Soon after the Supreme Court released its decision May 19th in Kentucky Department of Revenue v. Davis, some legal pundits and bloggers immediately began decrying it as an example of judicial protectionism of the municipal bond industry.

Considering the emphasis Justice David Souter, writing for the majority, and Justice Antonin Scalia, in a concurring opinion, placed on the number of states with tax exemption legislation similar to Kentucky's, the number of years the bond market has operated in this fashion, and the size of the industry in dollars exceeding several hundred billion plenty of fodder readily exists for those unhappy with the decision to denounce its result. But notwithstanding the seemingly public policy basis for the court's opinion, the decision actually rests upon sound constitutional theory, established principles of federalism, and court precedent regarding the scope of the dormant commerce clause.

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