Dollars Better Off In Private Hands
July 28, 2016 at 4:25 p.m.
I must go on record as saying I am generally in favor of tax breaks.
Tax breaks for everybody.
That's because I think, generally, money left is the private sector is money better spent.
I don't particularly believe that the government does a very good job of spending money.
They seem really wasteful.
Remember the $600 toilet seat and $400 hammer in that now-infamous defense contract of 1983?
So anytime the government can collect less money, I think it's a good thing.
Lots of people disagree with me on this, but I think Reaganomics works. That's the whole "trickle down" theory that says if you give tax breaks to corporations and business owners, they will expand and create jobs.
When that happens, the benefits "trickle down" to workers and everybody else.
Back in the Reagan years, there was some pretty strong evidence of that happening. Revenue to the U.S. treasury increased each year under Reagan, finally eclipsing $1 trillion for the first time in history.
More people were working. They were making more money and paying more taxes. All because of tax breaks instituted by Reagan.
Of course, the more people make, the more tax money there is to go into the treasury - even at lower tax rates.
Yet, despite record revenues, Reagan is remembered for staggering deficits. That's not for lack of revenue. That's because Reagan allowed Congress to spend, spend, spend.
See, government lots of times gets the revenue side of the equation right. They just always blow it on the spending side.
Which is precisely why I believe that the more money we keep out of the hands of government, the better.
And besides, does anybody really believe we as American individuals and businesses are undertaxed?
That's why it piqued my interest earlier this week when I saw the story about the U.S. Supreme Court considering a case about tax breaks.
The case the justices will review involves a Jeep plant in Toledo built by DaimlerChrysler.
Back in 1996, Chrysler told Toledo officials they might just pull their operations out of town and move to Michigan.
In order to convince Chrysler to remain in Toledo, the city came up with a package of incentives including land and tax breaks.
That's pretty routine stuff.
It's happened all over this great land - including right here in Kosciusko County.
Many local companies have enjoyed the benefits of tax abatements and tax increment financing.
And, frankly, I think that's a good thing. As long as the company agrees to a certain level of growth - jobs, capital investment, construction, expansion - I truly believe it's a win-win.
But anyway, a bunch of Ohio taxpayers, Michigan citizens and one small-business owner whose property was taken via eminent domain as part of the deal sued.
A federal appeals court ruled in favor of these plaintiffs, sayingÊone of the tax breaks was an unconstitutional form of discrimination against interstate commerce.
The court essentially ruled against Ohio's Machinery and Equipment Investment Tax Credit, saying it unconstitutionally interferes with interstate commerce.
The credit lowers tax burden for a business that makes an investment in Ohio, but doesn't do anything for a similar company making the same investment somewhere else.
According to a story in the Toledo Blade, here's how the credit works:
"Participating manufacturers may apply 7.5 percent of the costs of new equipment costs, up to 13.5 percent in economically distressed areas such as Toledo, against their corporate franchise tax bills over seven years.
"According to Ohio Department of Development spokesman Merle Madrid, DaimlerChrysler's expected machinery and equipment purchases associated with the plant expansion was $715.6 million. Assuming that the corporation took full advantage of the credit, it would have been worth $96.6 million.
"Since 1995, there have been 18,100 filings for the credit against total investment of $34 billion. The calculated value of that credit was $2 billion."
There are plenty of people lobbying the Supreme Court to uphold the lower court ruling.
A retired North Carolina Supreme Court justice has mounted a national campaign against tax incentives.
He's Justice Robert Orr and he's arguing against Chrysler. He says tax credits are a "zero sum game". "We're not talking about creating jobs, we're just talking about shifting jobs from one state to another."
I disagree. I think tax credits are a great way to retain companies and encourage expansion.
Good Jobs First is an anti-tax break lobby group headed by Greg LeRoy. He also filed a brief against Chrysler. He says tax credits are a "tragic waste of money" that drain resources away from spending on the skills and education that alone will bring real development.
I don't see it that way. Throwing tax dollars at training programs seems like a really poor way to bring about "real development."
If those guys would like to visit Warsaw, I would be happy to show them the benefits of tax increment financing.
Look no further than Zimmer World Headquarters and the resulting, renovated Central Park. Who would argue against the success of that venture engineered by then-mayor Jeff Plank?
I tend to agree with the people filing briefs on the other side of the issue, including the Tax Foundation.
Which is kind of weird because that group generally does not come to the defense of tax credits.
They generally believe lower tax rates are better than tax credits, but that's a whole different column.
Foundation staff attorney Chris Atkins said, "We are in favor of tax competition between states because we think competition is good." Tough to argue with that.
The U.S. Chamber of Commerce and the National Association of Manufacturers point out in their brief that unless the Supreme Court overturns the lower court decision, "states will be unable to use their tax systems to encourage development in destitute areas and they will cease to offer incentives designed to 'provide jobs and prosperity to their citizens,' a practice the Supreme Court has emphatically endorsed."
Frankly, I can't imagine the high court upholding this ruling.
The effects would be too far-ranging. And from a technical standpoint, I can't see what is constitutionally wrong - with regard to interstate commerce - with using taxes as an inducement to a company to locate in a state.
It wouldn't be wrong if the state used better schools, better police, better health care or better infrastructure to lure manufacturers.
So why not use "better" taxes? [[In-content Ad]]
I must go on record as saying I am generally in favor of tax breaks.
Tax breaks for everybody.
That's because I think, generally, money left is the private sector is money better spent.
I don't particularly believe that the government does a very good job of spending money.
They seem really wasteful.
Remember the $600 toilet seat and $400 hammer in that now-infamous defense contract of 1983?
So anytime the government can collect less money, I think it's a good thing.
Lots of people disagree with me on this, but I think Reaganomics works. That's the whole "trickle down" theory that says if you give tax breaks to corporations and business owners, they will expand and create jobs.
When that happens, the benefits "trickle down" to workers and everybody else.
Back in the Reagan years, there was some pretty strong evidence of that happening. Revenue to the U.S. treasury increased each year under Reagan, finally eclipsing $1 trillion for the first time in history.
More people were working. They were making more money and paying more taxes. All because of tax breaks instituted by Reagan.
Of course, the more people make, the more tax money there is to go into the treasury - even at lower tax rates.
Yet, despite record revenues, Reagan is remembered for staggering deficits. That's not for lack of revenue. That's because Reagan allowed Congress to spend, spend, spend.
See, government lots of times gets the revenue side of the equation right. They just always blow it on the spending side.
Which is precisely why I believe that the more money we keep out of the hands of government, the better.
And besides, does anybody really believe we as American individuals and businesses are undertaxed?
That's why it piqued my interest earlier this week when I saw the story about the U.S. Supreme Court considering a case about tax breaks.
The case the justices will review involves a Jeep plant in Toledo built by DaimlerChrysler.
Back in 1996, Chrysler told Toledo officials they might just pull their operations out of town and move to Michigan.
In order to convince Chrysler to remain in Toledo, the city came up with a package of incentives including land and tax breaks.
That's pretty routine stuff.
It's happened all over this great land - including right here in Kosciusko County.
Many local companies have enjoyed the benefits of tax abatements and tax increment financing.
And, frankly, I think that's a good thing. As long as the company agrees to a certain level of growth - jobs, capital investment, construction, expansion - I truly believe it's a win-win.
But anyway, a bunch of Ohio taxpayers, Michigan citizens and one small-business owner whose property was taken via eminent domain as part of the deal sued.
A federal appeals court ruled in favor of these plaintiffs, sayingÊone of the tax breaks was an unconstitutional form of discrimination against interstate commerce.
The court essentially ruled against Ohio's Machinery and Equipment Investment Tax Credit, saying it unconstitutionally interferes with interstate commerce.
The credit lowers tax burden for a business that makes an investment in Ohio, but doesn't do anything for a similar company making the same investment somewhere else.
According to a story in the Toledo Blade, here's how the credit works:
"Participating manufacturers may apply 7.5 percent of the costs of new equipment costs, up to 13.5 percent in economically distressed areas such as Toledo, against their corporate franchise tax bills over seven years.
"According to Ohio Department of Development spokesman Merle Madrid, DaimlerChrysler's expected machinery and equipment purchases associated with the plant expansion was $715.6 million. Assuming that the corporation took full advantage of the credit, it would have been worth $96.6 million.
"Since 1995, there have been 18,100 filings for the credit against total investment of $34 billion. The calculated value of that credit was $2 billion."
There are plenty of people lobbying the Supreme Court to uphold the lower court ruling.
A retired North Carolina Supreme Court justice has mounted a national campaign against tax incentives.
He's Justice Robert Orr and he's arguing against Chrysler. He says tax credits are a "zero sum game". "We're not talking about creating jobs, we're just talking about shifting jobs from one state to another."
I disagree. I think tax credits are a great way to retain companies and encourage expansion.
Good Jobs First is an anti-tax break lobby group headed by Greg LeRoy. He also filed a brief against Chrysler. He says tax credits are a "tragic waste of money" that drain resources away from spending on the skills and education that alone will bring real development.
I don't see it that way. Throwing tax dollars at training programs seems like a really poor way to bring about "real development."
If those guys would like to visit Warsaw, I would be happy to show them the benefits of tax increment financing.
Look no further than Zimmer World Headquarters and the resulting, renovated Central Park. Who would argue against the success of that venture engineered by then-mayor Jeff Plank?
I tend to agree with the people filing briefs on the other side of the issue, including the Tax Foundation.
Which is kind of weird because that group generally does not come to the defense of tax credits.
They generally believe lower tax rates are better than tax credits, but that's a whole different column.
Foundation staff attorney Chris Atkins said, "We are in favor of tax competition between states because we think competition is good." Tough to argue with that.
The U.S. Chamber of Commerce and the National Association of Manufacturers point out in their brief that unless the Supreme Court overturns the lower court decision, "states will be unable to use their tax systems to encourage development in destitute areas and they will cease to offer incentives designed to 'provide jobs and prosperity to their citizens,' a practice the Supreme Court has emphatically endorsed."
Frankly, I can't imagine the high court upholding this ruling.
The effects would be too far-ranging. And from a technical standpoint, I can't see what is constitutionally wrong - with regard to interstate commerce - with using taxes as an inducement to a company to locate in a state.
It wouldn't be wrong if the state used better schools, better police, better health care or better infrastructure to lure manufacturers.
So why not use "better" taxes? [[In-content Ad]]