Taxpayers Vs. The Business of Tax Breaks
Wednesday, March 01, 2006PAUL KANGAS: The Supreme Court today wrestled with the issue of whether taxpayers can sue to keep states from awarding tax breaks to companies in exchange for instate business investments. As Stephanie Dhue reports, the case, "Daimlerchrysler v. Cuno," could have multimillion-dollar implications for big business.
STEPHANIE DHUE, NIGHTLY BUSINESS REPORT CORRESPONDENT: The case centers around this Jeep plant in Toledo, Ohio. Back in 1998, the city and state awarded Daimlerchrysler $280 million in tax incentives to build the $1.2 billion facility. Sixteen businesses and 83 homes were taken by eminent domain to make room for the new factory. Kim Blankenship`s auto body shop was one of them. She`s one of the plaintiffs in the case.
KIM BLANKENSHIP, PLAINTIFF: Basically, I have no business. But I`m still paying taxes to support Daimlerchrysler.
DHUE: A lower court ruled the tax incentives were unconstitutional under the interstate commerce clause. Attorney`s representing Ohio and Michigan taxpayers want the high court to uphold that decision.
PETER ENRICH, ATTORNEY, CUNO, ET. AL.: When the states compete by using their tax codes to discriminate against out of state business activity, that is bad for the national economy. It leads to, in this case, the state`s inability to generate the revenues they need.
DHUE: But several justices didn`t seem to buy that argument. Justice Souter questioned why the tax breaks were discriminatory since businesses are free to choose whether to build or expand in a state. Justice Scalia said the controversy over the tax breaks should be settled in the state legislatures, not the courts. Attorneys for Daimlerchrysler say the tax incentives are a useful tool for states.
THEODORE OLSON, ATTORNEY, DAIMLERCHYRSYLER: I think the justices understood, that when states compete with one another to encourage business development, that`s good for everyone.
DHUE: State and local governments spend an estimated $50 billion a year on corporate tax breaks and other incentives. Business groups say the tax breaks spur growth.
DOROTHY COLEMAN, V.P. TAX POLICY, NATIONAL ASSOCIATION OF MANUFACTURERS: From our point of view, they are very effective in allowing businesses to expand and to create new businesses in the United States.
DHUE: A decision by the high court is expected by June. But lawmakers aren`t waiting. This month the Senate Finance Committee will take up a bill clarifying that states have the power to grant tax incentives to businesses. Stephanie Dhue, NIGHTLY BUSINESS REPORT, Washington.
