Expansion Management Editor Offers Perspective on Incentive Court Ruling
Many people are watching carefully for the fall-out from the U.S. 6th Circuit Court of Appeals' recent ruling that lets stand an earlier court ruling that the $280 million incentive package given to DaimlerChrysler by the State of Ohio was unconstitutional because it unfairly interferes with interstate commerce.
Ohio and the other states impacted by this ruling are quite concerned about how the new rules will impact their ability to compete for deals against states unaffected by the decision.
Expansion Management's Editor Bill King makes some valid points about the flaws in our judicial system that could be easily agreed with, but I tend to think that state and local government should use this ugly situation as an opportunity to rethink how they use public funds to support economic development in the future.
My assessment is that the incentive war chests of most (all) states are nothing more than hodge podges of isolated programs, lacking sufficient guidance from consistent underlying economic competitivesness policies and strategies. Most are also reactive in nature, and despite claims to being performance-based, they are not. In short, these programs have serious problems that need to be fixed.
Can individual states iron out their incentive problems on their own? I don't think so. I believe the states must sit together and commit themselves to the more prudent and accountable use of these programs in the future. And I believe the Federal Government should be invited in on these dialogues since our long-term national economic competitiveness depends upon what happens across the states.
There are many thorny issues to be tackled in the whole incentive arena. A major one has to do with the relationship between business tax policy and economic development incentives. We should not be afraid of tackling the big issues that come into play in this arena. Moreover, we should find solutions that support the improvement of our long-term global economic and business competitiveness. The time has past for states to gauge their competitive position solely in relation to other states. Offshoring and other 'high-impact" global business strategies have moved the focus into the global realm.
These are some starting points. You can expect to hear more on this issue in the near future. As always, I welcome your ideas.
posted by Don Iannone, D.Div., Ph.D. at
Sunday, March 13, 2005
1 Comments:
Don,
As I pointed out in my column last year about the Cuno-DaimlerChrysler case, my main criticism is that the underlying logic of the case is silly, and I fully expect the Supreme Court to overturn the 6th Circuit Court's decision. The federal government has no business establishing state tax policy, and that would be the effect of this case, should the Cuno side prevail.
That doesn't mean that state and local governments don't need to take a hard look at the financial incentives they offer to businesses in order to attract and/or retain jobs and tax base. I agree with you that they should.
My personal view of incentives is that they most often needed to offset other problems in the business climate of a particular location, and that the best way to limit the use of financial incentives is to improve the state and local business climate.
The federal government has no more business dictating state and local tax policy than it does, for example, telling a state like Texas that it must have a corportate income tax because not having one results in unfair competition for those states that do have a corporate income tax.
By
Anonymous, at 8:04 PM
Post a Comment
<< Home