Senator George Voinovich (R-OH), Representative Pat Tiberi (R-OH), Senator Debbie Stabenow (D-MI), and Representative Ben Chandler (D-KY) have introduced a bill to protect critical tax incentives used by states to encourage job creation and economic development.
The bill has bi-partisan support and is co-sponsored by all the Senators in the Sixth Circuit: Sen. Debbie Stabenow (D-MI), Sen. Mike DeWine (R-OH), Sen. Carl Levin (D-MI), Sen. Bill Frist (R-TN), Sen. Lamar Alexander (R-TN), Sen. Mitch McConnell (R-KY), and Sen. Jim Bunning (R-KY).
The bill is also supported by Ohio Governor Bob Taft, Tennessee Governor Phil Bredesen, the National Governors Association, the National Association of Counties, the US Conference of Mayors, which is led by Akron Mayor Don Plusquellic, the National League of Cities and the National Association of Manufacturers. The Teamsters and broad-based business coalitions are also supporting the bill.
The bill authorizes states to provide tax incentives for economic development purposes. Such tax credits are widely used by states to encourage companies to expand and relocate in their borders and are a critical economic development tool, especially during difficult economic times.
The bill seeks to override the 2004 ruling by the 6th Circuit Court of Appeals in Cuno v. DaimlerChrysler that declared Ohio's investment tax credit program unconstitutional because it was an attempt by a state to interfere with interstate commerce. The Cuno decision threatens to severely restrict the ability of states to design their tax codes to promote economic development.
This bill would override the Cuno case by authorizing states to grant tax incentives that otherwise would impermissibly interfere with interstate commerce. Tax incentives not authorized by the bill, however, would not automatically be invalid, but instead would be subject to the traditional judicial review.
The program at the heart of the Cuno case, the Ohio Machinery and Equipment Investment Tax Credit program, was used successfully by Voinovich while he was governor to convince DaimlerChrysler to build its new Jeep plant in Toledo, which plays a key role in ensuring the region's economic vitality.
Since the creation of Ohio's investment tax credit program in 1995, businesses have been eligible to claim a total of $2 billion in credits toward $34 billion in new equipment investments. Overall in Ohio, the manufacturing sector accounts for the second highest weekly earnings of any economic sector and supports local communities and schools with more than $1 billion in corporate franchise and personal property taxes."States are the laboratories of democracy and an innovation they have developed in recent years to help create jobs and prosperity are programs that allow them to encourage new growth through tax incentives for training, job creation, and investment in new plants and equipment," stated Voinovich.
He continued:
"This was critical to our success in Ohio and in being number one in new plant construction and expansion. States should be allowed to use these growth tools in their borders, and yes, states should be allowed to compete for new businesses and jobs.
"The winners will be working men and women who are looking for a job. My bill guarantees that we can keep using these tools to help grow our economy and put people to work," he added.
Meanwhile, Representative Tiberi noted that:
"While this issue can sound somewhat complicated, it boils down to one word and one word only-- jobs. We want to ensure that Ohio has the ability to compete when it comes to attracting new jobs or retaining the jobs we have."
A comprehensive report in our Intelligence Report series looking at offshore and onshore corporate structures and their tax implications is available in the Lowtax Library at http://www.lowtaxlibrary.com/asp/subs_reports.asp and a description of the report can be seen at http://www.lowtaxlibrary.com/asp/description_report7.asp
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