Tuesday, Feb. 28, 2006 | 7:32 a.m.
The U.S. Supreme Court will hear arguments Wednesday in a case that could bear heavily on the decisions made by large companies to either stay in a community or move elsewhere.
Roots of the case date from 1996, when officials in Toledo, Ohio, negotiated with Chrysler Corp. to keep its Jeep plant in their city. Chrysler had said it was considering a move to Michigan. Toledo officials countered with an offer of land, roads and $280 million in tax breaks.
Ten years later the deal appears successful. The Jeep plant has 3,800 employees and is undergoing a $600 million expansion - and more hiring - to add the Dodge Nitro SUV to its assembly lines. But threatening the whole arrangement is a lawsuit by other Ohio businesses whose executives charge that Chrysler got an advantage that was not available to them.
In 2004 the 6th U.S. Circuit Court of Appeals in Cincinnati struck down the main part of the deal, a break on Ohio's state investment tax credit in exchange for Chrysler's commitment to continuing and expanding its in-state activities. The Ohio businesses protesting are those that also conduct business out of state. They contend it is unconstitutional to give breaks to an in-state company if firms that pay Ohio taxes but do business out of state are not in line for the same breaks.
Reporting on the story, Bloomberg News wrote, "The case is sparking a nationwide debate about the legality and economic wisdom of the billions of dollars in tax breaks given each year by cities and states competing for new corporate investments."
Nevada and its local governments would be affected if the Supreme Court rules that tax breaks used for recruiting new or retaining existing businesses are discriminatory. Through the Nevada Commission on Economic Development, and cities throughout the state, millions are awarded to companies locating here. The World Market Center, for example, with its ultimate $2 billion investment in downtown Las Vegas, received $40 million in tax breaks over 20 years from the city.
Although we understand that big companies can sometimes use bullying tactics in seeking concessions from communities, we do not see anything discriminatory about states and local governments negotiating incentive packages. By keeping a big company, or recruiting a new one, a community's tax base grows, leveling the tax-paying field for all concerned.
A major role of state and local governments is to work toward retaining existing good jobs and adding new ones. The freedom to offer incentives enables all states and local governments to have a fair chance of securing opportunities for their citizens. We hope the Supreme Court rules that states are well within their rights to continue to do this in the same manner that they have done for decades.
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