OCTOBER TERM, 1993

															Syllabus

															WEST LYNN CREAMERY, INC., ET AL. v. HEALY, COMMISSIONER
OF MASSACHUSETTS DEPARTMENT OF FOOD AND AGRICULTURE

															CERTIORARI TO THE SUPREME JUDICIAL COURT OF MASSACHUSETTS No. 93-141. Argued March 2, 1994-Decided June 17, 1994 A Massachusetts pricing order subjects all fluid milk sold by
dealers to Massachusetts retailers to an assessment. Although most
of that milk is produced out of State, the entire assessment is
distributed to Massachusetts dairy farmers. Petitioners-licensed
dealers who purchase milk produced by out-of-state farmers and sell
it within Massachusetts-sued to enjoin enforcement of the order on
the ground that it violated the Federal Commerce Clause, but the
state court denied relief. The Supreme Judicial Court of
Massachusetts affirmed, concluding that the order was not facially
discriminatory, applied evenhandedly, and only incidentally
burdened interstate commerce, and that such burden was outweighed
by the "local benefits" to the dairy industry. Held: The pricing order unconstitutionally discriminates
against interstate commerce. Pp. 192-207.

															(a) The order is clearly unconstitutional under this Court's
decisions invalidating state laws designed to benefit local
producers of goods by creating tariff-like barriers that
neutralized the competitive and economic advantages possessed by
lower cost out-of-state producers. See, e. g., Bacchus
Imports, Ltd. v. Dias, 468 U. S. 263 . The
"premium payments" are effectively a tax making milk produced out
of State more expensive. Although that 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, who are thereby
empowered to sell at or below the price charged by lower cost
out-of-state producers. Pp. 192-197.

															(b) Respondent's principal argument-that, because both the
localsubsidy and nondiscriminatory-tax components of the order are
valid, the combination of the two is equally valid-is rejected.
Even granting respondent's assertion that both components of the
pricing order would be constitutional standing alone, the order
must still fall because it is funded principally from taxes on the
sale of milk produced in other States and therefore burdens
interstate commerce. More fundamentally, the argument is logically
flawed in its assumption that the lawfulness of each of two acts
establishes the legality of their combination. 187 Indeed, by conjoining a tax and a subsidy, Massachusetts has
created a program more dangerous to interstate commerce than either
part alone:

															The Commonwealth's political processes cannot be relied on to
prevent legislative abuse where dairy farmers, one of the powerful
in-state interests that would ordinarily be expected to lobby
against the order premium as a tax raising milk prices, have been
mollified by the subsidy. pp. 198-202.

															(c) Respondent's second argument-that the order is not
discriminatory because the dealers who pay premiums are not
competitors of the farmers who receive disbursements-cannot
withstand scrutiny. 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-ofstate producer. pp.
202-203.

															(d) If accepted, respondent's third argument-that the order is
not protectionist because the program's costs are borne only by
Massachusetts dealers and consumers and its benefits are
distributed exclusively to Massachusetts farmers-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 are unconstitutional. More
fundamentally, the argument ignores the fact that Massachusetts
dairy farmers are part of an integrated interstate market. The
obvious impact of the order on out-of-state production demonstrates
that it is simply wrong to assume that it burdens only in-state
consumers and dealers. Pp. 203-204.

															(e) Acceptance of respondent's final argument-that the order's
incidental burden on commerce is justified by the local benefit of
saving the financially distressed dairy industry-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. Pp. 204-207.

															415 Mass. 8, 611 N. E. 2d 239, reversed.

															STEVENS, J., delivered the opinion of the Court, in which
O'CONNOR, KENNEDY, SOUTER, and GINSBURG, JJ., joined. SCALIA, J.,
filed an opinion concurring in the judgment, in which THOMAS, J.,
joined, post, p. 207. REHNQUIST, C. J., filed a dissenting
opinion, in which BLACKMUN, J., joined, post, p. 212. Steven J. Rosenbaum argued the cause for
petitioners.

															With him on the briefs were Michael L. Altman and Robert A. Long, Jr. 188 Douglas H. Wilkins, Assistant Attorney General of
Massachusetts, argued the cause for respondent. With him on the
brief were Scott Harshbarger, Attorney General, and Eric
E. Smith, Assistant Attorney General. *

															JUSTICE STEVENS 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

															*Briefs of amici curiae urging reversal were filed for
Cumberland Farms, Inc., by Allan Afrow; and for the Milk
Industry Foundation et al. by Steven J. Rosenbaum and Robert A. Long, Jr. Briefs of amici curiae urging affirmance were filed for
the State of New Jersey by Fred DeVesa, Acting Attorney
General, Mary Carol Jacobson, Assistant Attorney General,
and Gregory Romano, Deputy Attorney General; and for the
Massachusetts Association of Dairy Farmers et al. by Erwin N.
Griswold, Gregory A. Castanias, and Allen Tupper
Brown. Jeffrey L. Amestoy, Attorney General of Vermont, and Eileen I. Elliott, Assistant Attorney General, filed a brief
of amicus curiae for the State of Vermont. 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.

															1 The minimum price is a "blend price" that is determined, in
part, by the ultimate use of the raw milk. See 7 CFR § 1001.1 et
seq. (1993). Raw milk used to produce fluid milk products has
the highest price and is characterized in the federal order as
"Class I" milk. Milk used for other products, such as eggnog, sour
cream, and hard cheese, bears a lower price and is characterized as
"Class II" and "Class III" milk. Each dealer is required to file a
monthly report of its raw milk purchases and the use to which that
milk is put. In computing the monthly blend price, the Federal
Market Administrator calculates the weighted average price of the
various classes of milk. If Class I milk predominates in the dealer
reports, the blend price is high; if other classes predominate, the
blend price is lower. Although all of the farmers are paid the same
minimum blend price regardless of the use to which their milk is
put, dealers who sell more than an average amount of Class I
products pay a higher per unit price than those with relatively
lower Class I sales. The federal marketing order thus provides a
uniform blend price for sellers of raw milk while imposing
nonuniform payment obligations on the dealers purchasing that milk.
The federal order does not prohibit the payment of prices higher
than the established minima. Like the federal order, the
Massachusetts order requires dealers to make payments into a fund
that is disbursed to farmers on a monthly basis. The assessments,
however, are only on Class I sales and the distributions are only
to Massachusetts farmers. 190 In his declaration he noted that the average federal blend
price2 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 $1/cwt.5 Second, the premium is
multiplied by the amount

															2 For an explanation of the term "blend price," see the previous
footnote. 3 The order was first issued on February 18, 1992, and
amended on February 26, 1992. App. 32-40; Brief for Respondent 4-5.
Only the amended order is at issue in this case.

															4 A "dealer" is defined as "any person who is engaged within the
Commonwealth in the business of receiving, purchasing,
pasteurizing, bottling, processing, distributing, or otherwise
handling milk, purchases or receives milk for sale as the consignee
or agent of a producer, and shall include a producer-dealer,
dealer-retailer, and sub-dealer." App. 32-33.

															5 App. 35-36; West Lynn Creamery, Inc. v. Commissioner
of Dept. of Food and Agriculture, 415 Mass. 8, 11, n. 10,611 N.
E. 2d 239, 241, n. 10 (1993). The commissioner appears to have set
the order premium at only a third of the difference between the
federal price and $15 because Massachusetts farmers produce only
about one-third of the milk sold as fluid milk in the State. App.
21. Since Massachusetts dairy farmers produce 191 (in pounds) of the dealer's Class 16 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.s

															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

															one-third of the milk, an assessment of one-third the difference
between $15 and the federal minimum price generates enough revenue
to give Massachusetts dairy farmers the entire difference between
$15 and the federal minimum price without leaving any surplus. By
paying Massachusetts dairy farmers the entire difference between
$15 and the federal minimum price, the order premium allows
Massachusetts farmers whose cost of production is $15/cwt to sell
their milk without loss at the federal minimum price.

															6 For an explanation of the term "Class I," see n. 1, supra.

															7 A "producer" is defined as "any person producing milk from
dairy cattle." App. 33.

															8 The disbursement is subject to two qualifications. First, any
farmer who produced more than 200,000 pounds of milk is considered
to have produced only 200,000 pounds. Second, no producer may
receive payments that make its net price per cwt (including both
the federal minimum price and payments from the Equalization Fund)
higher than $15/cwt. If these limitations lead to a surplus in the
Dairy Equalization Fund, the surplus is returned to the dealers. Id., at 36-38. 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- 193 269,273-274 (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 N ew York or elsewhere. This Court did not hesitate, however, to
strike it down. Writing for a unanimous Court, Justice Cardozo
reasoned:

															9 The "negative" aspect of the Commerce Clause was considered
the more important by the "father of the Constitution," James
Madison. In one of his letters, Madison wrote that the Commerce
Clause "grew out of the abuse of the power by the importing States
in taxing the nonimporting, and was intended as a negative and
preventive provision against injustice among the States themselves,
rather than as a power to be used for the positive purposes of the
General Government." 3 M. Farrand, Records of the Federal
Convention of 1787, p. 478 (1911). 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.1o 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

															10 A numerical example may make this effect clearer. Suppose the
federal minimum price is $ 12/cwt, that out-of-state producers can
sell milk profitably at that price, but that in-state producers
need a price of $15/cwt in order to break even. Under the pricing
order, the tax or "order premium" will be $1/cwt (one-third the
difference between the $15/cwt target price and the $12/cwt federal
minimum price). Assuming the tax generates sufficient funds (which
will be the case as long as two-thirds of the milk is produced out
of State, which appears to be the case), the Massachusetts farmers
will receive a subsidy of $3/cwt. This subsidy will allow them to
lower their prices from $15/cwt to $12/cwt while still breaking
even. Selling at $12/cwt, Massachusetts dairy farmers will now be
able to compete with out-of-state producers. The net effect of the
tax and subsidy, like that of a tariff, is to raise the after-tax
price paid by the dealers. If exactly two-thirds of the milk sold
in Massachusetts is produced out of State, net prices will rise by
$1/cwt. If out-of-state farmers produce more than two-thirds of the
raw milk, the Dairy Equalization Fund will have a surplus, which
will be refunded to the milk dealers. This refund will mitigate the
price increase, although it will have no effect on the ability of
the program to enable higher cost Massachusetts dairy farmers to
compete with lower cost out-of-staters.

															11 In New Energy, 486 U. S., at 275, we noted: "It is
true that in [Great Atlantic & Pacific Tea Co. v. Cottrell, 424
U. S. 366 (1976),] and Sporhase [v. Nebraska ex rel.
Douglas, 458 U.
S. 941 (1982),] the effect of a State's refusal to accept the
offered reciprocity was total elimination of all transport of the
subject product into or out of the offering State; whereas in the
present case the only effect of refusal is that the out-of-state
product is placed at a substantial commercial disadvantage through
discriminatory tax treatment. That makes no difference for purposes
of Commerce Clause analysis. In the leading case of Baldwin v. G. A. F. Seelig, Inc., 294 U. S. 511 (1935), the
New York law excluding out-of-state milk did not impose an absolute
ban, but rather allowed importation and sale so long 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, "neutraliz[es]
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-

															as the initial purchase from the dairy farmer was made at or
above the New York State-mandated price. In other words, just as
the appellant here, in order to sell its product in Ohio, only has
to cut its profits by reducing its sales price below the market
price sufficiently to compensate the Ohio purchaser-retailer for
the forgone tax credit, so also the milk wholesaler-distributor in Baldwin, in order to sell its product in New York, only had
to cut its profits by increasing its purchase price above the
market price sufficiently to meet the New York-prescribed premium.
We viewed the New York law as 'an economic barrier against
competition' that was 'equivalent to a rampart of customs duties.' Id., at 527."

															12 That is not to say that the Massachusetts dairy industry may
not continue to shrink and that the market share of Massachusetts
dairy producers may not continue its fall. It may be the case that
Massachusetts producers' costs are so high that, even with the
pricing order, many of them will be unable to compete.
Nevertheless, the pricing order will certainly allow more
Massachusetts dairy farmers to remain in business than would have
had the pricing order not been imposed. For Commerce Clause
purposes, it does not matter whether the challenged regulation
actually increases the market share of local producers or whether
it merely mitigates a projected decline. See Bacchus Imports,
Ltd. v. Dias, 468 U. S. 263 , 272 (1984)
("[W]e perceive no principle of Commerce Clause jurisprudence
supporting a distinction between thriving and struggling
enterprises .. ."); Baldwin v. G. A. F. Seelig,
Inc., 294 U. S., at 523. 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 1. 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

															13 Indeed, it is this aspect of the pricing order which allows
it to give Massachusetts farmers a benefit three times as valuable
per cwt as the tax (order premium) imposed. See n. 5, supra. 14 One might attempt to distinguish Bacchus by noting
that the rebate in this case goes not to the entity which pays the
tax (milk dealers) but to the dairy farmers themselves. Rebating
the taxes directly to producers rather than to the dealers,
however, merely reinforces the conclusion that the pricing order
will favor local producers. If the taxes were refunded only to the
dealers, there might be no impact on interstate commerce, 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 taxis 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

															because the dealers might not use the funds to increase the
price or quantity of milk purchased from Massachusetts dairy
farmers. The refund to the dealers might, therefore, result in no
advantage to in-state producers. On the other hand, by refunding
moneys directly to the dairy farmers, the pricing order ensures
that Massachusetts producers will benefit. 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. More fundamentally, respondent errs in assuming that the
constitutionality of the pricing order follows logically from the
constitutionality of its component parts. By conjoining

															15We have never squarely confronted the constitutionality of
subsidies, and we need not do so now. We have, however, noted that
"[d]irect subsidization of domestic industry does not ordinarily
run afoul" of the negative Commerce Clause. New Energy Co. of
Ind. v. Limbach, 486 U. S. 269 , 278
(1988); see also Hughes v. Alexandria Scrap Corp., 426 U. S. 794 ,
815 (1976) (STEVENS, J., concurring). In addition, it is undisputed
that States may try to attract business by creating an environment
conducive to economic activity, as by maintaining good roads, sound
public education, or low taxes. Zobel v. Williams, 457 U. S. 55 , 67
(1982) (Brennan, J., concurring); Bacchus Imports, Ltd. v. Dias, 468 U. S., at 271; Metropolitan Life Ins. Co. v. Ward, 470
U. S. 869 , 876-878 (1985).

															16 It is undisputed that an overwhelming majority of the milk
sold in Massachusetts is produced elsewhere. Thus, even though the
tax is applied evenhandedly to milk produced in State and out of
State, most of the tax collected comes from taxes on milk from
other States. In addition, the tax on in-state milk, unlike that
imposed on out-of-state milk, does not impose any burden on
in-state producers, because in-state dairy farmers can be confident
that the taxes paid on their milk will be returned to them via the
Dairy Equalization Fund. 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

															17The same principle is recognized in the conceptually similar
field of intergovernmental taxation, where nondiscrimination also
plays a central role in setting the boundary between the
permissible and the impermissible. Washington v. United
States, 460 U. S.
536 , 545 (1983) ("A 'political check' is provided when a state
tax falls on a significant group of state citizens who can be
counted upon to use their votes to keep the State from raising the
tax excessively, and thus placing an unfair burden on the Federal
Government"); South Carolina v. Baker, 485 U. S. 505 , 525-526,
n. 15 (1988); United States v. County of Fresno, 429 U. S. 452 ,
462-464 (1977). 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 , 455456
(1940); Maryland v. Louisiana, 451 U. S. 725 , 756
(1981);

															18 As the Governor's Special Commission Relative to the
Establishment of a Dairy Stabilization Fund realized, consumers
would be unlikely to organize effectively to oppose the pricing
order. The commission's report remarked, "the estimated two cent
increase per quart of milk would not be noticed by the consuming
public," App. 18, because the price of milk varies so often and for
so many reasons that consumers would be unlikely to feel the price
increases or to attribute them to the pricing order. 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 2829. 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");
1. 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); Web ber 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 are 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

															19 On the way changing the demand for Class I milk products
changes the blend price for producers in the entire area covered by
the marketing order, see n. 1, supra. 20 Among the "local benefits" that respondent identifies is
"protecting unique open space and related benefits." Brief for
Respondent 40. As the Massachusetts Supreme Judicial Court
recognized by relegating the "open space" point to a single
footnote, West Lynn Creamery, Inc. v. Commissioner of
Dept. of Food and Agriculture, 415 Mass. 8, 10, n. 6, 611 N. E.
2d 239, 240, n. 6 (1993), the argument that environmental benefits
were central and the enhancement of the market share of
Massachusetts dairy farmers merely "incidental" turns the pricing
order on its head. In addition, even if environmental preservation
were the central purpose of 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 Bac chus 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 the pricing order, that would not be sufficient to uphold a
discriminatory regulation. See Philadelphia v. New
Jersey, 437 U. S.
617 , 626-627 (1978). Finally, the suggestion that the collapse
of the dairy industry endangers open space is not self-evident.
Dairy farms are enclosed by fences, and the decline of farming may
well lead to less, rather than more, intensive land use. As one
scholar noted: "Many people assume that ... land lost from
agriculture is now in urban uses. It is true that some agricultural
land has been urbanized, especially since World War II, but the
major portion of the land moving out of agriculture over the years
has been abandoned to natural forest growth." J. Foster & W.
MacConnell, Agricultural Land Use Change in Massachusetts
1951-1971, p. 5 (Research Bulletin No. 640, Jan. 1977); see also
Department of Agriculture, A. Daugherty, Major Uses of Land in the
United States: 1987, pp. 4, 13 (Agricultural Economic Rep. No. 643,
1991) (decline in grazing and pasture land offset by increased
wilderness, wildlife, and park areas). 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 21 "This distinction between the power of the State to shelter
its people from menaces to their health or safety and from fraud,
even when those dangers emanate from interstate commerce, and its
lack of power to retard, burden or constrict the flow of such
commerce for their economic advantage, is one deeply rooted in both
our history and our law." H. P. Hood & Sons, Inc. v. Du Mond, 336 U. S. 525 , 533
(1949); see also Bacchus Imports, Ltd. v. Dias, 468
U. S., at 272-273.

															22 A surprisingly large number of our Commerce Clause cases
arose out of attempts to protect local dairy farmers. Schollenberger v. Pennsylvania, 171 U. S. 1 (1898); Baldwin v. G. A. F. Seelig, Inc., 294 U. S. 511 (1935); H. P. Hood & Sons, Inc. v. Du Mond, 336 U.
S., at 539; Dean Milk Co. v. Madison, 340 U. S. 349 , 354
(1951); Polar Ice Cream & Creamery Co. v. Andrews, 375
U. S. 361 (1964); Great Atlantic & Pacific Tea
Co. v. Cottrell, 424 U. S. 366 (1976). The
reasons for the political effectiveness of milk producers are
explored in G. Miller, The Industrial Organization of Political
Production: A Case Study, 149 J. Institutional & Theoretical
Economics 769 (1993). 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 negativeCommerce-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 "neutraliz[es] 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 assist[ing]" 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 nonexporting 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, 15 Wall. 232 (1873), and since then have decided a vast
number of negative-CommerceClause cases, engendering considerable
reliance interests. 210 As a result, I will, on stare decisis grounds, enforce a
selfexecuting "negative" Commerce Clause in two situations: (1)
against a state law that facially discriminates against interstate
commerce, and (2) against a state law that is indistinguishable
from a type of law previously held unconstitutional by this Court.
See Itel Containers Int'l Corp. v. Huddleston, 507 U. S. 60 ,
78-79, and nn. 1, 2 (1993) (SCALIA, J., concurring in judgment)
(collecting cases). Applying this approach-or at least the second
part of it-is not always easy, since once one gets beyond facial
discrimination our negative-Commerce-Clause jurisprudence becomes
(and long has been) a "quagmire." Northwestern States Portland
Cement Co. v. Minnesota, 358 U. S. 450 , 458
(1959). See generally D. Currie, The Constitution in the Supreme
Court: The First Hundred Years 1789-1888, pp. 168-181, 222-236,
330-342, 403-416 (1985). The object should be, however, to produce
a clear rule that honors the holdings of our past decisions but
declines to extend the rationale that produced those decisions any
further. See American Trucking Assns., Inc. v. Scheiner, 483
U. S. 266 , 305-306 (1987) (SCALIA, J., dissenting).

															There are at least four possible devices that would enable a
State to produce the economic effect that Massachusetts has
produced here: (1) a discriminatory tax upon the industry, imposing
a higher liability on out-of-state members than on their in-state
competitors; (2) a tax upon the industry that is nondiscriminatory
in its assessment, but that has an "exemption" or "credit" for
in-state members; (3) a nondiscriminatory tax upon the industry,
the revenues from which are placed into a segregated fund, which
fund is disbursed as "rebates" or "subsidies" to in-state members
of the industry (the situation at issue in this case); and (4) with
or without nondiscriminatory taxation of the industry, a subsidy
for the in-state members of the industry, funded from the State's
general revenues. It is long settled that the first of these
methodologies is unconstitutional under the negative Com- 211 merce Clause. See, e. g., Guy v. Baltimore, 100 U. S. 434 ,
443 (1880). The second of them, "exemption" from or "credit"
against a "neutral" tax, is no different in principle from the
first, and has likewise been held invalid. See Maryland v. Louisiana, 451
U. S. 725 , 756 (1981); Westinghouse Elec. Corp. v. Tully, 466 U.
S. 388 , 399-400, and n. 9 (1984). The fourth methodology,
application of a state subsidy from general revenues, is so far
removed from what we have hitherto held to be unconstitutional,
that prohibiting it must be regarded as an extension of our
negativeCommerce-Clause jurisprudence and therefore, to me,
unacceptable. See New Energy Co. of Ind. v. Limbach,
486 U. S. 269, 278 (1988). Indeed, in my view our
negativeCommerce-Clause cases have already approved the use of such
subsidies. See Hughes v. Alexandria Scrap Corp., 426 U. S. 794, 809-810 (1976).

															The issue before us in the present case is whether the third of
these methodologies must fall. Although the question is close, I
conclude it would not be a principled point at which to disembark
from the negative-Commerce-Clause train. The only difference
between methodology (2) (discriminatory "exemption" from
nondiscriminatory tax) and methodology (3) (discriminatory refund
of nondiscriminatory tax) is that the money is taken and returned
rather than simply left with the favored in-state taxpayer in the
first place. The difference between (3) and (4), on the other hand,
is the difference between assisting in-state industry through
discriminatory taxation and assisting in-state industry by other
means.

															I would therefore allow a State to subsidize its domestic
industry so long as it does so from nondiscriminatory taxes that go
into the State's general revenue fund. Perhaps, as some
commentators contend, that line comports with an important economic
reality: A State is less likely to maintain a subsidy when its
citizens perceive that the money (in the general fund) is available
for any number of competing, 212 nonprotectionist, purposes. See Coenen, Untangling the
Market-Participant Exemption to the Dormant Commerce Clause, 88
Mich. L. Rev. 395, 479 (1989); Collins, Economic Union as a
Constitutional Value, 63 N. Y. U. L. Rev. 43, 103 (1988); Gergen,
The Selfish State and the Market, 66 Texas L. Rev. 1097, 1138
(1988); see also ante, at 200, and n. 17. That is not,
however, the basis for my position, for as THE CHIEF JUSTICE
explains, "[a]nalysis of interest group participation in the
political process may serve many useful purposes, but serving as a
basis for interpreting the dormant Commerce Clause is not one of
them." Post, at 215 (dissenting opinion). Instead, I draw
the line where I do because it is a clear, rational line at the
limits of our extant negativeCommerce-Clause jurisprudence.

															CHIEF JUSTICE REHNQUIST, with whom JUSTICE BLACKMUN joins,
dissenting.

															The Court is less than just in its description of the reasons
which lay behind the Massachusetts law which it strikes down. The
law undoubtedly sought to aid struggling Massachusetts dairy
farmers, beset by steady or declining prices and escalating costs.
This situation is apparently not unique to Massachusetts; New
Jersey has filed an amicus brief in support of respondent
because New Jersey has enacted a similar law. Both States lie in
the northeastern metropolitan corridor, which is the most urbanized
area in the United States, and has every prospect of becoming more
so. The value of agricultural land located near metropolitan areas
is driven up by the demand for housing and similar urban uses;
distressed farmers eventually sell out to developers. Not merely
farm produce is lost, as is the milk production in this case, but,
as the Massachusetts Special Commission whose report was the basis
for the order in question here found: "Without the continued existence of dairy farmers, the
Commonwealth will lose its supply of locally produced fresh milk,
together with the open lands that are used as 213 wildlife refuges, for recreation, hunting, fishing, tourism, and
education." App. 13. Massachusetts has dealt with this problem by providing a subsidy
to aid its beleaguered dairy farmers. In case after case, we have
approved the validity under the Commerce Clause of such enactments.
"No one disputes that a State may enact laws pursuant to its police
powers that have the purpose and effect of encouraging domestic
industry." Bacchus Imports, Ltd. v. Dias, 468 U. S. 263 , 271
(1984). "Direct subsidization of domestic industry does not
ordinarily run afoul of [the dormant Commerce Clause];
discriminatory taxation of out-of-state manufacturers does." New
Energy Co. of Ind. v. Limbach, 486 U. S. 269 , 278
(1988). But today the Court relegates these well-established
principles to a footnote and, at the same time, gratuitously casts
doubt on the validity of state subsidies, observing that "[w]e have
never squarely confronted" their constitutionality. Ante, at
199, n. 15.

															But in Milk Control Bd. v. Eisenberg Farm Products,
306 U. S. 346 (1939), the Court upheld a Pennsylvania statute
establishing minimum prices to be paid to Pennsylvania dairy
farmers against a Commerce Clause challenge by a Pennsylvania milk
dealer that shipped all of its milk purchased in Pennsylvania to
New York to be sold there. The Court observed that "[t]he purpose
of the statute ... is to reach a domestic situation in the interest
of the welfare of the producers and consumers of milk in
Pennsylvania." Id., at 352. It went on to say: "One of the commonest forms of state action is the exercise of
the police power directed to the control of local conditions and
exerted in the interest of the welfare of the state's citizens.
Every state police statute necessarily will affect interstate
commerce in some degree, but such a statute does not run counter to
the grant of Congressional power merely because it incidentally
or 214 indirectly involves or burdens interstate commerce .... These
principles have guided judicial decision for more than a century." Id., at 351-352. The Massachusetts subsidy under consideration is similar in many
respects to the Pennsylvania statute described in Eisenberg,
supra. Massachusetts taxes all dealers of milk within its
borders. The tax is evenhanded on its face, i. e., it
affects all dealers regardless of the point of origin of the milk. Ante, at 194 ("the tax also applies to milk produced in
Massachusetts"); ante, at 200 ("the evenhanded tax at issue
here"). The State has not acted to strong-arm sister States as in Limbach; rather, its motives are purely local. As the
Supreme Judicial Court of Massachusetts aptly described it: "[T]he
premiums represent one of the costs of doing business in the
Commonwealth, a cost all milk dealers must pay." West Lynn
Creamery, Inc. v. Commissioner of Dept. of Food and
Agriculture, 415 Mass. 8, 19, 611 N. E. 2d 239, 245 (1993).

															Consistent with precedent, the Court observes: "A pure subsidy
funded out of general revenue ordinarily imposes no burden on
interstate commerce, but merely assists local business." Ante, at 199. And the Court correctly recognizes that
"[n]ondiscriminatory measures, like the evenhanded tax at issue
here, are generally upheld" due to the deference normally accorded
to a State's political process in passing legislation in light of
various competing interest groups. Ante, at 200, citing Minnesota v. Clover Leaf Creamery Co., 449 U. S. 456 , 473, n. 17
(1981), and Raymond Motor Transp., Inc. v. Rice, 434 U. S. 429 ,
444, n. 18 (1978). But the Court strikes down this method of state
subsidization because the nondiscriminatory tax levied against all
milk dealers is coupled with a subsidy to milk producers.
Ante, at 200-20l. The Court does this because of its view that
the method of imposing the tax and subsidy distorts the State's
political process: The dairy farmers, who would otherwise lobby
against the tax, have been mollified by the subsidy. Ibid. But as the Court itself points out, there are still at least
two 215 strong interest groups opposed to the milk order-consumers and
milk dealers. More importantly, nothing in the dormant Commerce
Clause suggests that the fate of state regulation should turn upon
the particular lawful manner in which the state subsidy is enacted
or promulgated. Analysis of interest group participation in the
political process may serve many useful purposes, but serving as a
basis for interpreting the dormant Commerce Clause is not one of
them.

															The Court concludes that the combined effect of the milk order
"simultaneously burdens interstate commerce and discriminates in
favor of local producers." Ante, at 201. In support of this
conclusion, the Court cites Baldwin v. G. A. F. Seelig,
Inc., 294 U. S.
511 (1935), and Bacchus Imports, Ltd. v. Dias,
supra, as two examples in which constitutional means were held
to have unconstitutional effects on interstate commerce. But both Baldwin and Bacchus are a far cry from this case.

															In Baldwin, supra, in order to sell bottled milk in New
York, milk dealers were required to pay a minimum price for milk,
even though they could have purchased milk from Vermont farmers at
a lower price. This scheme was found to be an effort to prevent
Vermont milk producers from selling to New York dealers at their
lower market price. As Justice Cardozo explained, under the New
York statute, "the importer ... may keep his milk or drink it, but
sell it he may not." 294 U. S., at 521. Such a scheme clearly made
it less attractive for New York dealers to purchase milk from
Vermont farmers, for the disputed law negated any economic
advantage in so doing. Under the Massachusetts milk order, there is
no such adverse effect. Milk dealers have the same incentives to
purchase lower priced milk from outof-state farmers; dealers of all
milk are taxed equally. To borrow Justice Cardozo's description,
milk dealers in Massachusetts are free to keep their milk, drink
their milk, and sell it-on equal terms as local milk. 216 In Bacchus, the State of Hawaii combined its undisputed
power to tax and grant exemptions in a manner that the Court found
violative of the Commerce Clause. There, the State exempted a local
wine from the burdens of an excise tax levied on all other liquor
sales. Despite the Court's strained attempt to compare the scheme
in Bacchus to the milk order in this case, ante, at
196-197, it is clear that the milk order does not produce the same
effect on interstate commerce as the tax exemption in Bacchus. I agree with the Court's statement that Bacchus can be distinguished "by noting that the rebate in
this case goes not to the entity which pays the tax (milk dealers)
but to the dairy farmers themselves." Ante, at 197, n. 14.
This is not only a distinction, but a significant difference. No
decided case supports the Court's conclusion that the negative
Commerce Clause prohibits the State from using money that it has
lawfully obtained through a neutral tax on milk dealers and
distributing it as a subsidy to dairy farmers. Indeed, the case
which comes closest to supporting the result the Court reaches is
the ill-starred opinion in United States v. Butler, 297 U. S. 1 (1936),
in which the Court held unconstitutional what would have been an
otherwise valid tax on the processing of agricultural products
because of the use to which the revenue raised by the tax was
put.

															More than half a century ago, Justice Brandeis said in his
dissenting opinion in New State Ice Co. v. Liebmann,
285 U. S. 262, 311 (1932): "To stay experimentation in things social and economic is a
grave responsibility. Denial of the right to experiment may be
fraught with serious consequences to the Nation. It is one of the
happy incidents of the federal system that a single courageous
State may, if its citizens choose, serve as a laboratory; and try
novel social and economic experiments without risk to the rest of
the country." 217 Justice Brandeis' statement has been cited more than once in
subsequent majority opinions of the Court. See, e. g., Reeves, Inc. v. Stake, 447 U. S. 429 , 441
(1980). His observation bears heeding today, as it did when he made
it. The wisdom of a messianic insistence on a grim sink-or-swim
policy of laissez-faire economics would be debatable had Congress
chosen to enact it; but Congress has done nothing of the kind. It
is the Court which has imposed the policy under the dormant
Commerce Clause, a policy which bodes ill for the values of
federalism which have long animated our constitutional
jurisprudence.

Summary: The Supreme Court ruled that a Massachusetts pricing order, which taxed all milk sold by dealers to retailers in the state and distributed the proceeds exclusively to local dairy farmers, violated the Federal Commerce Clause. The Court found that the order effectively discriminated against interstate commerce by making milk produced out of state more expensive, while offsetting the tax burden on local producers through subsidies. This combination of a tax and subsidy created a barrier that neutralized the competitive advantage of lower-cost out-of-state milk producers. The Court rejected the argument that the order's individual components were lawful, concluding that their combination was more harmful to interstate commerce.