A Radical New Interpretation of "Interstate Commerce"

Matt Welch | June 29, 2005

In a case headed toward the Supreme Court's next session, a Sixth Circuit judge last September invalidated parts of Ohio's $280 million subsidy/tax break package to DaimlerChrysler, ruling that they amounted to an unconstitutional disruption of free trade between states. It's all part of a small but growing backlash against corporate welfare, according to this Wall Street Journal article:

An anti-incentives decision by the high court would have broader implications as well, potentially endangering incentives for projects such as factories and sports stadiums across the country. An attack on incentives could encourage states to shift to other financial inducements, such as direct cash grants.

If home-growing medical marijuana qualifies as "interstate commerce," then it's hard to see how trade-distoring giveaways do not; obviously, though, there is a political chasm between the two potentially addictive activities.

To protect states' authority to set incentives, two Republican lawmakers from Ohio, Sen. George Voinovich and Rep. Patrick Tiberi, last month introduced legislation to explicitly grant states the power to offer tax incentives for economic development. "The bill guarantees that we can keep using these tools to help grow our economy and put people to work," Mr. Voinovich said at the time.

Comments

|6.29.05 @ 2:58PM|#

Hooray! An issue we all feel passionate about is headed to the Supreme Court! Oh wait...

|6.29.05 @ 3:09PM|#

I'm a little confused. If North Carolina built a road to make locating there more attractive to Dell, it would be an inducement just like a tax break.

Xrlq|6.29.05 @ 3:21PM|#

Nothing new or radical about this. The "dormant commerce clause" has been around for quite some time. One company's tax break is his competitor's fine, relatively speaking.

|6.29.05 @ 3:21PM|#

"The bill guarantees that we can keep using these tools to help grow our economy and put people to work,"

..and that's not the job of the free market?

Fucking Republicans. Hypocrits. Tools.

R C Dean|6.29.05 @ 3:21PM|#

I'm a little confused.

That's not news to any of us, joe. ;-)

|6.29.05 @ 3:24PM|#

Joe,
Because as it states in the article, it would shift the funding of a road for exclusive use by a business from the business to the taxpayer. Let's put it this way, here in Florida (my current residence) the state could build roads for companies to get them to set up shop in say Orlando. I live in the far northwest panhandle of the state that would see at least a bit of tax money coming from this business going back into the state coffers. Now, if they offer tax breaks then I would see little to no benefit from MY tax dollars being used to fund this business.

|6.29.05 @ 3:26PM|#

Building a road to entice a company is a little different than corporate subsidies. Same concept, but a tad less eggregious, I suppose.

Though, I honestly have no problem with there being a "market" in tax breaks (IOW, states compete for business by lowering their taxes). This is a win-win for everyone involved. However, subsidies and isolated tax breaks for singular entities is patently unfair, and is nearly indistinguishable from bribery.

Prohibiting states from lowering the tax rates to lure businesses would be absurd; however, I would support a law that prohibited individualized subsidies & tax breaks. I just don't see how you can invoke the commerce clause without banning tax rate adjustment altogether. If giving tax breaks to particular companies is an "unconstitutional disruption of free trade between states", then, following the logical path, so would lowering the tax rate and loosening regulations.

There's a damned good argument against corporate welfare and selective tax breaks/subsidies to lure corporations in; but when you try to invoke the Commerce Clause, all you do is invite an additional horde of restrictions. Under this logic, anything that a state does that makes them look more economically attractive than their nieghbors could similarly be banned. Lowering the business tax rate? Loosening economic and environmental restrictions & regulations? Building a business-friendly infrastructure? All these things could be seen as a "disruption of free trade". Methinks it might be wise to keep our distance from the Commerce Clause, as our omnipotent leaders seem wholly unable to resist the urge to club us over the fucking skulls with it.

|6.29.05 @ 3:27PM|#

You're right, Mr. Nice Guy, they are hypocrites, tools, and ,also, waaaaay undereducated about economics. However, please keep in mind that it is not just the Republicans. The Democrats also are hypocrites, tools, and so on. Statists are statists, no matter what else they may call themselves.

|6.29.05 @ 3:47PM|#

Doesn't this contradict Kelo?

|6.29.05 @ 4:12PM|#

However, subsidies and isolated tax breaks for singular entities is patently unfair, and is nearly indistinguishable from bribery.

I'm not sure I want to know what distinction is exactly drawn. Is the distinction between these things merely just a case of re-defining terms to remove the underlying reality from the prohibited category of behavior? (e.g. -- "the Geneva conventions only apply to prisoners of war, but this isn't a "war" it's a "deployment of military force", so the enemies we capture by definition cannot be prisoners of war, so therefore the Geneva conventions don't apply")

|6.29.05 @ 4:18PM|#

I struggle with the tax incentives concept as applied here in the same way I struggle with it as applied to individual income taxes. No, the government shouldn't be picking winners and losers. No, the solution is not equal but high tax rates to everyone.

The distinguishing characteristic that I don't like is the notion that the incentives have a specific company's name on them. If they were applied broadly as an incentive to any company, I would feel better about the whole thing. I don't like the Omnibus Jason Gets to Retire Incentive Package, but the 401(k) Plan as a concept doesn't bother me much.

drf|6.29.05 @ 4:29PM|#

Hej d� Swede!

While you're right about the statist by any other name, it is somehow satisifying pointing out to many repub true believers who still spout the Barry Goldwater/ "limited government" / "individual responsibility" stuff while they justify this current hog-wild regime.

Somehow, their most blatant hypocracy highlights and illuminates all of those buttheads for what they really are.

I'm not going to say anything "balanced" about the other side here, because these limited government principles apply, regardless, and I find the clash between the repub rhetoric and action to be the worst of the worst.

|6.29.05 @ 8:01PM|#

Interesting SCOTUS opinion here.

Also answers joe's question in another thread about takings that were denied.

|6.30.05 @ 7:38AM|#

Swede/drf:

Don't get me started on the left.. there's plenty to laugh about those clowns.

But that quote I cited came FROM A REPUBLICAN!! Maybe I'm naive, but for a man of his supposed idealogy, it's like a priest talking about his favorite porn movie during a sermon.