West Lynn Creamery, Inc. v. Healy

delivered the opinion of the Court.

A Massachusetts pricing order imposes an assessment on all fluid milk sold by dealers to Massachusetts retailers. About two-thirds of that milk is produced out of State. The entire assessment, however, is distributed to Massachusetts dairy farmers. The question presented is whether the pricing order unconstitutionally discriminates against interstate commerce. We hold that it does.

I

Petitioner West Lynn Creamery, Inc., is a milk dealer licensed to do business in Massachusetts. It purchases raw milk, which it processes, packages, and sells to wholesalers, retailers, and other milk dealers. About 97% of the raw milk it purchases is produced by out-of-state farmers. Petitioner LeComte’s Dairy, Inc., is also a licensed Massachusetts milk dealer. It purchases all of its milk from West Lynn and distributes it to retail outlets in Massachusetts.

Since 1937, the Agricultural Marketing Agreement Act, 50 Stat. 246, as amended, 7 U. S. C. § 601 et seq., has authorized the Secretary of Agriculture to regulate the minimum prices *189 paid to producers of raw milk by issuing marketing orders for particular geographic areas. 1 While the Federal Government sets minimum prices based on local conditions, those prices have not been so high as to prevent substantial competition among producers in different States. In the 1980’s and early 1990’s, Massachusetts dairy farmers began to lose market share to lower cost producers in neighboring States. In response, the Governor of Massachusetts appointed a Special Commission to study the dairy industry. The commission found that many producers had sold their dairy farms during the past decade and that if prices paid to farmers for their milk were not significantly increased, a majority of the remaining farmers in Massachusetts would be “forced out of business within the year.” App. 13. On January 28, 1992, relying on the commission’s report, the Commissioner of the Massachusetts Department of Food and Agriculture (respondent) declared a State of Emergency. *190 In his declaration he noted that the average federal blend price 2 had declined from $14.67 per hundred pounds (cwt) of raw milk in 1990 to $12.64/cwt in 1991, while costs of production for Massachusetts farmers had risen to an estimated average of $15.50/cwt. Id., at 27. He concluded:

“Regionally, the industry is in serious trouble and ultimately, a federal solution will be required. In the meantime, we must act on the state level to preserve our local industry, maintain reasonable minimum prices for the dairy farmers, thereby ensure a continuous and adequate supply of fresh milk for our market, and protect the public health.” Id., at 31.

Promptly after his declaration of emergency, respondent issued the pricing order that is challenged in this proceeding. 3

The order requires every “dealer” 4 in Massachusetts to make a monthly “premium payment” into the “Massachusetts Dairy Equalization Fund.” The amount of those payments is computed in two steps. First, the monthly “order premium” is determined by subtracting the federal blend price for that month from $15 and dividing the difference by three; thus if the federal price is $12/cwt, the order premium is $l/cwt. 5 Second, the premium is multiplied by the amount *191 (in pounds) of the dealer’s Class 1 6 sales in Massachusetts. Each month the fund is distributed to Massachusetts producers. 7 Each Massachusetts producer receives a share of the total fund equal to his proportionate contribution to the State’s total production of raw milk. 8

Petitioners West Lynn and LeComte’s complied with the pricing order for two months, paying almost $200,000 into the Massachusetts Dairy Equalization Fund. Id., at 100, 105. Starting in July 1992, however, petitioners refused to make the premium payments, and respondent commenced license revocation proceedings. Petitioners then filed an action in state court seeking an injunction against enforcement of the order on the ground that it violated the Commerce Clause of the Federal Constitution. The state court denied relief and respondent conditionally revoked their licenses.

The parties agreed to an expedited appellate procedure, and the Supreme Judicial Court of Massachusetts transferred the cases to its own docket. It affirmed, because it concluded that “the pricing order does not discriminate on its face, is evenhanded in its application, and. only incidentally *192 burdens interstate commerce.” West Lynn Creamery, Inc. v. Commissioner of Dept. of Food and Agriculture, 415 Mass. 8, 15, 611 N. E. 2d 239, 243 (1993). The court noted that the “pricing order was designed to aid only Massachusetts producers.” Id., at 16, 611 N. E. 2d, at 244. It conceded that “[c]ommon sense” indicated that the plan has an “adverse impact on interstate commerce” and that “[t]he fund distribution scheme does burden out-of-State producers.” Id., at 17, 611 N. E. 2d, at 244. Nevertheless, the court asserted that “the burden is incidental given the purpose and design of the program.” Id., at 18, 611 N. E. 2d, at 244. Because it found that the “local benefits” provided to the Commonwealth’s dairy industry “outweigh any incidental burden on interstate commerce,” it sustained the constitutionality of the pricing order. Id., at 19, 611 N. E. 2d, at 245. We granted certiorari, 510 U. S. 811 (1993), and now reverse.

II

The Commerce Clause vests Congress with ample power to enact legislation providing for the regulation of prices paid to farmers for their products. United States v. Darby, 312 U. S. 100 (1941); Wickard v. Filburn, 317 U. S. 111 (1942); Mandeville Island Farms, Inc. v. American Crystal Sugar Co., 334 U. S. 219 (1948). An affirmative exercise of that power led to the promulgation of the federal order setting minimum milk prices. The Commerce Clause also limits the power of the Commonwealth of Massachusetts to adopt regulations that discriminate against interstate commerce. “This ‘negative’ aspect of the Commerce Clause prohibits economic protectionism — that is, regulatory measures designed to benefit in-state economic interests by burdening out-of-state competitors.... Thus, state statutes that clearly discriminate against interstate commerce are routinely struck down . . . unless the discrimination is demonstrably justified by a valid factor unrelated to economic protection *193 ism . . . .” New Energy Co. of Ind. v. Limbach, 486 U. S. 269, 273-274 (1988). 9

The paradigmatic example of a law discriminating against interstate commerce is the protective tariff or customs duty, which taxes goods imported from other States, but does not tax similar products produced in State. A tariff is an attractive measure because it simultaneously raises revenue and benefits local producers by burdening their out-of-state competitors. Nevertheless, it violates the principle of the unitary national market by handicapping out-of-state competitors, thus artificially encouraging in-state production even when the same goods could be produced at lower cost in other States.

Because of their distorting effects on the geography of production, tariffs have long been recognized as violative of the Commerce Clause. In fact, tariffs against the products of other States are so patently unconstitutional that our cases reveal not a single attempt by any State to enact one. Instead, the cases are filled with state laws that aspire to reap some of the benefits of tariffs by other means. In Baldwin v. G. A. F. Seelig, Inc., 294 U. S. 511 (1935), the State of New York attempted to protect its dairy farmers from the adverse effects of Vermont competition by establishing a single minimum price for all milk, whether produced in New York or elsewhere. This Court did not hesitate, however, to strike it down. Writing for a unanimous Court, Justice Cardozo reasoned:

*194 “Neither the power to tax nor the police power may be used by the state of destination with the aim and effect of establishing an economic barrier against competition with the products of another state or the labor of its residents. Restrictions so contrived are an unreasonable clog upon the mobility of commerce. They set up what is equivalent to a rampart of customs duties designed to neutralize advantages belonging to the place of origin.” Id., at 527.

Thus, because the minimum price regulation had the same effect as a tariff or customs duty — neutralizing the advantage possessed by lower cost out-of-state producers — it was held unconstitutional. Similarly, in Bacchus Imports, Ltd. v. Dias, 468 U. S. 263 (1984), this Court invalidated a law which advantaged local production by granting a tax exemption to certain liquors produced in Hawaii. Other cases of this kind are legion. Welton v. Missouri, 91 U. S. 275 (1876); Guy v. Baltimore, 100 U. S. 434 (1880); Toomer v. Witsell, 334 U. S. 385 (1948); Polar Ice Cream & Creamery Co. v. Andrews, 375 U. S. 361 (1964); Chemical Waste Management, Inc. v. Hunt, 504 U. S. 334 (1992); see also Hunt v. Washington State Apple Advertising Comm’n, 432 U. S. 333, 351 (1977) (invalidating statute, because it “has the effect of stripping away from the Washington apple industry the competitive and economic advantages it has earned”).

Under these cases, Massachusetts’ pricing order is clearly unconstitutional. Its avowed purpose and its undisputed effect are to enable higher cost Massachusetts dairy farmers to compete with lower cost dairy farmers in other States. The “premium payments” are effectively a tax which makes milk produced out of State more expensive. Although the tax also applies to milk produced in Massachusetts, its effect on Massachusetts producers is entirely (indeed more than) offset by the subsidy provided exclusively to Massachusetts dairy farmers. Like an ordinary tariff, the tax is thus effectively imposed only on out-of-state products. The pricing *195 order thus allows Massachusetts dairy farmers who produce at higher cost to sell at or below the price charged by lower cost out-of-state producers. 10 If there were no federal minimum prices for milk, out-of-state producers might still be able to retain their market share by lowering their prices. Nevertheless, out-of-staters’ ability to remain competitive by lowering their prices would not immunize a discriminatory measure. New Energy Co. of Ind. v. Limbach, 486 U. S., at 275. 11 In this case, because the Federal Government sets *196 minimum prices, out-of-state producers may not even have the option of reducing prices in order to retain market share. The Massachusetts pricing order thus will almost certainly “cause local goods to constitute a larger share, and goods with an out-of-state source to constitute a smaller share, of the total sales in the market.” 12 Exxon Corp. v. Governor of Maryland, 437 U. S. 117, 126, n. 16 (1978). In fact, this effect was the motive behind the promulgation of the pricing order. This effect renders the program unconstitutional, because it, like a tariff, “neutralizes] advantages belonging to the place of origin.” Baldwin, 294 U. S., at 527.

In some ways, the Massachusetts pricing order is most similar to the law at issue in Bacchus Imports, Ltd. v. Dias, 468 U. S. 263 (1984). Both involve a broad-based tax on a single kind of good and special provisions for in-state produc *197 ers. Bacchus involved a 20% excise tax on all liquor sales, coupled with an exemption for fruit wine manufactured in Hawaii and for okolehao, a brandy distilled from the root of a shrub indigenous to Hawaii. The Court held that Hawaii’s law was unconstitutional because it “had both the purpose and effect of discriminating in favor of local products.” Id., at 273. See also I. M. Darnell & Son Co. v. Memphis, 208 U. S. 113 (1908) (invalidating property tax exemption favoring local manufacturers). By granting a tax exemption for local products, Hawaii in effect created a protective tariff. Goods produced out of State were taxed, but those produced in State were subject to no net tax. It is obvious that the result in Bacchus would have been the same if instead of exempting certain Hawaiian liquors from tax, Hawaii had rebated the amount of tax collected from the sale of those liquors. See New Energy Co. of Ind. v. Limbach, 486 U. S. 269 (1988) (discriminatory tax credit). And if a discriminatory tax rebate is unconstitutional, Massachusetts’ pricing order is surely invalid; for Massachusetts not only rebates to domestic milk producers the tax paid on the sale of Massachusetts milk, but also the tax paid on the sale of milk produced elsewhere. 13 The additional rebate of the tax paid on the sale of milk produced elsewhere in no way reduces the danger to the national market posed by tariff-like barriers, but instead exacerbates the danger by giving domestic producers an additional tool with which to shore up their competitive position. 14

*198 III

Respondent advances four arguments against the conclusion that its pricing order imposes an unconstitutional burden on interstate commerce: (A) Because each component of the program — a local subsidy and a nondiscriminatory tax— is valid, the combination of the two is equally valid; (B) The dealers who pay the order premiums (the tax) are not competitors of the farmers who receive disbursements from the Dairy Equalization Fund, so the pricing order is not discriminatory; (C) The pricing order is not protectionist, because the costs of the program are borne only by Massachusetts dealers and consumers, and the benefits are distributed exclusively to Massachusetts farmers; and (D) The order’s incidental burden on commerce is justified by the local benefit of saving the dairy industry from collapse. We discuss each of these arguments in turn.

A

Respondent’s principal argument is that, because “the milk order achieves its goals through lawful means,” the order as a whole is constitutional. Brief for Respondent 20. He argues that the payments to Massachusetts dairy farmers from the Dairy Equalization Fund are valid, because subsidies are constitutional exercises of state power, and that the order premium which provides money for the fund is valid, because it is a nondiscriminatory tax. Therefore the pricing order is constitutional, because it is merely the combination of two independently lawful regulations. In effect, respondent argues, if the State may impose a valid tax on dealers, it is free to use the proceeds of the tax as it chooses; and *199 if it may independently subsidize its farmers, it is free to finance the subsidy by means of any legitimate tax.

Even granting respondent’s assertion that both components of the pricing order would be constitutional standing alone, 15 the pricing order nevertheless must fall. A pure subsidy funded out of general revenue ordinarily imposes no burden on interstate commerce, but merely assists local business. The pricing order in this case, however, is funded principally from taxes on the sale of milk produced in other States. 16 By so funding the subsidy, respondent not only assists local farmers, but burdens interstate commerce. The pricing order thus violates the cardinal principle that a State may not “benefit in-state economic interests by burdening out-of-state competitors.” New Energy Co. of Ind. v. Limbach, 486 U. S., at 273-274; see also Bacchus Imports, Ltd. v. Dias, 468 U. S., at 272; Guy v. Baltimore, 100 U. S., at 443.

More fundamentally, respondent errs in assuming that the constitutionality of the pricing order follows logically from the constitutionality of its component parts. By conjoining *200 a tax and a subsidy, Massachusetts has created a program more dangerous to interstate commerce than either part alone. Nondiscriminatory measures, like the evenhanded tax at issue here, are generally upheld, in spite of any adverse effects on interstate commerce, in part because “[t]he existence of major in-state interests adversely affected . . . is a powerful safeguard against legislative abuse.” Minnesota v. Clover Leaf Creamery Co., 449 U. S. 456, 473, n. 17 (1981); see also Raymond Motor Transp., Inc. v. Rice, 434 U. S. 429, 444, n. 18 (1978) (special deference to state highway regulations because “their burden usually falls on local economic interests as well as other States’ economic interests, thus insuring that a State’s own political processes will serve as a check against unduly burdensome regulations”); South Carolina Highway Dept. v. Barnwell Brothers, Inc., 303 U. S. 177, 187 (1938); Goldberg v. Sweet, 488 U. S. 252, 266 (1989). 17 However, when a nondiscriminatory tax is coupled with a subsidy to one of the groups hurt by the tax, a State’s political processes can no longer be relied upon to prevent legislative abuse, because one of the in-state interests which would otherwise lobby against the tax has been mollified by the subsidy. So, in this case, one would ordinarily have expected at least three groups to lobby against the order premium, which, as a tax, raises the price (and hence lowers demand) for milk: dairy farmers, milk dealers, and consumers. But because the tax was coupled with a subsidy, one of the most powerful of these groups, Massachusetts dairy *201 farmers, instead of exerting their influence against the tax, were in fact its primary supporters. 18

Respondent’s argument would require us to analyze separately two parts of an integrated regulation, but we cannot divorce the premium payments from the use to which the payments are put. It is the entire program — not just the contributions to the fund or the distributions from that fund — that simultaneously burdens interstate commerce and discriminates in favor of local producers. The choice of constitutional means — nondiscriminatory tax and local subsidy — cannot guarantee the constitutionality of the program as a whole. New York’s minimum price order also used constitutional means — a State’s power to regulate prices — but was held unconstitutional because of its deleterious effects. Baldwin v. G. A. F. Seelig, Inc., 294 U. S. 511 (1935). Similarly, the law held unconstitutional in Bacchus Imports, Ltd. v. Dias, 468 U. S. 263 (1984), involved the exercise of Hawaii’s undisputed power to tax and to grant tax exemptions.

Our Commerce Clause jurisprudence is not so rigid as to be controlled by the form by which a State erects barriers to commerce. Rather our cases have eschewed formalism for a sensitive, case-by-case analysis , of purposes and effects. As the Court declared over 50 years ago: “The commerce clause forbids discrimination, whether forthright or ingenious. In each case it is our duty to determine whether the statute under attack, whatever its name may be, will in its practical operation work discrimination against interstate commerce.” Best & Co. v. Maxwell, 311 U. S. 454, 455-456 (1940); Maryland v. Louisiana, 451 U. S. 725, 756 (1981); *202 Exxon Corp. v. Governor of Maryland, 437 U. S., at 147; see also Guy v. Baltimore, 100 U. S., at 443 (invalidating discriminatory wharfage fees which were “mere expedient or device to accomplish, by indirection, what the State could not accomplish by a direct tax, viz., build up its domestic commerce by means of unequal and oppressive burdens upon the industry and business of other States”); Baldwin v. G. A. F. Seelig, Inc., 294 U. S., at 527 (“What is ultimate is the principle that one state in its dealings with another may not put itself in a position of economic isolation. Formulas and catchwords are subordinate to this overmastering requirement”); Dean Milk Co. v. Madison, 340 U. S. 349, 354 (1951); New Energy Co. of Ind. v. Limbach, 486 U. S., at 275, 276 (invalidating reciprocal tax credit because it, “in effect, tax[es] a product made by [Indiana] manufacturers at a rate higher than the same product made by Ohio manufacturers”).

B

Respondent also argues that since the Massachusetts milk dealers who pay the order premiums are not competitors of the Massachusetts farmers, the pricing order imposes no discriminatory burden on commerce. Brief for Respondent 28-29. This argument cannot withstand scrutiny. Is it possible to doubt that if Massachusetts imposed a higher sales tax on milk produced in Maine than milk produced in Massachusetts that the tax would be struck down, in spite of the fact that the sales tax was imposed on consumers, and consumers •do not compete with dairy farmers? For over 150 years, our cases have rightly concluded that the imposition of a differential burden on any part of the stream of commerce — from wholesaler to retailer to consumer — is invalid, because a burden placed at any point will result in a disadvantage to the out-of-state producer. Brown v. Maryland, 12 Wheat. 419, 444, 448 (1827) (“So, a tax on the occupation of an importer is, in like manner, a tax on importation. It must add to. the price of the article, and be paid by the consumer, or by the *203 importer himself, in like manner as a direct duty on the article itself would be made.” “The distinction between a tax on the thing imported, and on the person of the importer, can have no influence on this part of the subject. It is too obvious for controversy, that they interfere equally with the power to regulate commerce”); I. M. Darnell & Son Co. v. Memphis, 208 U. S. 113 (1908) (differential burden on intermediate stage manufacturer); Bacchus Imports, Ltd. v. Dias, 468 U. S. 263 (1984) (differential burden on wholesaler); Webber v. Virginia, 103 U. S. 344, 350 (1881) (differential burden on sales agent); New Energy Co. of Ind. v. Limbach, 486 U. S., at 273-274 (differential burden on retailer).

C

Respondent also argues that “the operation of the Order disproves any claim of protectionism,” because “only in-state consumers feel the effect of any retail price increase . . . [and] [t]he dealers themselves ... have a substantial in-state presence.” Brief for Respondent 17 (emphasis in original). This argument, if accepted, would undermine almost every discriminatory tax case. State taxes are ordinarily paid by in-state businesses and consumers, yet if they discriminate against out-of-state products, they aré unconstitutional. The idea that a discriminatory tax does not interfere with interstate commerce “merely because the burden of the tax was borne by consumers” in the taxing State was thoroughly repudiated in Bacchus Imports, Ltd. v. Dias, 468 U. S., at 272. The cost of a tariff is also borne primarily by local consumers, yet a tariff is the paradigmatic Commerce Clause violation.

More fundamentally, respondent ignores the fact that Massachusetts dairy farmers are part of an integrated interstate market. As noted supra, at 194-196, the purpose and effect of the pricing order are to divert market share to Massachusetts dairy farmers. This diversion necessarily injures the dairy farmers in neighboring States. Further *204 more, the Massachusetts order regulates a portion of the same interstate market in milk that is more broadly regulated by a federal milk marketing order which covers most of New England. 7 CFR § 1001.2 (1993). The Massachusetts producers who deliver milk to dealers in that regulated market are participants in the same interstate milk market as the out-of-state producers who sell in the same market and are guaranteed the same minimum blend price by the federal order. The fact that the Massachusetts order imposes assessments only on Massachusetts sales and distributes them only to Massachusetts producers does not exclude either the assessments or the payments from the interstate market. To the extent that those assessments affect the relative volume of Class I milk products sold in the marketing area as compared to other classes of milk products, they necessarily affect the blend price payable even to out-of-state producers who sell only in non-Massachusetts markets. 19 The obvious impact of the order on out-of-state production demonstrates that it is simply wrong to assume that the pricing order burdens only Massachusetts consumers and dealers.

D

Finally, respondent argues that any incidental burden on interstate commerce “is outweighed by the ‘local benefits’ of preserving the Massachusetts dairy industry.” 20 Brief for *205 Respondent 42. In a closely related argument, respondent urges that “the purpose of the order, to save an industry from collapse, is not protectionist.” Id., at 16. If we were to accept these arguments, we would make a virtue of the vice that the rule against discrimination condemns. Preservation of local industry by protecting it from the rigors of interstate competition is the hallmark of the economic protectionism that the Commerce Clause prohibits. In Bacchus Imports, Ltd. v. Dias, 468 U. S., at 272, we explicitly rejected any distinction “between thriving and struggling enterprises.” Whether a State is attempting to “‘enhance thriving and substantial business enterprises’ ” or to “ ‘subsidize ... financially troubled’ ” ones is irrelevant to Commerce Clause analysis. Ibid. With his characteristic eloquence, Justice Cardozo responded to an argument that respondent echoes today:

“The argument is pressed upon us, however, that the end to be served by the Milk Control Act is something more than the economic welfare of the farmers or of any other class or classes. The end to be served is the maintenance of a regular and adequate supply of pure and wholesome milk, the supply being put in jeopardy when *206 the farmers of the state are unable to earn a living income. Nebbia v. New York, [291 U. S. 502 (1934)] . . . Let such an exception be admitted, and all that a state will have to do in times of stress and strain is to say that its farmers and merchants and workmen must be protected against competition from without, lest they go upon the poor relief lists or perish altogether. To give entrance to that excuse would be to invite a speedy end of our national solidarity. The Constitution was framed under the dominion of a political philosophy less parochial in range. It was framed upon the theory that the peoples of the several states must sink or swim together, and that in the long run prosperity and salvation are in union and not division.” Baldwin v. G. A. F. Seelig, Inc., 294 U. S., at 522-523. 21

In a later case, also involving the welfare of Massachusetts dairy farmers, 22 Justice Jackson described the same overriding interest in the free flow of commerce across state lines:

“Our system, fostered by the Commerce Clause, is that every farmer and every craftsman shall be encouraged *207 to produce by the certainty that he will have free access to every market in the Nation, that no home embargoes will withhold his exports, and no foreign state will by customs duties or regulations exclude them. Likewise, every consumer may look to the free competition from every producing area in the Nation to protect him from exploitation by any. Such was the vision of the Founders; such has been the doctrine of this Court which has given it reality.” H. P. Hood & Sons, Inc. v. Du Mond, 336 U. S. 525, 539 (1949).

The judgment of the Supreme Judicial Court of Massachusetts is reversed.

It is so ordered.

Justice Scalia, with whom Justice Thomas joins, concurring in the judgment.

In my view the challenged Massachusetts pricing order is invalid under our negative-Commerce-Clause jurisprudence, for the reasons explained in Part II below. I do not agree with the reasons assigned by the Court, which seem to me, as explained in Part I, a broad expansion of current law. Accordingly, I concur only in the judgment of the Court.

I

The purpose of the negative Commerce Clause, we have often said, is to create a national market. It does not follow from that, however, and we have never held, that every state law which obstructs a national market violates the Commerce Clause. Yet that is what the Court says today. It seems to have canvassed the entire corpus of negative-Commerce-Clause opinions, culled out every free-market snippet of reasoning, and melded them into the sweeping principle that the Constitution is violated by any state law or regulation that “artificially encourag[es] in-state production even when the same goods could be produced at lower cost in other States.” Ante, at 193. See also ante, at 194 (the *208 law here is unconstitutional because it “neutralizes] the advantage possessed by lower cost out-of-state producers”); ante, at 195 (price order is unconstitutional because it allows in-state producers “who produce at higher cost to sell at or below the price charged by lower cost out-of-state producers”); ante, at 196 (a state program is unconstitutional where it “‘neutralizes advantages belonging to the place of origin’ ”) (quoting Baldwin v. G. A. F. Seelig, Inc., 294 U. S. 511, 527 (1935)); ante, at 205 (“Preservation of local industry by protecting it from the rigors of interstate competition is the hallmark of the economic protectionism that the Commerce Clause prohibits”).

As the Court seems to appreciate by its eagerness expressly to reserve the question of the constitutionality of subsidies for in-state industry, ante, at 199, and n. 15, this expansive view of the Commerce Clause calls into question a wide variety of state laws that have hitherto been thought permissible. It seems to me that a state subsidy would clearly be invalid under any formulation of the Court’s guiding principle identified above. The Court guardedly asserts that a “pure subsidy funded out of general revenue ordinarily imposes no burden on interstate commerce, but merely assists local business,” ante, at 199 (emphasis added), but under its analysis that must be taken to be true only because most local businesses (e. g., the local hardware store) are not competing with businesses out of State. The Court notes that, in funding this subsidy, Massachusetts has taxed milk produced in other States, and thus “not only assists local farmers, but burdens interstate commerce.” Ibid. But the same could be said of almost all subsidies funded from general state revenues, which almost invariably include moneys from use taxes on out-of-state products. And even where the funding does not come in any part from taxes on out-of-state goods, “merely assisting] ” in-state businesses, ibid., unquestionably neutralizes advantages possessed by out-of-state enterprises. Such subsidies, particularly where *209 they are in the form of cash or (what comes to the same thing) tax forgiveness, are often admitted to have as their purpose — indeed, are nationally advertised as having as their purpose — making it more profitable to conduct business in State than elsewhere, i. e., distorting normal market incentives.

The Court’s guiding principle also appears to call into question many garden-variety state laws heretofore permissible under the negative Commerce Clause. A state law, for example, which requires, contrary to the industry practice, the use of recyclable packaging materials, favors local non-exporting producers, who do not have to establish an additional, separate packaging operation for in-state sales. If the Court’s analysis is to be believed, such a law would be unconstitutional without regard to whether disruption of the “national market” is the real purpose of the restriction, and without the need to “balance” the importance of the state interests thereby pursued, see Pike v. Bruce Church, Inc., 397 U. S. 137 (1970). These results would greatly extend the negative Commerce Clause beyond its current scope. If the Court does not intend these consequences, and does not want to foster needless litigation concerning them, it should not have adopted its expansive rationale. Another basis for deciding the case is available, which I proceed to discuss.

II

“The historical record provides no grounds for reading the Commerce Clause to be other than what it says — an authorization for Congress to regulate commerce.” Tyler Pipe Industries, Inc. v. Washington State Dept. of Revenue, 483 U. S. 232, 263 (1987) (Scalia, J., concurring in part and dissenting in part). Nonetheless, we formally adopted the doctrine of the negative Commerce Clause 121 years ago, see Case of the State Freight Tax,