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Let States Be Entrepreneurs. Competition between states concentrates their minds on this: Capital goes where it is welcome and stays where it is well treated.

Last week the Supreme Court heard arguments for and against the proposition that "entrepreneurial federalism" is unconstitutional. No one used that phrase, but it captures what the court is pondering: When states compete to attract businesses by offering tax and other incentives, are they violating the Constitution’s Commerce Clause? It delegates to Congress the power to "regulate commerce … among the several states."

In 1998, Ohio granted DaimlerChrysler substantial tax benefits—all states offer similar incentives—to expand a Jeep assembly plant in Toledo rather than moving operations to Michigan. A federal appeals court disapproved the deal, ruling that it unconstitutionally interfered with interstate commerce by favoring companies expanding in one state. The case was brought to court by some Ohio and Michigan taxpayers who said—correctly, but irrelevantly as regards the Constitution—that such state policies shift tax burdens from businesses to individuals.

The Supreme Court must first decide if these taxpayers even have standing to sue. If it says they do, taxpayers everywhere will flood the court system with litigation to express their political objections to tax policies. If the court improvidently allows the case to proceed to the question of the pertinence of the Commerce Clause to 50 states’ policies, the court will find that the plaintiffs’ argument assumes something odd. It assumes that Ohio’s deal disrupts the "natural" flow of economic forces across the nation in which market forces are not otherwise deflected by states’ differences. Actually, the nation is planted thick with the 50 varying systems of laws and regulations that burden or facilitate commerce in different ways.

By George F. Will
Newsweek

Full Story: http://www.msnbc.msn.com/id/11677298/site/newsweek/from/RSS/

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High court doubtful about challenge to state tax incentives to companies that expand their investments in the state. http://www.matr.net/article-18463.html

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