A case before the U.S. Supreme Court could change the practice of states using tax credits to attract development, an economic strategy all but four states use.
DaimlerChrysler v. Cuno, the opening arguments of which began March 1, originates from a 1998 decision by the Ohio government to provide DaimlerChrysler with a $280 million tax credit to convince the company to build a $1.2 billion Jeep plant in Toledo, instead of across the border in Michigan. The court has not yet reached a decision.
Back in 1998
DaimlerChrysler made the decision to expand their Jeep plant in Toledo said Lisa Hackley, a spokeswoman for the Ohio Department of Development. To protect more than 4 000 jobs
we offered a tax credit.
Toledo small business owner Charlotte Cuno, along with several other Ohio residents and Michigan residents, filed the suit accusing the state of using tax incentives to force businesses to stay in Ohio.
Other opponents of the practice said it impedes interstate commerce, and states giving away tax incentives mean those states' general funds are shrinking, at the cost of other programs. The court's focus was whether the Ohio law violated the Commerce Clause of the United States Constitution, according to a Supreme Court press release.
Mark Rickel, a spokesman for the Governor's Office, said a decision to end corporate tax breaks would not be as detrimental to Ohio's economy now that certain aspects of the tax breaks have been phased out.
It's important to know that the outcome will not have any affect on new investment
he said, adding it could affect already existing tax breaks, like the one given to DaimlerChrysler and similar companies.
The Ohio Revised Code allows for a non-refundable corporate franchise or state income tax credit for a manufacturer that purchases new manufacturing machinery and equipment. The code stipulates that the equipment must be located in an Ohio county.
Though awarding tax credits is still legal, the machinery and equipment tax itself was eliminated by the state legislature. Now instead of the state giving explicit breaks, companies pay no tax for equipment.
Obviously
we don't know what they're going to decide or the scope of the decision
Hackley said. But we're ahead of the game.
Though this credit was only available from July 1, 1995 to December 31, 2000 G
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Justin Thompson
