Salorio v. Glaser

Decision Date08 June 1983
Citation461 A.2d 1100,93 N.J. 447
PartiesJohn SALORIO, Robert Coe and John D. McGarr, Jr., Plaintiffs-Appellants, v. Sidney GLASER, Director of the Division of Taxation, Department of the Treasury of the State of New Jersey, Defendant-Respondent.
CourtNew Jersey Supreme Court

Max Gitter, a member of the New York bar, New York City, for plaintiffs-appellants (Connell, Foley & Geiser, Newark, attorneys; Max Gitter, Suzanne Last Stone, a member of the New York bar, New York City, Adrian M. Foley, Jr., and Kevin J. Coakley, Newark, of counsel).

Michael R. Cole, Asst. Atty. Gen., for defendant-respondent (Irwin I. Kimmelman, Atty. Gen., attorney; Michael R. Cole, Mary R. Hamill and Andrea M. Silkowitz, Deputy Attys. Gen., on the briefs).

The opinion of the Court was delivered by


This case concerns the constitutionality of the Emergency Transportation Tax Act (ETT), N.J.S.A. 54:8A-1 to -57. Plaintiffs are three New York residents who commute or have commuted from their homes in New York to work in New Jersey. Claiming that the ETT, an obligation levied on the New Jersey-derived income of only New York residents, discriminates unconstitutionally against them, plaintiffs seek declaratory and injunctive relief in addition to damages. This cause was initially decided by the trial court after a summary proceeding without testimony pursuant to R. 4:67 and was certified for direct appeal to this Court. 81 N.J. 269, 405 A.2d 814 (1979). In Salorio v. Glaser (Salorio I), 82 N.J. 482, 414 A.2d 943, cert. denied, 449 U.S. 874, 101 S.Ct. 215, 66 L.Ed.2d 94 (1980), we held that the ETT does not violate the Equal Protection Clause of the fourteenth amendment, U.S. Const., amend. XIV, § 1. We remanded for plenary hearing to make a complete record so as to enable the trial court to determine whether the ETT contravenes the Privileges and Immunities Clause of the federal constitution, U.S. Const., art. IV, § 2, cl. 1. Today we review the proceedings that followed our remand.


The facts were fully described by Justice Pashman in Salorio I. 82 N.J. at 488-90, 414 A.2d 943. A summary is sufficient for an understanding of this opinion. New Jersey has developed, constructed and maintained commuter transportation facilities so that residents of New Jersey and New York residing in one state and working in the other can move more readily between these states. State expenditures for this purpose have been and are financed in part by general revenue taxes and in part by taxes collected specifically to defray the cost of transportation programs. One revenue source earmarked for these state expenditures is the Emergency Transportation Tax (ETT), first enacted in 1961. L.1961, c. 32. 1

Under the existing scheme New York residents who commute to work in New Jersey must pay the higher of the New Jersey Gross Income Tax, N.J.S.A. 54A:1-1 to : 10-12, or the ETT, each of which is imposed only on income earned in New Jersey. If the ETT obligation is the greater of the two and is therefore imposed, that part of the ETT revenues equivalent to the New Jersey Gross Income Tax is paid into the Property Tax Relief Fund. N.J.S.A. 54:8A-121; N.J.S.A. 54A:9-25. 2 The balance of the ETT revenues is deposited in a special "Transportation Fund," N.J.S.A. 54:8A-120, identified for projects and programs to meet transportation problems. 3 N.J.S.A. 54:8A-20(a).

In Salorio I, we noted that under the Privileges and Immunities Clause 4 residents and nonresidents are to be treated with "substantial equality," 82 N.J. at 501, 414 A.2d 943 and that the ETT tax, which falls only on New York residents, involves a constitutionally-protected right to pursue an occupation outside their home state. Id. We stated that a statute that causes disparate treatment of nonresidents is invalid under the Privileges and Immunities Clause, unless (1) the State can prove that nonresidents are a "peculiar source" of the evil at which the statute is aimed and (2) the singular treatment of nonresidents bears a "substantial relationship" to the particular evil that nonresidents are said to present. Id. at 503-04, 414 A.2d 943. We agreed with the State that costs and expenses related to mass transportation due to the almost daily movement of large numbers of people from New York to New Jersey served as a valid independent justification for a commuter tax on nonresidents. Id. at 504-05, 414 A.2d 943. On the record before us in Salorio I, however, we could not identify the extent of the "peculiar source" of the transportation problem attributable to the New York commuter or the "substantial relationship" that the tax levied on the New York commuter bore to costs expended in attempting to solve that problem.

With regard to "peculiar source," we explained:

While commuters living in New York need not be the sole cause of New Jersey's transportation crisis to justify discriminatory treatment, more than merely their identification is required. The State's burden of showing that non-residents constitute a "peculiar source" of an evil would be stripped of meaning if that obligation could be discharged simply by referring to a problem to which non-residents make but a small contribution. [Id. at 505, 414 A.2d 943 (footnote omitted) ]

The "substantial relationship" test also required particular proof:

Imposition of the ETT cannot be justified if it appears that the tax burden on New York residents is substantially disproportionate to their burden upon New Jersey's transportation facilities.

This is not to say that non-resident commuters cannot be charged for any benefits resulting from New Jersey's subsidization of commuter transportation facilities and expenditures for highway construction and maintenance in northern New Jersey. The Constitution does not entitle nonresident commuters to a "free ride." The State may exact from them a fair share of the cost of adequate transportation facilities without violating the Privileges and Immunities Clause.

The record discloses that expenditures for highway construction and maintenance in northern New Jersey amounted to $910 million during the years 1970 through 1977. Since none of these funds came from emergency transportation taxes, non-residents apparently did not contribute to the cost of providing these vital transportation facilities. The expenditure figures introduced also indicate, however, that ETT funds have supplied a very substantial portion of state expenditures for bus and rail facilities. While non-resident use of such facilities constitutes a very small percentage of total patronage, we recognize that a strict percentage analysis is not required for each separate type of commuter transportation facility. [Id. at 505-06, 414 A.2d 943. (footnotes omitted) ]

The State was thus required to produce evidence to determine whether the tax imposed on New York commuters is commensurate with the share of the expenditures related to the transportation problem they cause. See id. at 517, 414 A.2d 943.

After a five-day hearing pursuant to our remand in Salorio I, the trial court found the burden of the ETT on New York commuters to be "substantially commensurate with the benefit they derive from the use of New Jersey's transportation facilities." Accordingly, the trial court held that the ETT does not violate the Privileges and Immunities Clause. We certified the case for direct review on our own motion. 91 N.J. 182, 450 A.2d 521 (1982).


The Supreme Court has frequently observed that the principal purpose of the Privileges and Immunities Clause of article IV, section 2, of the Constitution is "to help fuse into one Nation a collection of independent, sovereign States. It was designed to ensure to a citizen of State A who ventures into State B the same privileges which the citizens of State B enjoy." 5 Toomer v. Witsell, 334 U.S. 385, 395, 68 S.Ct. 1156, 1162, 92 L.Ed. 1460, 1471 (1948). The Clause's predecessor, which had the same intent, is found in the Articles of Confederation, art. IV, par. 1. Thus, protection is afforded the nonresident who lacked the right to vote and who was vulnerable to local bias or insensitivity. J. Ely, Democracy and Distrust 83 (1980); Simson, "Discrimination Against Nonresidents and the Privileges and Immunities Clause of Article IV," 128 U.Pa.L.Rev. 379, 384-86 (1979). At the heart of the Clause "is the right of a citizen of one state to pass into any other state of the Union for the purpose of engaging in lawful commerce, trade or business, without molestation ...." Ward v. Maryland, 79 U.S. (12 Wall.) 418, 430, 20 L.Ed. 449, 452 (1871). It forbids one state from unduly discriminating against citizens of another state in favor of its own. Excepted from this principle is the situation in which the discrimination against the nonresident relates to conduct or activities that are not "basic to the maintenance or well-being of the Union." Baldwin v. Fish & Game Comm'n, 436 U.S. 371, 388, 98 S.Ct. 1852, 1863, 56 L.Ed.2d 354, 368 (1978). The theory behind this exception is that state discrimination concerning nonfundamental activities does not "frustrate the purposes of the formation of the Union." Id. at 387, 98 S.Ct. at 1862. For a criticism of this view, see Varat, "State 'Citizenship' and Interstate Equality," 48 U.Chi.L.Rev. 487, 511 (1981), contending that the purpose of the Clause was to promote political and social cohesion as well as economic interrelationship.

In analyzing a statute challenged under the Privileges and Immunities Clause, it is necessary to determine if the statute discriminates against nonresidents, to identify the nature and extent of that discrimination, and to decide whether the discrimination is reasonably related to legitimate purposes that are the bases for the discrimination. If there is no substantial reason for the discrimination, the clause is violated and the inquiry is at an end. Austin v. New Hampshire, 420 U.S. 656, ...

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