Groups ask court to reconsider its tax-break ruling

They fear the ruling will hamper efforts to lure companies.
TOLEDO (AP) -- An unusual alliance is coming together against a federal court ruling that struck down a tax break that governments in Ohio use to lure companies to relocate.
And it's happening at a time when the groups -- union leaders and corporate executives, Republicans and Democrats -- are sharply divided over the presidential election.
All fear that the court ruling will severely hamper the ability of Ohio, Michigan, Kentucky and Tennessee, to bring new companies and jobs to their states.
Those four states are directly affected by the decision from the 6th U.S. Circuit Court of Appeals in Cincinnati.
"There's one area everyone comes together on and that's jobs," said Carol Van Sickle, vice president of public affairs for the Toledo Area Chamber of Commerce.
The ruling
The appeals court in September ruled that Ohio shouldn't be allowed to grant companies a tax credit on new equipment they purchase because it improperly rewards companies for investing in Ohio without offering a break if the same company invests in another state.
The case involved a dozen taxpayers and three small businesses in Toledo that sued over the investment tax credit Ohio granted DaimlerChrysler AG to build a Jeep assembly plant that opened in 2001.
Among the groups that have asked the court to reconsider its decision are the United Auto Workers, Ford Motor Co., the National Association of Manufacturers and chambers of commerce groups in Cincinnati, Lexington, Ky., and Nashville, Tenn.
Also joining in are Ohio Gov. Bob Taft, a Republican, and former Detroit mayor Dennis Archer, a Democrat.
Republican Sens. George Voinovich and Mike DeWine of Ohio have taken a different approach. They introduced a bill in Congress last week to clarify that the tax credit is constitutional and not a violation of a law regulating commerce between states.
Concern
The primary concern is that other states will be at an advantage in economic development advantage if Ohio, Michigan, Kentucky and Tennessee can't offer the same incentives.
"All the other states are home free and it gives them one heck of a competitive edge," Van Sickle said.
Archer, who was mayor in Detroit from 1994-2001, said that without tax incentives, cities such as Detroit and Cleveland will lose out on jobs because companies have a responsibility to find the best deal.
He noted that tax credits helped the city attract a new auto plant and an expansion at an existing plant that amounted to a $1 billion investment.
"That could not be possible without tax incentives," he said.
Archer said incentives also help clean up old industrial sites, and the jobs that are created have a ripple effect on the economy.
"In the long run, you make up more than what you give up in tax incentives," he said. "People forget we're not just looking at permanent jobs. We're looking at construction jobs, service jobs."
Opposition
Some, though, believe the tax breaks aren't so significant because they aren't available to all businesses.
Sam Staley, president of the Buckeye Institute, a Columbus-based organization that advocates smaller government, said tax incentives only benefit high profile developments.
He also said tax breaks mean less to companies looking to build a new plant than do the availability of a trained work force and access to highways and ports.
He thinks the ruling could lead Ohio lawmakers to restructure Ohio's tax system and make it more equitable for all businesses, eliminating the need for tax breaks.
"I don't think this is going to torpedo the Ohio economy," Staley said. "In the long run, it will be good for business."
Terry Lodge, a Toledo attorney who brought the suit against DaimlerChrysler, said that the use of tax breaks has gotten out of hand.
"It has become a case of everybody's doing it," he said.
The solution, he said, would be for Ohio to come up with new incentives and to mount a legal challenge to tax incentives used by those states not covered by the appeals court's decision.
"There's a lot of things government could be doing besides wringing their hands over this," Lodge said.