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

Abstract

The European Court of Justice’s decision in Kerckhaert-Morress, allowing double taxation of the same income, leads to stagnation in the European internal market. Over the past thirteen years, reservation of competences to member states has created a tension between the European Community’s goal of a common internal market and the goal to eliminate double taxation. By exploring and comparing and contrasting the Constitutional basis for taxation in the US and the Treaty basis for taxation in the European Union, one finds how American New Deal Legislation in the 1930s as a move from Lochner Era could be the basis for an analogous move from Kerckharet-Morress to a European New Deal. The common understanding of the evolutionary change which took place between the “Lochner” Era and the New Deal pictures a reversal of decades of judicial intervention to prevent states from enacting economic regulation, by reference to “substantive due process rights” under the commerce clause, to a judicial policy to approve all economic regulations based on a completely different reading of the U.S. Constitution’s commerce clause. As The New Deal in the 1930s brought the US out of the Lochner Era, a similar New Deal should be conducted in the European Union bringing the EU out of the Kerckhaert-Morress era. Either the EU should adopt a true federal system — akin to that of the United States — or it should not pretend to have a Hamiltonian system (indeed it does not pretend to have a “Hamiltonian” system) or avoid the issues of fiscal coherence all together for a non-common market. The Lochner style Kercharet-Morress era hurts the unity of the “federal” system of the European Union. There are markers of a federal system of finance, such as a national bank — the EU Bank. But a common codified system of taxation — such as the 1916 Constitutional Amendment or the United States Commerce Clause — perhaps through a directive or new multi-lateral treaty negotiation amongst the states could lead to such a system.