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BILL SEEKS TO RETURN SHARP OBJECTS TO TODDLERS
May 19, 2005
A bipartisan group of advocates of bad tax policy led by Sen. Voinovich of Ohio yesterday announced a bill to preserve targeted state tax incentives.
Such incentives became illegal in the 6th U.S. Circuit, which includes Ohio, Michigan, Ohio and Tennessee, when the 6th Circuit Court of Appeals ruled that they violate the U.S. Constitution's commerce clause. Iowa has around 20 tax credits that likely would be struck down under the same analysis.
The 6th Circuit decision provides a golden opportunity for states to abandon their circular firing squad system of targeted incentives to bribe businesses to locate in their states. These incentives tax existing businesses to lure and subsidize their competitors, but the bribees generally have vocal and influential support. This support is evident in Tax Analysts's list of co-sponsors of the "Economic Development Act of 2005":
Seeking to protect a tax incentive program he championed as governor of Ohio, Sen. George V. Voinovich, R-Ohio, announced May 18 that he and Rep. Patrick J. Tiberi, R-Ohio, Sen. Debbie Stabenow, D- Mich., and Rep. Ben Chandler, D-Ky., would introduce legislation to overturn a recent federal appeals court decision.
...
The Senate version is being cosponsored by every senator in the Sixth Circuit, including Mike DeWine, R-Ohio; Carl Levin, D-Mich.; Lamar Alexander, R-Tenn.; Mitch McConnell, R-Ky.; Jim Bunning, R-Ky.; and Majority Leader Bill Frist, R-Tenn
Truly an impressive display of support for foolish tax policy.
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Comments
Bad tax policy? Hardly. More like the 6th district's really choppy reading of the Commerce Clause. While you may be speaking from higher ground (a lot of us agree that there should be no corporate tax but we keep filing 1120's anyway) it is not realistic, nor legal, to do away with tax incentives.
Posted by: Dale Hanks | May 19, 2005 9:04 AM
Not realistic? Perhaps. But not legal? If they can enact them, they certainly can repeal them the same way.
These incentives aren't just for corporations, either. My least favorite Iowa one is a tax holiday for businesses funded by certain venture capital outfits. These businesses can defer state taxes for several years, while a competitor who scrapes up savings and borrows from the bank or relatives to start her business pays tax as soon as she turns a profit.
Such incentives are inherently unfair. If there is to be a tax, it is far better to have it at a low rate that applies to all. Incentives lead to one system for the well-connected, paid for by the less politically-favored.
Posted by: Joe Kristan | May 19, 2005 1:55 PM
The 6th District did not enact them, they are ruling on a law suit. What may happen, and has already been introduced, is that Congress will pass a bill that spells out very clearly that tax incentives are legal. This is an example of what happens sometimes when you try to fix something that is not really broken, somebody comes along fixes it permanently eliminating any flexibility.
I do agree with your point though, tax incentives are inherently unfair. But elected people want to do something, and they are as susceptible to marketing as the rest of us. If a group convinces them that the tax break is for the greater good then that is what they want to do. Sometimes.
Here in Colorado the elected representatives to the House and Senate are just going nuts. With the TABOR bill they cannot increase taxes without a taxpayer vote, and most of the revenue has mandatorily been spent for them. About all they have left is quibbling about smoking bans and seatbelts. Its truly sad. *sniff*. So effectively all they have left is the lowering of taxes.
Posted by: Dale Hanks | May 20, 2005 9:26 AM