Scamming the States

In a potential bombshell for the ways states and cities subsidize corporations in the name of jobs, the Supreme Court announced in late September that it will hear the case of DaimlerChrysler v. Cuno. A year ago the US Court of Appeals for the Sixth Circuit ruled that a huge investment tax credit given by the State of Ohio for a new Jeep plant in Toledo violated the commerce clause of the Constitution. If the Supremes uphold the decision many job subsidies are likely to be invalidated. In the world of "economic development," where states and cities spend at least $50 billion a year, such a ruling would be huge news.

The DaimlerChrysler episode is a classic case of "job blackmail," in which the automaker threatened to move Toledo's longstanding Jeep production, playing Ohio against Michigan. Ohio "won" with a package valued at about $281 million.

Such episodes have become epidemic: state versus state or more commonly suburb versus suburb. Boeing did it to Washington State for the Dreamliner project. Dell did it to North Carolina. Dozens have done it to New York City. Raytheon and Fidelity did it to Massachusetts. Cabela's does it and so does Wal-Mart. The average state now subsidizes jobs in more than thirty ways. Individual deals routinely involve eight or ten giveaways: property tax abatements, corporate income tax credits, tax increment financing, low-interest loans, free land--and just plain cash. Such packages often exceed $100,000 per job.

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