Tax Abatements Spawn Development

After the arguments by residents which challenged the city's right to seize their homes for the benefit of a private company ( Jeep manufacturer Daimler Chrysler AG ) were rejected by the the U.S. Supreme Court last summer, a new case was heard last week involving tax incentives to the tune of $300 million.

The case involves claims that Toledo residents should not pay for expenses of a private firms wanting to expand or move into the area. Their case cited a ruling by the 6th U.S. Circuit Court of Appeals in Cincinnati that granting of tax incentives was unconstituional because it hinderd interstate commerce due to the fact that the incentives were only available to businesses that wanted to invest in Ohio.

I don't understand the reasoning in that decision. Was the court saying that Ohio should also offer incentives to companies which wish to expand outside the borders of Ohio? Justice David Souter who was skeptical about taxpayers' claims that Ohio's investment tax credit discriminates against Ohio companies that do business outside the state, stated if a company decides not to take advantage of the credit and expands elsewhere, "That's not discrimination. That's a free choice."

Recently the city offered tax incentives for the Westgate Development ($2.5 million), GM Powertrain ($34.3 million), and most recently Pro Bass Shops which included tax incentives as part of a $30 million package to build a new store in the Marina district.

I believe that tax incentives have become a neccessary and instrumental tool in luring business to locate in our cities and state. That being said, we have to be careful that these practices do not become a vicious competitive cycle that yield minimal economic benefit and leave taxpayers footing the bill.

It is my opinion that tax incentivs should not be painted with a broad brush giving the business which seek them a carte blanc to avoid all tax assesments. Rather they should be structured in such a fashion that excludes tax abatement for such services as Schools and other levys which suppport the community and which the taxpayers have voted and agreed upon. This could include "direct contributions" ( equal to the amounts which would have been generated by taxes ) by the company seeking tax abatements to those institutions supported by the levies. This would still allow those business to realize a substantial savings in taxes without jepordizing the revenues to be realized by those instituions dependent on the approved levies.

If the Toledo residents' argument is upheld, not only will it hurt economic development throughout the nation, but it will put U.S. manufacturing in an even tougher position against foreign competitors.

I hope the Supreme Court justices agree and don't buy into what is a pretty flimsy argument.

ref: Battle Creek Enquirer