the Emergency Transporta-

tion Tax is consistent with the Privileges and Immuni-

ties Clause of Article IV because New Jersey residents

pay substantial other state taxes which nonresidents

do not pay.

In determining the constitutionality of States taxes im-

posed only upon nonresidents, the Court has made clear

that the analysis must take into account the entire taxing

scheme of a State. If, when all the taxes are taken into

account, the burden on residents and nonresidents is ap-

proximately equal, an individual tax imposed only upon

nonresidents is not infirm. In Travelers’ Insurance Com-

pany v. Connecticut, 185 U.S. 364 (1901), a state property

tax based upon the assessed value of shares of stock in do-

mestic corporations was challenged under the Privileges

and Immunities Clause on the ground that shares held by

nonresidents were assessed at market value while shares

held by residents were assessed at market value “less the

proportionate value of all real estate held by the corpora-

tion on which it [had] already paid a tax.” The Court up-

held the tax. It found that nonresident shareholders effec-

tively paid no local taxes while resident shareholders paid

taxes to the municipalities in which they resided. The

Court reasoned:

26

It was believed that a resident in a city or town, en-

joying all the benefits of local government, should

be taxed for the expenses of that government upon

all the property he possessed, whether that property

consisted in part or in whole of shares of stock. On

the other hand, the nonresident, enjoying little or

none of the benefits of local government, was ex-

empted from taxation on account of the expenses of

such local government. At the same time it was not

right that he should escape all contribution to the

support of the state which created and protected the

corporation and the property of all its stockholders,

and so a tax was cast upon the nonresident stock-

holder for the expenses of the state [185 U.S. at

368 ; emphasis supplied].

See also, General American Tank Car v. Day, 270 U.S. 367

(1926) (State property tax on rolling stock owned by non-

resident corporations held not violative of Commerce

Clause or Equal Protection Clause because, while resident

corporations did not pay the tax, residents paid local prop-

erty taxes). In Gregg Dyeing Co. v. Query, 286 U.S. 472

(1932), the Court squarely faced the issue of whether a

State tax must be nondiscriminatory in and of itself or

whether other taxes may be taken into account in deter-

mining its constitutionality. The Court concluded that a

State tax imposed upon the use or storage of gasoline

brought into the State violated neither the Commerce

Clause nor the Equal Protection Clause because in-state

sales and the in-state use of gasoline by in-state producers

were similarly taxed although under different taxing stat-

utes. The Court stated:

But appellants question the right to invoke other

statutes to support the validity of the Act assailed.

To stand the test of constitutionality, they say, the

27

Act must be constitutional ‘within its four corners,’

that is, considered by itself. This argument is with-

out merit. The question of constitutional validity is

not to be determined by artificial standards. What

is required is that state action, whether through one

agency or another, or through one enactment or

more than one, shal! be consistent with the restric-

tions of the Federal Constitution. There is no de-

mand in that Constitution that the State shall put its

requirement in any one statute. It may distribute

them as it sees fit, if the result, taken in its totality,

is within the state’s constitutional power [286 U.S.

at 479-480].

Moreover, there is no requirement that a tax on nonresi-

dents be duplicated by an identical tax on residents. A tax

on nonresidents may be completely different in form and

rate as long as the overall burden is approximately equal.

Interstate Busses Corp. v. Blodgett, 276 U.S, 245 (1927)

(state mileage tax on interstate buses held not violative of

Commerce Clause when intrastate carriers paid a gross

receipts tax) ; Safeway Trails, Inc. v. Furman, 41 N.J. 467,

490-491 (1964) appeal dism’d and cert. den. 379 U.S. 14

(1964).

Austin v. New Hampshire, supra, is consistent with the

principle of taking into account the entire taxing scheme

of the State. Reviewing all the New Hampshire taxes, the

Court concluded that those paid by nonresidents nowhere

near equalled those imposed upon nonresidents under the

commuter tax. Thus, Austin does not deviate from the

principles set forth in the cases just discussed. Rather, the

State simply could not meet the test which those cases im-

pose.

In contrast to Austin, it is clear in this case and the

trial court so held, that residents of New Jersey pay sub-

28

stantial property taxes. Nonresident commuters do not

ordinarily pay such taxes, and yet they benefit from the

services and protections afforded by the local governments

which are supported by the property tax (App. B at 54).

There is ample evidence in the record to support the trial

court’s findings. In an affidavit filed in conjunction with

the State’s cross motion for summary judgment in the ini-

tial trial court proceeding (Pa 845 to Pa 850), the Director

of the New Jersey Division of Taxation stated that during

the 1976 fiscal year, the average New Jersey resident paid

property taxes amounting to $446.48. The only state in

which per capita property taxes were higher during that

year was Alaska. The Director of the Division of Taxa-

tion further attested that during the 1977 calendar year

the average New Jersey resident household paid total New

Jersey taxes amounting to $2,605.65, while the average

nonresident household paid total New Jersey taxes, includ-

ing the ETT, amounting to $583.15. In short, when the

whole scheme of taxation is taken into account, it is clear

that New Jersey residents pay more than their fair share

of the costs of government, including the costs of trans-

portation services. The New Jersey Supreme Court did

not take the State’s entire taxing scheme nor the govern-

mental services provided (in addition to transportation

services) into account in analyzing the constitutionality

of the ETT under the Privileges and Immunities Clause.

Moreover, even if the ETT were analyzed without con-

sideration of the other taxes borne by New Jersey resi-

dents, the tax would still be consistent with the Privi-

leges and Immunities Clause. As established by the State

in the remand proceeding, the New Jersey highway

system was in place by 1961, the year in which the ETT

was enacted (App. B to cross respondents’ petition for

certiorari at 37). Since that time, State expenditmres

for highway facilities have been used primarily to widen

29

and maintain the existing roads in order to accomodate

commuter demand (Jbid.). Thus, while New York com-

muters, through the ETT, have contributed to the on-

going support of the New Jersey highway system, they

contributed virtually nothing to its initial construction.

The capital costs to construct the system were borne by

New Jersey residents alone.

The Court has sanctioned similar state imposed cost

differentials between residents and nonresidents. In

Vlandis v. Kline, 412 U.S. 441 (1973), the Court struck

down on Due Process grounds a State statute which

created, under certain facts, an irrebuttable presumption

of nonresidency for purposes of determining tuition rates

at the state university. However, the Court made clear

that the State had a legitimate interest in establishing

preferential tuition rates for its residents. 412 U.S. at

448 and 453. That legitimate interest was elaborated

upon in the dissenting opinions. In view of the large costs

incurred by the States in constructing and operating

their state universities and the tax burden imposed on

state residents to fund those costs, the States could con-

stitutionally require nonresidents to pay higher tuitions

than residents.

The position of the New York commuters in this case

is similar. They are benefiting from a highway system

constructed in large part through tax dollars paid by New

Jersey residents. The ETT merely ass-sses the New

York commuters for a small portion of the State’s current

transportation costs. Such an assessment, in view of the

heavy costs borne by New Jersey residents in putting the

highway and transit systems in place, is fully consistent

with the Privileges and Immunities Clause.

In short, the New Jersey Supreme Court misinterpreted

the holdings of this Court in prohibiting the State from

justifying the ETT on the basis of other taxes paid

primarily by residents and the prior contributions made

by New Jersey residents to the transportation infra-

structure, as well as the transportation costs imposed

by New York commuters on the State of New Jerrey.

Therefore, if the Court grants the petition for certiorari,

it should also grant the cross petition.

CONCLUSION

It is respectfully submitted that for the foregoing

reasons the cross petition for a writ of certiorari should

be granted.

Respectfully submitted,

Irwin I. KimMELMAN,

Attorney General of New Jersey,

Attorney for Cross Petitioner, Sidney

Glaser, Director of the Division of

Taxation, Department of the Treasury

of the State of New Jersey,

Richard J. Hughes Justice Complex

ON 112,

Trenton, New Jersey 08625.

(609) 292-4925

Micwaet R. Core,

Assistant Attorney General,

Of Counsel.

Anprea M. Sr_xowirz

Mary R.

~— Attorneys General,

m the Cross Petition,

October 6, 1983