International Financial Law Prof Blog

Editor: William Byrnes
Texas A&M University
School of Law

Friday, June 1, 2018

A New Deal for Europe? The Commerce Clause as the Solution to Tax Discrimination and Double Taxation in the European Union

Charles E.A. Lincoln, IV, PricewaterhouseCoopers, full article on SSRN

The decision by the European Court of Justice (ECJ) in Kerckhaert-Morres,[1]allowing double taxation of the same income, led to stagnation in the European internal market. Over the past thirteen years, reservation of competences to member states has created tension between the European Community’s goal of a common internal market and the goal to eliminate double taxation.[2]

By exploring and comparing the constitutional basis for taxation in the United States and the treaty basis for taxation in the European Union, one discovers how American New Deal legislation in the 1930s, as a departure from LochnerEra,[3]could provide the basis for an analogous departure from Kerckharet-Morresin a European New Deal. 

The common understanding of the evolution between the LochnerEra and the New Deal denotes the reversal of decades of judicial intervention that prevented states from enacting economic regulation,[4]with reference to substantive due process rights under the Commerce Clause, and a judicial policy to approve all economic regulations based on a different reading of the U.S. Constitution’s Commerce Clause.[5]As the New Deal in the 1930s brought the United States out of the LochnerEra, a similar New Deal should be conducted in the European Union to bring it out of the Kerckhaert-Morresera.

The European Union should adopt a true federal system akin to that of the United States, avoid pretending to maintain a Hamiltonian[6]system, or avoid fiscal coherence issues all together for a non-common market. The Lochner-styleKercharet-Morres era damages the unity of the “federal” system of the European Union. 

The European Union exhibits some markers of a federal system of finance,[7]such as a national bank in the European Union Bank. However, a common codified system of taxation enacted through a directive or new multi-lateral treaty negotiation amongst states, such as the 1916 Constitutional Amendment or the United States Commerce Clause, could lead to the creation of a proper federal system in the European Union. 

[1]Case C-513/04, Kerckhaert & Morres v. Belgium, 2006 E.C.R. I-10967.

[2]But see Hegel’s theory of dialectical processes in the resolution of conflict over power. Charles Edward Andrew Lincoln IV, Hegelian Dialectical Analysis of U.S. Voting Laws, 42 U. Dayton L. Rev. 87, 91 (2017).

[3]See Lochner v. New York, 198 U.S. 45 (1905). 

     [4]The Texas Supreme Court recently summarized Lochnerby stating:

Basically, then, during the “Lochner[E]ra,” substantive due process was a touchstone by which courts analyzed both the purpose and the effect of governmental economic regulation by scrutinizing them with a somewhat equivocal deference to the legislative body’s pronounced purpose for a law and its choice of the method embodied in the law to achieve that purpose.

Patel v. Texas Dep’t of Licensing & Regulation, 469 S.W.3d 69, 85–86 (Tex. 2015). Cf.Randy E. Barnett, Restoring the Lost Constitution: The Presumption of Liberty(2004).

  [5]The United States Supreme Court pronounced that:

[R]egulatory legislation affecting ordinary commercial transactions is not to be pronounced unconstitutional unless in the light of the facts made known or generally assumed it is of such a character as to preclude the assumption that it rests upon some rational basis . . . .

United States v. Carolene Products Co.304 U.S. 144, 152 (1938). “Ensuing federal decisions tracked Carolene Products’ guidance that economic regulatory laws were presumed to be constitutional absent evidence or judicially known facts demonstrating that no rational basis existed for the regulation.” Patel, 469 S.W.3d at 86.

[6]CompareJoyce O. Appleby, Foreword to The Revolutionary Writings Of Alexander Hamiltonvii, viii–x (Richard B. Vernier ed., 2008) (discussing the skill and impact of Hamilton’s writings), with Lin-Manuel Miranda, Hamilton: An American Musical, Cabinet Battle #1, (Atlantic Recording Corp. 2015)(in order to be “aggressive and competitive,” such as the musical), and Richard F. Duncan, Justice Scalia and the Rule of Law: Originalism vs. the Living Constitution, 29 Regent U. L. Rev.9, 33, n.169 (2017).

[7]See Kevin Foley, The Civil War and the National Banking System, CoinWeek(Nov. 13, 2015),

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