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Wednesday, March 01, 2006

Are State Level Business Tax Incentives Constitutional?

Do tax breaks to promote investment at the state level act as barriers to free trade between states and thus violate the constitution? The Supreme Court will decide:

Legalities of Corporate Tax Incentives Before Court, by David Cay Johnston, NY Times: The Supreme Court takes up a major case today about the legality of tens of billions of dollars in tax breaks that states and local governments award businesses each year to build new factories or offices, or just to stay put. ... At issue is whether tax breaks for companies that build or expand factories within Ohio discriminate against other Ohio companies that choose to invest in a different state. State tax laws that favor in-state businesses over those in other states have vexed America from the start and were a major reason that government under the Articles of Confederation proved unworkable. ...

[Those] who filed the case say that the tax breaks are the equivalent of a state tariff, not unlike the tariffs that states erected under the Articles of Confederation to protect in-state businesses from competition from 1781 to 1789, when the Constitution took effect. ... Under a legal theory known as the negative commerce clause, the Supreme Court has repeatedly struck down state taxes and regulations that have the effect of taxes when it found them to be protectionist, favoring businesses within a state and thus discouraging national commerce. ...

    Posted by on Wednesday, March 1, 2006 at 12:09 AM in Economics, Policy, Taxes | Permalink  TrackBack (2)  Comments (5)

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    » This boring news could change our country from CGP: The Flaming Grasshopper

    NPR was talking about it, and it's in the NYTimes today, and it's a blogworthy topic. The Supreme Court is hearing a case in which some folks have challenged as unconstitutional the practice of state and local governments granting tax... [Read More]

    Tracked on Wednesday, March 01, 2006 at 11:36 AM

    » This boring news could change our country from CGP: The Flaming Grasshopper

    NPR was talking about it, and it's in the NYTimes today, and it's a blogworthy topic. The Supreme Court is hearing a case in which some folks have challenged as unconstitutional the practice of state and local governments granting tax... [Read More]

    Tracked on Wednesday, March 01, 2006 at 01:37 PM


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