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SUPREME COURT OF THE UNITED STATES
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No. 91-794
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HENRY HARPER, et al., PETITIONERS v. VIRGINIA
DEPARTMENT OF TAXATION
on writ of certiorari to the supreme court of
virginia
[June 18, 1993]

  Justice O'Connor, with whom The Chief Justice
joins, dissenting.
  Today the Court applies a new rule of retroactivity to
impose crushing and unnecessary liability on the States,
precisely at a time when they can least afford it.  Were
the Court's decision the product of statutory or
constitutional command, I would have no choice but to
join it.  But nothing in the Constitution or statute
requires us to adopt the retroactivity rule the majority
now applies.  In fact, longstanding precedent requires the
opposite result.  Because I see no reason to abandon our
traditional retroactivity analysis as articulated in Chevron
Oil Co. v. Huson, 404 U. S. 97, 106-107 (1971), and
because I believe the Supreme Court of Virginia correctly
applied Chevron Oil in this case, I would affirm the
judgment below.
                            I
  This Court's retroactivity jurisprudence has become
somewhat chaotic in recent years.  Three Terms ago, the
case of American Trucking Assns., Inc. v. Smith, 496 U. S.
167 (1990), produced three opinions, none of which
garnered a majority.  One Term later, James B. Beam
Distilling Co. v. Georgia, 501 U. S. ___ (1991), yielded five
opinions; there, no single writing carried more than three
votes.  As a result, the Court today finds itself confronted
with such disarray that, rather than relying on precedent,
it must resort to vote-counting: Examining the various
opinions in Jim Beam, it discerns six votes for a single
proposition that, in its view, controls this case.  Ante, at
8-9.
  If we had given appropriate weight to the principle of
stare decisis in the first place, our retroactivity
jurisprudence never would have become so hopelessly
muddled.  After all, it was not that long ago that the law
of retroactivity for civil cases was considered well settled.
In Chevron Oil Co., we explained that whether a decision
will be nonretroactive depends on whether it announces
a new rule, whether prospectivity would undermine the
purposes of the rule, and whether retroactive application
would produce injustice.  404 U. S., at 106-107.  Even
when this Court adjusted the retroactivity rule for
criminal cases on direct review some six years ago, we
reaffirmed the vitality of Chevron Oil, noting that
retroactivity in civil cases -continues to be governed by
the standard announced in Chevron Oil Co. v. Huson.-
Griffith v. Kentucky, 479 U. S. 314, 322, n. 8 (1987).  In
American Trucking Assns., supra, however, a number of
Justices expressed a contrary view, and the jurisprudential
equivalent of entropy immediately took over.  Whatever
the merits of any retroactivity test, it cannot be denied
that resolution of the case before us would be simplified
greatly had we not disregarded so needlessly our
obligation to follow precedent in the first place.
  I fear that the Court today, rather than rectifying that
confusion, reinforces it still more.  In the usual case, of
course, retroactivity is not an issue; the courts simply
apply their best understanding of current law in resolving
each case that comes before them.  James B. Beam, 501
U. S., at ___, ___-___ (Souter, J.) (slip op., at 3, 4-5).
But where the law changes in some respect, the courts
sometimes may elect not to apply the new law; instead,
they apply the law that governed when the events giving
rise to the suit took place, especially where the change in
law is abrupt and the parties may have relied on the
prior law.  See id., at ___ (slip op., at 3).  This can be
done in one of two ways.  First, a court may choose to
make the decision purely prospective, refusing to apply it
not only to the parties before the court but also to any
case where the relevant facts predate the decision.  Id.,
at ___ (slip op., at 5).  Second, a court may apply the rule
to some but not all cases where the operative events
occurred before the court's decision, depending on the
equities.  See id., at ___ (slip op., at 5-7).  The first
option is called -pure prospectivity- and the second
-selective prospectivity.-
  As the majority notes, ante, at 8, six Justices in James
B. Beam, supra, expressed their disagreement with
selective prospectivity.  Thus, even though there was no
majority opinion in that case, one can derive from that
case the proposition the Court announces today: Once
-this Court applies a rule of federal law to the parties
before it, that rule . . . must be given full retroactive
effect in all cases still open on direct review.-  Ante, at
8.  But no decision of this Court forecloses the possibility
of pure prospectivity-refusal to apply a new rule in the
very case in which it is announced and every case
thereafter.  As Justice White explained in his
concurrence in James B. Beam, -[t]he propriety of
prospective application of decision in this Court, in both
constitutional and statutory cases, is settled by our prior
decisions.-  501 U. S., at ___ (White, J., concurring in
judgment) (slip op., at 2-3).
  Rather than limiting its pronouncements to the question
of selective prospectivity, the Court intimates that pure
prospectivity may be prohibited as well.  See ante, at 9
(referring to our lack of -`constitutional authority . . . to
disregard current law'-); ibid. (relying on -`basic norms of
constitutional adjudication'- (quoting Griffith, supra, at
322)); see also id., at 6 (touting the -fundamental rule of
`retrospective operation'- of judicial decisions).  The
intimation is incorrect.  As I have explained before and
will touch upon only briefly here:
-[W]hen the Court changes its mind, the law changes
with it.  If the Court decides, in the context of a civil
case or controversy, to change the law, it must make
[a] determination whether the new law or the old is
to apply to conduct occurring before the law-changing
decision.  Chevron Oil describes our long-established
procedure for making this inquiry.-  James B. Beam,
supra, at ___ (O'Connor, J., dissenting) (internal
quotation marks omitted) (slip op., at 1-2).
Nor can the Court's suggestion be squared with our cases,
which repeatedly have announced rules of purely prospec-
tive effect.  See, e.g., Northern Pipeline Constr. Co. v.
Marathon Pipe Line Co., 458 U. S. 50, 88 (1982); Chevron
Oil, supra, at 106-107; Phoenix v. Kolodziejski, 399 U. S.
204, 214 (1970); Cipriano v. City of Houma, 395 U. S.
701, 706 (1969); see also American Trucking Assns., supra,
at 188-200 (plurality opinion) (canvassing the Court's
retroactivity jurisprudence); ante, at 1 (Kennedy, J.,
concurring in part and concurring in judgment) (citing
cases).
  In any event, the question of pure prospectivity is not
implicated here.  The majority first holds that once a rule
has been applied retroactively, the rule must be applied
retroactively to all cases thereafter.  Ante, at 8.  Then it
holds that Davis v. Michigan Dept. of Treasury, 489 U. S.
803 (1989), in fact retroactively applied the rule it
announced.  Ante, at 10-11.  Under the majority's
approach, that should end the matter: Because the Court
applied the rule retroactively in Davis, it must do so here
as well.  Accordingly, there is no reason for the Court's
careless dictum regarding pure prospectivity, much less
dictum that is contrary to clear precedent.
  Plainly enough, Justice Scalia would cast overboard
our entire retroactivity doctrine with precisely the
-unceremonious `heave-ho'- he decries in his concurrence.
See ante, at 8.  Behind the undisguised hostility to an era
whose jurisprudence he finds distasteful, Justice Scalia
raises but two substantive arguments, both of which were
raised in James B. Beam, supra, at ___ (Scalia, J.,
concurring in judgment), and neither of which has been
adopted by a majority of this Court.  Justice White
appropriately responded to those arguments then, see id.,
at ___ (White, J., concurring in judgment), and there is
no reason to repeat the responses now.  As Justice
Frankfurter explained more than 35 years ago:
      -We should not indulge in the fiction that the law
now announced has always been the law . . . .  It is
much more conducive to law's self-respect to recognize
candidly the considerations that give prospective
content to a new pronouncement of law.-  Griffin v.
Illinois, 351 U. S. 12, 26 (1956) (opinion concurring
in judgment).
                           II
  I dissented in James B. Beam because I believed that
the absolute prohibition on selective prospectivity was not
only contrary to precedent, but also so rigid that it
produced unconscionable results.  I would have adhered
to the traditional equitable balancing test of Chevron Oil
as the appropriate method of deciding the retroactivity
question in individual cases.  But even if one believes the
prohibition on selective prospectivity desirable, it seems
to me that the Court today takes that judgment to an
illogical-and inequitable-extreme.  It is one thing to say
that, where we have considered prospectivity in a prior
case and rejected it, we must reject it in every case
thereafter.  But it is quite another to hold that, because
we did not consider the possibility of prospectivity in a
prior case and instead applied a rule retroactively through
inadvertence, we are foreclosed from considering the issue
forever thereafter.  Such a rule is both contrary to
established precedent and at odds with any notion of
fairness or sound decisional practice.  Yet that is precisely
the rule the Court appears to adopt today.  Ante, at 8-9.

                            A
  Under the Court's new approach, we have neither
authority nor discretion to consider the merits of applying
Davis v. Michigan Dept. of Treasury, supra, retroactively.
Instead, we must inquire whether any of our previous
decisions happened to have applied the Davis rule
retroactively to the parties before the Court.  Deciding
whether we in fact have applied Davis retroactively turns
out to be a rather difficult matter.  Parsing the language
of the Davis opinion, the Court encounters a single
sentence it declares determinative: -The State having
conceded that a refund is appropriate in these
circumstances, see Brief for Appellee 63, to the extent
appellant has paid taxes pursuant to this invalid tax
scheme, he is entitled to a refund.-  Id., at 817 (quoted
in part, ante, at 10).  According to the majority, that
sentence constitutes -`consideration of remedial issues'-
and therefore -`necessarily'- indicates that we applied the
rule in Davis retroactively to the parties before us.  Ante,
at 10 (quoting James B. Beam, supra, at ___ (opinion of
Souter, J.) (slip op., at 8)).  Ironically, respondent and its
amici draw precisely the opposite conclusion from the
same sentence.  According to them, the fact that Michigan
conceded that it would offer relief meant that we had no
reason to decide the question of retroactivity in Davis.
Michigan was willing to provide relief whether or not
relief was required.  The Court simply accepted that offer
and preserved the retroactivity question for another day.
  One might very well debate the meaning of the single
sentence on which everyone relies.  But the debate is as
meaningless as it is indeterminate.  In Brecht v.
Abrahamson, 507 U. S. ___ (1993), we reaffirmed our
longstanding rule that, if a decision does not -squarely
addres[s] [an] issue,- this Court remains -free to address
[it] on the merits- at a later date.  Id., at ___ (slip op.,
at 9-10).  Accord, United States v. L. A. Tucker Truck
Lines, Inc., 344 U. S. 33, 38 (1952) (issue not -raised in
briefs or argument nor discussed in the opinion of the
Court- cannot be taken as -a binding precedent on th[e]
point-); Webster v. Fall, 266 U. S. 507, 511 (1925)
(-Questions which merely lurk in the record, neither
brought to the attention of the court nor ruled upon, are
not considered as having been so decided as to constitute
precedents-).  The rule can be traced back to some of the
earliest of this Court's decisions.  See Statement of
Marshall, C. J., as reported in the arguments of counsel
in United States v. More, 3 Cranch 159, 172 (1805) (-No
question was made, in that case, as to the jurisdiction.
It passed sub silentio, and the court does not consider
itself as bound by that case-).  Regardless of how one
reads the solitary sentence upon which the Court relies,
surely it does not -squarely address- the question of
retroactivity; it does not even mention retroactivity.  At
best, by addressing the question of remedies, the sentence
implicitly -assumes- the rule in Davis to be retroactive.
Our decision in Brecht, however, makes it quite clear that
unexamined assumptions do not bind this Court.  Brecht,
supra, at ___ (slip op., at 9-10) (That the Court -assumed
the applicability of- a rule does not bind the Court to the
assumption).
  In fact, there is far less reason to consider ourselves
bound by precedent today than there was in Brecht.  In
Brecht, the issue was not whether a legal question was
resolved by a single case; it was whether our consistent
practice of applying a particular rule, Chapman v.
California, 386 U. S. 18, 24 (1967), to cases on collateral
review precluded us from limiting the rule's application
to cases on direct review.  Because none of our prior cases
directly had addressed the applicability of Chapman to
cases on collateral review-each had only assumed it
applied-the Court held that those cases did not bind us
to any particular result.  See Brecht, supra, at ___ (slip
op., at 9-10).  I see no reason why a single retroactive
application of the Davis rule, inferred from the sparse and
ambiguous language of Davis itself, should carry more
weight here than our consistent practice did in Brecht.
  The Court offers no justification for disregarding the
settled rule we so recently applied in Brecht.  Nor do I
believe it could, for the rule is not a procedural nicety.
On the contrary, it is critical to the soundness of our
decisional processes.  It should go without saying that any
decision of this Court has wide-ranging applications;
nearly every opinion we issue has effects far beyond the
particular case in which it issues.  The rule we applied
in Brecht, which limits the stare decisis effect of our
decisions to questions actually considered and passed on,
ensures that this Court does not decide important
questions by accident or inadvertence.  By adopting a
contrary rule in the area of retroactivity, the Court now
permanently binds itself to its every unexamined
assumption or inattention.  Any rule that creates a grave
risk that we might resolve important issues of national
concern sub silentio, without thought or consideration,
cannot be a wise one.
  This case demonstrates the danger of such a rule.  The
question of retroactivity was never briefed in Davis.  It
had not been passed upon by the court below.  And it was
not within the question presented.  Indeed, at oral
argument we signaled that we would not pass upon the
retroactivity of the rule Davis would announce.  After
conceding that the Michigan Department of Taxation
would give Davis himself a refund if he prevailed, counsel
for the Department argued that it would be unfair to
require Michigan to provide refunds to the 24,000
taxpayers who were not before the Court.  The following
colloquy ensued:
      -[Court]: So why do we have to answer that at all?
      -[Michigan]: -if, if this Court issues an opinion
stating that the current Michigan classification is
unconstitutional or in violation of the statute, there
are these 24,000 taxpayers out there.
             .        .        .       .        .
      -[Court]: But that's not-it's not here, is it?  Is
that question here?.
      -[Michigan]: It is not specifically raised, no.-  Tr.
of Oral Arg., O. T. 1988, No. 87-1020, pp. 37-38.
Now, however, the Court holds that the question was
implicitly before us and that, even though the Davis
opinion does not even discuss the question of retroactivity,
it resolved the issue conclusively and irretrievably.
  If Davis somehow did decide that its rule was to be
retroactive, it was by chance and not by design.  The
absence of briefing, argument, or even mention of the
question belies any suggestion that the issue was given
thoughtful consideration.  Even the author of the Davis
opinion refuses to accept the notion that Davis resolved
the question of retroactivity.  Instead, Justice Kennedy
applies the analysis of Chevron Oil to resolve the
retroactivity question today.  See ante, at 1-3 (opinion
concurring in part and concurring in judgment).
  The Court's decision today cannot be justified by
comparison to our decision in Griffith v. Kentucky, 479
U. S. 314 (1987), which abandoned selective prospectivity
in the criminal context.  Ante, at 9.  As I explained in
American Trucking Assns., 496 U. S., at 197-200, there
are significant differences between criminal and civil cases
that weigh against such an extension.  First, nonretro-
activity in criminal cases historically has favored the
government's reliance interests over the rights of criminal
defendants.  As a result, the generalized policy of favoring
individual rights over governmental prerogative can justify
the elimination of prospectivity in the criminal arena.
The same rationale cannot apply in civil cases, as non-
retroactivity in the civil context does not necessarily favor
plaintiffs or defendants; -nor is there any policy reason for
protecting one class of litigants over another.-  Id., at 198.
More important, even a party to civil litigation who is
-deprived of the full retroactive benefit of a new decision
may receive some relief.-  Id., at 198-199.  Here, for
example, petitioners received the benefit of prospective
invalidation of Virginia's taxing scheme.  From this
moment forward, they will be treated on an equal basis
with all other retirees, the very treatment our intergovern-
mental immunity cases require.  The criminal defendant,
in contrast, is usually interested only in one remedy-
reversal of his conviction.  That remedy can be obtained
only if the rule is applied retroactively.  See id., at 199.
  Nor can the Court's rejection of selective retroactivity
in the civil context be defended on equal treatment
grounds.  See Griffith, supra, at 323 (selective retroactivity
accords a benefit to the defendant in whose case the
decision is announced but not to any defendant there-
after).  It may well be that there is little difference
between the criminal defendant in whose case a decision
is announced and the defendant who seeks certiorari on
the same question two days later.  But in this case there
is a tremendous difference between the defendant in
whose case the Davis rule was announced and the
defendant who appears before us today: The latter
litigated and preserved the retroactivity question while the
former did not.  The Michigan Department of Taxation did
not even brief the question of retroactivity in Davis.
Respondent, in contrast, actually prevailed on the question
in the court below.
  If the Court is concerned with equal treatment, that
difference should be dispositive.  Having failed to demand
the unusual, prospectivity, respondent in Davis got the
usual-namely, retroactivity.  Respondent in this case has
asked for the unusual.  In fact, respondent here defends
a judgment below that awarded it just that.  I do not see
how the principles of equality can support forcing the
Commonwealth of Virginia to bear the harsh consequences
of retroactivity simply because, years ago, the Michigan
Department of Taxation failed to press the issue-and we
neglected to consider it.  Instead, the principles of fairness
favor addressing the contentions the Virginia Department
of Taxation presses before us by applying Chevron Oil
today.  It is therefore to Chevron Oil that I now turn.

                            B
  Under Chevron Oil, whether a decision of this Court
will be applied nonretroactively depends on three factors.
First, as a threshold matter, -the decision to be applied
nonretroactively must establish a new principle of law.-
404 U. S., at 106.  Second, nonretroactivity must not
retard the new rule's operation in light of its history,
purpose, and effect.  Id., at 107.  Third, nonretroactivity
must be necessary to avoid the substantial injustice and
hardship that a holding of retroactivity might impose.
Ibid.  In my view, all three factors favor holding our
decision in Davis nonretroactive.

                            1
  As Justice Kennedy points out in his concurrence,
ante, at 2, a decision cannot be made nonretroactive
unless it announces -a new principle of law.-  Chevron
Oil, 404 U. S., at 106.  For purposes of civil retroactivity,
Chevron Oil identifies two types of decisions that can be
new.  First, a decision is new if it overturns -clear past
precedent on which litigants may have relied.-  Ibid.; ante,
at 2 (Kennedy, J., concurring in part and concurring in
judgment).  I agree with Justice Kennedy that Davis did
not represent such a -`revolutionary'- or -`avulsive
change'- in the law.  Ante, at 3 (quoting Hanover Shoe,
Inc. v. United Shoe Machinery Corp., 392 U. S. 481, 499
(1968)).
  Nonetheless, Chevron also explains that a decision may
be -new- if it resolves -an issue of first impression whose
resolution was not clearly foreshadowed.-  Chevron Oil,
supra, at 106 (emphasis added).  Thus, even a decision
that is -controlled by the . . . principles- articulated in
precedent may announce a new rule, so long as the rule
was -sufficiently debatable- in advance.  Arizona
Governing Committee for Tax Deferred Annuity and
Deferred Compensation Plans v. Norris, 463 U. S. 1073,
1109 (1983) (O'Connor, J., concurring).  Reading the
Davis opinion alone, one might get the impression that it
did not announce a new rule even of that variety.  The
opinion's emphatic language suggests that the outcome
was not even debatable.  See ante, at 2-3 (Kennedy, J.,
concurring in part and concurring in judgment).  In my
view, however, assertive language is not itself
determinative.  As The Chief Justice explained for the
Court in a different context:
-[T]he fact that a court says that its decision . . . is
`controlled' by a prior decision, is not conclusive for
purposes of deciding whether the current decision is
a `new rule' . . . .  Courts frequently view their
decisions as being `controlled' or `governed' by prior
opinions even when aware of reasonable contrary
conclusions reached by other courts.-  Butler v.
McKellar, 494 U. S. 407, 415 (1990).
In Butler, we determined that the rule announced in
Arizona v. Roberson, 486 U. S. 675 (1988), was -new- for
purposes of Teague v. Lane, 489 U. S. 288 (1989), despite
Roberson's repeated assertions that its rule was -directly
controlled- by precedent.  Indeed, we did not even feel
bound by the opinion's statement that it was not
announcing a new rule at all but rather declining to
create an exception to an existing rule.  While Teague and
its progeny may not provide the appropriate standard of
novelty for Chevron Oil purposes, their teaching-that
whether an opinion is new depends not on its language
or tone but on the legal landscape from which it
arose-obtains nonetheless.
  In any event, Justice Stevens certainly thought that
Davis announced a new rule.  In fact, he thought that the
rule was not only unprecedented, but wrong: -The Court's
holding is not supported by the rationale for the
intergovernmental immunity doctrine and is not compelled
by our previous decisions.  I cannot join the unjustified,
court-imposed restriction on a State's power to administer
its own affairs.-  489 U. S., at 818-819 (dissenting
opinion).  And just last Term two Members of this Court
expressed their disagreement with the decision in Davis,
labeling its application of the doctrine of intergovern-
mental immunity -perverse.-  Barker v. Kansas, 503 U. S.
___, ___ (1992) (slip op., at 1) (Stevens, J., joined by
Thomas, J., concurring).  Although I would not call our
decision in Davis perverse, I agree that its rule was
sufficiently debatable in advance as to fall short of being
-clearly foreshadowed.-  The great weight of authority is
in accord.
  In fact, before Davis was announced, conventional
wisdom seemed to be directly to the contrary.  One would
think that, if Davis was -clearly foreshadowed,- some
taxpayer might have made the intergovernmental
immunity argument before.  No one had.  Twenty-three
States had taxation schemes just like the one at issue in
Davis; and some of those schemes were established as
much as half a century before Davis was decided.  See
Harper v. Virginia Dept. of Taxation, 241 Va. 232, 237,
401 S. E. 2d 868, 871 (1991).  Yet not a single taxpayer
ever challenged one of those schemes on inter-
governmental immunity grounds until Davis challenged
Michigan's in 1984.  If Justice Holmes is correct that
-[t]he prophecies of what the courts will do in fact, and
nothing more pretentious- are -law,- O. Holmes, The Path
of the Law, in Collected Legal Papers 167, 173 (1920),
then surely Davis announced new law; the universal
-prophecy- before Davis seemed to be that such taxation
schemes were valid.
  An examination of the decision in Davis and its
predecessors reveals that Davis was anything but clearly
foreshadowed.  Of course, it was well established long
before Davis that the nondiscrimination principle of 4
U. S. C. 111 and the doctrine of intergovernmental
immunity prohibit a State from imposing a discriminatory
tax on the United States or those who do business with
it.  The income tax at issue in Davis, however, did not
appear discriminatory on its face.  Like the Virginia
income tax at issue here, it did not single out federal
employees or retirees for disfavored treatment.  Instead,
federal retirees were treated identically to all other
retirees, with a single and numerically insignificant
exception-retirees whose retirement benefits were paid
by the State.  Whether such an exception rendered the
tax -discriminatory- within the meaning of the
intergovernmental immunity doctrine, it seems to me, was
an open question.  On the one hand, the tax scheme did
distinguish between federal retirees and state retirees: The
former were required to pay state taxes on their
retirement income, while the latter were not.  But it was
far from clear that such was the proper comparison.  In
fact, there were strong arguments that it was not.
  As Justice Stevens explained more thoroughly in his
Davis dissent, Davis, supra, at 819-and as we have
recognized since McCulloch v. Maryland, 4 Wheat. 316
(1819)-intergovernmental immunity is necessary to
prevent the States from interfering with federal interests
through taxation.  Because the National Government has
no recourse to the state ballot box, it has only a limited
ability to protect itself against excessive state taxes.  But
the risk of excessive taxation of federal interests is elim-
inated, and -[a] `political check' is provided, when a state
tax falls- not only on the Federal Government but also -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.-  Washington v. United States, 460
U. S. 536, 545 (1983) (emphasis added).  Accord, United
States v. County of Fresno, 429 U. S. 452, 462-464 (1977);
South Carolina v. Baker, 485 U. S. 505, 526, n. 15 (1988).
  There can be no doubt that the taxation scheme at issue
in Davis and the one employed by the Commonwealth of
Virginia provided that necessary -political check.-   They
exempted only a small group of citizens, state retirees,
while subjecting the remainder of their citizens-federal
retirees, retirees who receive income from private sources,
and nonretirees alike-to a uniform income tax.  As a
result, any attempt to increase income taxes excessively
so as to interfere with federal interests would have caused
the similarly taxed populace to -use their votes- to protect
their interests, thereby protecting the interests of the
Federal Government as well.  There being no risk of
abusive taxation of the National Government, there was
a good argument that there should have been no
intergovernmental immunity problem either.  See Davis,
489 U. S., at 821-824 (Stevens, J., dissenting).
  In addition, distinguishing between taxation of state
retirees and all others, including private and federal
retirees, was justifiable from an economic standpoint.  The
State, after all, does not merely collect taxes from its
retirees; it pays their benefits as well.  As a result, it
makes no difference to the State or the retirees whether
the State increases state retirement benefits in an amount
sufficient to cover taxes it imposes, or whether the State
offers reduced benefits and makes them tax-free.  The net
income level of the retirees and the impact on the state
fisc is the same.  Thus, the Michigan Department of
Taxation had a good argument that its differential
treatment of state and federal retirees was -directly
related to, and justified by, [a] significant differenc[e]
between the two classes,- id., at 816 (internal quotation
marks omitted): Taxing federal retirees enhances the
State's fisc, whereas taxing state retirees does not.
  I recite these arguments not to show that the decision
in Davis was wrong-I joined the opinion then and remain
of the view that it was correct-but instead to point out
that the arguments on the other side were substantial.
Of course, the Court was able to -ancho[r] its decision in
precedent,- ante, at 3 (Kennedy, J., concurring in part
and concurring in judgment).  But surely that cannot be
dispositive.  Few decisions are so novel that there is no
precedent to which they may be moored.  What is deter-
minative is that the decision was -sufficiently debatable-
ex ante that, under Chevron Oil, nonretroactivity cannot
be precluded.  Arizona Governing Committee v. Norris, 463
U. S., at 1109 (O'Connor, J., concurring).  That, it seems
to me, is the case here.

                            2
  The second Chevron Oil factor is whether denying the
rule retroactive application will retard its operation in
light of the rule's history, purpose, and effect.  404 U. S.,
at 107.  That factor overwhelmingly favors respondent.
The purpose of the intergovernmental immunity doctrine
is to protect the rights of the Federal Sovereign against
state interference.  It does not protect the private rights
of individuals:
-[T]he purpose of the immunity was not to confer
benefits on the employees by relieving them from
contributing their share of the financial support of the
other government . . . , but to prevent undue
interference with the one government by imposing on
it the tax burdens of the other.-  Graves v. New York
ex rel. O'Keefe, 306 U. S. 466, 483-484 (1939)
(footnote omitted).
Accord, Davis, 489 U. S., at 814 (-intergovernmental tax
immunity is based on the need to protect each sovereign's
governmental operations from undue interference by the
other-).  Affording petitioners retroactive relief in this case
would not vindicate the interests of the Federal
Government.  Instead, it lines the pockets of the
Government's former employees.  It therefore comes as no
surprise that the United States, despite its consistent
participation in intergovernmental immunity cases in the
past, has taken no position here.  Because retroactive
application of the rule in Davis serves petitioners'
interests but not the interests intergovernmental immunity
was meant to protect-the Federal Government's-denying
Davis retroactive application would not undermine the
decision's purpose or effect.

                            3
  The final factor under Chevron Oil is whether the
decision -`could produce substantial inequitable results if
applied retroactively.'-  Chevron Oil, supra, at 107
(quoting Cipriano v. City of Houma, 395 U. S., at 706).
We repeatedly have declined to give our decisions
retroactive effect where doing so would be unjust.  In
Arizona Governing Committee v. Norris, supra, for
example, we declined to apply a Title VII decision
retroactively, noting that the resulting -unanticipated
financial burdens would come at a time when many States
and local governments are struggling to meet substantial
fiscal deficits.-  Id., at 1106-1107 (Powell, J., joined by
Burger, C. J., Blackmun, Rehnquist, and O'Connor, JJ.).
There was -no justification- for -impos[ing] this magnitude
of burden retroactively on the public,- we concluded.  Id.,
at 1107.  Accord, id., at 1107-1111 (O'Connor, J.,
concurring); see id., at 1075 (per curiam).  Similarly, we
declined to afford the plaintiff full retroactive relief in Los
Angeles Dept. of Water and Power v. Manhart, 435 U. S.
702, 718-723 (1978) (Stevens, J.).  There, too, we
explained that -[r]etroactive liability could be devastating-
and that -[t]he harm would fall in large part on innocent
third parties.-  Id., at 722-723.
  Those same considerations exist here.  Retroactive
application of rulings that invalidate state tax laws have
the potential for producing -disruptive consequences for
the State[s] and [their] citizens.  A refund, if required by
state or federal law, could deplete the state treasur[ies],
thus threatening the State[s'] current operations and
future plans.-  American Trucking Assns., Inc. v. Smith,
496 U. S., at 182 (plurality opinion).  Retroactive
application of Davis is no exception.  -The fiscal
implications of Davis for the [S]tates,- one commentator
has noted, -are truly staggering.-  Hellerstein, Preliminary
Reflections on McKesson and American Trucking
Associations, 48 Tax Notes 325, 336 (1990).  The States
estimate that their total liability will exceed $1.8 billion.
Brief for Respondent SA-1; Brief for State of Utah et al.
as Amici Curiae 12-13.  Virginia's share alone exceeds
$440 million.  Brief for Respondent SA-1; Brief for State
of Utah et al. as Amici Curiae 12-13.  This massive
liability could not come at a worse time.  See Wall Street
Journal, July 27, 1992, p. A2 (-Most states are in dire
fiscal straits, and their deteriorating tax base is making
it harder for them to get out, a survey of legislatures
indicates-).  Accord, 241 Va., at 239-240, 401 S. E. 2d, at
873 (such massive liability -would have a potentially
disruptive and destructive impact on the Commonwealth's
planning, budgeting, and delivery of essential state
services-); Swanson v. State, 329 N. C. 576, 583, 407 S. E.
2d 791, 794 (1991) (-this State is in dire financial straits-
and $140 million in refunds would exacerbate it); Bass v.
State, 302 S. C. 250, 256, 395 S. E. 2d 171, 174 (1990)
($200 million in refunds -would impose a severe financial
burden on the State and its citizens [and] endanger the
financial integrity of the State-).  To impose such liability
on Virginia and the other States that relied in good faith
on their taxation laws, -at a time when most States are
struggling to fund even the most basic services, is the
height of unfairness.-  James B. Beam, 501 U. S., at ___
(O'Connor, J., dissenting) (slip op., at 10).
  It cannot be contended that such a burden is justified
by the States' conduct, for the liability is entirely
disproportionate to the offense.  We do not deal with a
State that willfully violated the Constitution but rather
one that acted entirely in good faith on the basis of an
unchallenged statute.  Moreover, during the four years in
question, the constitutional violation produced a benefit
of approximately $8 million to $12 million per year, Tr.
of Oral Arg. 33, 36, and that benefit accrued not to the
Commonwealth but to individual retirees.  Yet, for that
$32 million to $48 million error, the Court now allows the
imposition of liability well in excess of $400 million
dollars.  Such liability is more than just disproportionate;
it is unconscionable.  Finally and perhaps most important,
this burden will not fall on some thoughtless government
official or even the group of retirees that benefited from
the offending exemption.  Instead the burden falls
squarely on the backs of the blameless and unexpecting
taxpayers of the affected States who, although they
profited not at all from the exemption, will now be forced
to pay higher taxes and be deprived of essential services.
  Petitioners, in contrast, would suffer no hardship if the
Court refused to apply Davis retroactively.  For years, 23
States enforced taxation schemes like the Commonwealth's
in good faith, and for years not a single taxpayer objected
on intergovernmental immunity grounds.  No one put the
States on notice that their taxing schemes might be
constitutionally suspect.  Denying Davis retroactive relief
thus would not deny petitioners a benefit on which they
had relied.  It merely would deny them an unanticipated
windfall.  Because that windfall would come only at the
cost of imposing hurtful consequences on innocent
taxpayers and the communities in which they live, I
believe the substantial inequity of imposing retroactive
relief in this case, like the other Chevron factors, weighs
in favor of denying Davis retroactive application.

                           III
  Even if the Court is correct that Davis must be applied
retroactively in this case, there is the separate question
of the remedy that must be given.  The questions of
retroactivity and remedy are analytically distinct.
American Trucking Assns., Inc. v. Smith, supra, at 189
(plurality opinion) (-[T]he Court has never equated its
retroactivity principles with remedial principles-).  As
Justice Souter explained in James B. Beam, supra, at
___ (slip op., at 3-4), retroactivity is a matter of choice of
law -[s]ince the question is whether the court should
apply the old rule or the new one.-  When the
retroactivity of a decision of this Court is in issue, the
choice-of-law issue is a federal question.  Ashland Oil, Inc.
v. Caryl, 497 U. S. 916, 918 (1990) (per curiam).
  The question of remedy, however, is quite different.
The issue is not whether to apply new law or old law, but
what relief should be afforded once the prevailing party
has been determined under applicable law.  See James B.
Beam, supra, at ___ (Souter, J.) (slip op., at 4) (-Once a
rule is found to apply `backward,' there may then be a
further issue of remedies, i.e., whether the party
prevailing under a new rule should obtain the same relief
that would have been awarded if the rule had been an old
one-).  The question of remedies is in the first instance
a question of state law.  See ibid. (-[T]he remedial inquiry
is one governed by state law, at least where the case
originates in state court-).  In fact, the only federal
question regarding remedies is whether the relief afforded
is sufficient to comply with the requirements of due
process.  See McKesson Corp. v. Division of Alcoholic
Beverages and Tobacco, 496 U. S. 18, 31-52 (1990).
  While the issue of retroactivity is properly before us, the
question of remedies is not.  It does not appear to be
within the question presented, which asks only if Davis
may be applied -nonretroactively so as to defeat federal
retirees' entitlement to refunds.-  Pet. for Cert. i.
Moreover, our consideration of the question at this
juncture would be inappropriate, as the Supreme Court
of Virginia has yet to consider what remedy might be
available in light of Davis's retroactivity and applicable
state law.  The Court inexplicably discusses the question
at length nonetheless, noting that if the Commonwealth
of Virginia provides adequate predeprivation remedies, it
is under no obligation to provide full retroactive refunds
today.  Ante, at 12-14.
  When courts take it upon themselves to issue helpful
guidance in dictum, they risk creating additional confusion
by inadvertently suggesting constitutional absolutes that
do not exist.  The Court's dictum today follows that
course.  Amidst its discussion of pre- and postdeprivation
remedies, the Court asserts that a plaintiff who has been
deprived a predeprivation remedy cannot be -confine[d]
. . . to prospective relief.-  Ante, at 13, n. 10.  I do not
believe the Court's assertion to be correct.
  Over 20 years ago, Justice Harlan recognized that the
equities could be taken into account in determining the
appropriate remedy when the Court announces a new rule
of constitutional law:
      -To the extent that equitable considerations, for
example, `reliance,' are relevant, I would take this
into account in the determination of what relief is
appropriate in any given case.  There are, of course,
circumstances when a change in the law will
jeopardize an edifice which was reasonably constructed
on the foundation of prevailing legal doctrine.-
United States v. Estate of Donnelly, 397 U. S. 286,
296 (1970) (concurring opinion).
The commentators appear to be in accord.  See Fallon &
Meltzer, New Law, Non-Retroactivity, and Constitutional
Remedies, 104 Harv. L. Rev. 1733 (1991) (urging consider-
ation of novelty and hardship as part of the remedial
framework rather than as a question of whether to apply
old law or new).  In my view, and in light of the Court's
revisions to the law of retroactivity, it should be
constitutionally permissible for the equities to inform the
remedial inquiry.  In a particularly compelling case, then,
the equities might permit a State to deny taxpayers a full
refund despite having refused them predeprivation process.
  Indeed, some members of this Court have argued that
we recognized as much long ago.  In American Trucking
Assns., 496 U. S., at 219-224 (dissenting opinion), Justice
Stevens admitted that this Court repeatedly had applied
the Chevron Oil factors to preclude the provision of
monetary relief.  In Justice Stevens' view, however,
Chevron Oil determined the question of remedy rather
than which law would apply, new or old.  See 496 U. S.,
at 220 (Chevron Oil and its progeny -establish a remedial
principle for the exercise of equitable discretion by federal
courts and not, as the plurality states, a choice-of-law
principle applicable to all cases on direct review-); see also
ante, at 6, n. 9 (reserving the possibility that Chevron Oil
governs the question of remedies in federal court).  If
Justice Stevens' view or something like it has prevailed
today-and it seems that it has-then state and federal
courts still retain the ability to exercise their -equitable
discretion- in formulating appropriate relief on a federal
claim.  After all, it would be wholly anomalous to suggest
that federal courts are permitted to determine the scope
of the remedy by reference to Chevron Oil, but that state
courts are barred from considering the equities altogether.
Not only would that unduly restrict state court -flexibility
in the law of remedies,- Estate of Donnelly, supra, at 297
(Harlan, J., concurring), but it also would turn federalism
on its head.  I know of no principle of law that permits
us to restrict the remedial discretion of state courts
without imposing similar restrictions on federal courts.
Quite the opposite should be true, as the question of
remedies in state court is generally a question of state
law in the first instance.  James B. Beam, 501 U. S., at
___ (Souter, J) (slip op., at 4).
  The Court cites only a single case that might be read
as precluding courts from considering the equities when
selecting the remedy for the violation of a novel
constitutional rule.  That case is McKesson Corp. v.
Division of Alcoholic Beverages and Tobacco, 496 U. S. 18
(1990).  Ante, at 13.  But, as the controlling opinion in
James B. Beam explains, McKesson cannot be so read.
501 U. S., at ___ (slip op., at 13) (-Nothing we say here
[precludes the right] to raise procedural bars to recovery
under state law or demonstrate reliance interests entitled
to consideration in determining the nature of the remedy
that must be provided, a matter with which McKesson did
not deal- (emphases added)).  Accord, id., at ___ (slip op.,
at 12) (-[N]othing we say here precludes consideration of
individual equities when deciding remedial issues in
particular cases-).  It is true that the Court in McKesson
rejected, on due process grounds, the State of Florida's
equitable arguments against the requirement of a full
refund.  But the opinion did not hold that those
arguments were irrelevant as a categorical matter.  It
simply held that the equities in that case were insufficient
to support the decision to withhold a remedy.  The opinion
expressly so states, rejecting the State's equitable
arguments as insufficiently -weighty in these circum-
stances.-  McKesson, 496 U. S., at 45 (emphasis added).
  The circumstances in McKesson were quite different
than those here.  In McKesson, the tax imposed was
patently unconstitutional: The State of Florida collected
taxes under its Liquor Tax statute even though this Court
already had invalidated a -virtually identical- tax.  Id., at
46.  Given that the State could -hardly claim surprise-
that its statute was declared invalid, this Court concluded
that the State's reliance on the presumptive validity of its
statute was insufficient to preclude monetary relief.  Ibid.
As we explained in American Trucking Assns., the large
burden of retroactive relief is -largely irrelevant when a
State violates constitutional norms well established under
existing precedent.-  We cited McKesson as an example.
496 U. S., at 183 (plurality opinion).
  A contrary reading of McKesson would be anomalous in
light of this Court's immunity jurisprudence.  The Federal
Government, for example, is absolutely immune from suit
absent an express waiver of immunity; and federal officers
enjoy at least qualified immunity when sued in a Bivens
action.  As a result, an individual who suffers a
constitutional deprivation at the hands of a federal officer
very well may have no access to backwards-looking
(monetary) relief.  I do not see why the Due Process
Clause would require a full, backwards-looking
compensatory remedy whenever a governmental official
reasonably taxes a citizen under what later turns out to
be an unconstitutional statute but not where the officer
deprives a citizen of her bodily integrity or her life.
  In my view, if the Court is going to restrict authority
to temper hardship by holding our decisions nonretroactive
through the Chevron Oil factors, it must afford courts the
ability to avoid injustice by taking equity into account
when formulating the remedy for violations of novel
constitutional rules.  See Fallon & Meltzer, 104 Harv. L.
Rev. 1733 (1991).  Surely the Constitution permits this
Court to refuse plaintiffs full backwards-looking relief
under Chevron Oil; we repeatedly have done so in the
past.  American  Trucking Assns., supra, at 188-200
(canvasing the Court's practice); see also supra, at 4, 18.
I therefore see no reason why it would not similarly
permit state courts reasonably to consider the equities in
the exercise of their sound remedial discretion.

                           IV
  In my view, the correct approach to the retroactivity
question before us was articulated in Chevron Oil some
22 years ago.  By refusing to apply Chevron Oil today, the
Court not only permits the imposition of grave and
gratuitous hardship on the States and their citizens, but
also disregards settled precedents central to the fairness
and accuracy of our decisional processes.  Nor does the
Court cast any light on the nature of the regime that will
govern from here on.  To the contrary, the Court's
unnecessary innuendo concerning pure prospectivity and
ill-advised dictum regarding remedial issues introduce still
greater uncertainty and disorder into this already chaotic
area.  Because I cannot agree with the Court's decision
or the manifestly unjust results it appears to portend, I
respectfully dissent.