Cite as: 522 U. S. 287 (1998)
Opinion of the Court
ment." Shaffer, 252 U. S., at 53. That duty is one "to pay taxes not more onerous in effect than those imposed under like circumstances upon citizens of the . . . State." Ibid.; see also Ward v. Maryland, supra, at 430 (nonresidents should not be "subjected to any higher tax or excise than that exacted by law of . . . permanent residents"). Nonetheless, as a practical matter, the Privileges and Immunities Clause affords no assurance of precise equality in taxation between residents and nonresidents of a particular State. Some differences may be inherent in any taxing scheme, given that, "[l]ike many other constitutional provisions, the privileges and immunities clause is not an absolute," Toomer, supra, at 396, and that "[a]bsolute equality is impracticable in taxation," Maxwell v. Bugbee, 250 U. S. 525, 543 (1919).
Because state legislatures must draw some distinctions in light of "local needs," they have considerable discretion in formulating tax policy. Madden v. Kentucky, 309 U. S. 83, 88 (1940). Thus, "where the question is whether a state taxing law contravenes rights secured by [the Federal Constitution], the decision must depend not upon any mere question of form, construction, or definition, but upon the practical operation and effect of the tax imposed." Shaffer, supra, at 55; see also St. Louis Southwestern R. Co. v. Arkansas, 235 U. S. 350, 362 (1914) ("[W]hen the question is whether a tax imposed by a State deprives a party of rights secured by the Federal Constitution, . . . [w]e must regard the substance, rather than the form, and the controlling test is to be found in the operation and effect of the law as applied and enforced by the State"). In short, as this Court has noted in the equal protection context, "inequalities that result not from hostile discrimination, but occasionally and incidentally in the application of a [tax] system that is not arbitrary in its classification, are not sufficient to defeat the law." Maxwell, supra, at 543.
We have described this balance as "a rule of substantial equality of treatment" for resident and nonresident taxpay-
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