Supreme Court rejects suit against incentives

The court disagreed with taxpayers that they are affected by tax breaks.
ASSOCIATED PRESS
WASHINGTON -- In a victory for business, the Supreme Court on Monday rebuffed the efforts of a group of taxpayers in Toledo to challenge nearly $300 million in tax breaks for DaimlerChrysler AG's new Jeep plant.
Chief Justice John Roberts said in the 9-0 decision that the alleged injury to the taxpayers was mere conjecture and that they had no standing to challenge tax or spending decisions "simply by virtue of their status as taxpayers."
DaimlerChrysler called the ruling "a big win for America" and said Congress and the states should seek legislation to reinforce the ability to use tax incentives as a tool to compete for investment and jobs.
The message from the ruling is that states "will not be held hostage to lawsuits" brought by people with "no direct connection to the issue at hand," said W. Frank Fountain, DaimlerChrysler's senior vice president for government affairs and public policy.
Herman Blankenship, whose Toledo auto shop was torn down to make way for the Jeep plant, said he hoped the challenge made people more aware about how much money government gives away to business.
"It seems to me that the government wants to tax us for everything, and that the corporate world is controlling the government," said Blankenship, among neighbors in the area of the plant who joined in the lawsuit.
Hurting development
Business groups and lawmakers in several states said in friend-of-the-court filings that a ruling against Ohio and DaimlerChrysler would hurt economic development throughout the nation and put U.S. manufacturing at a disadvantage against foreign competitors.
"It's an important cloud that's been lifted off the state of Ohio from an economic development perspective," said Lt. Gov. Bruce Johnson, also head of the state Department of Development.
Peter Enrich, an attorney for the taxpayers, said the decision "simply sends us back to the Ohio state courts, where we began six years ago." Enrich, a Northeastern University law professor, said "tax giveaways" similar to Toledo's cost states and municipalities around the country billions of dollars that could be better spent on education and other publicly financed programs.
In an earlier ruling in favor of the taxpayers, the 6th U.S. Circuit Court of Appeals struck down Ohio's tax credit on new equipment, saying the practice hinders interstate commerce because the incentives are available only to businesses that invest in Ohio.
To lure a $1.2 billion Jeep assembly plant to the area, the city of Toledo and two local school districts gave the company a 10-year exemption from property taxes, and the company received additional investment tax credits against the state's corporate franchise tax.
Disagreed
The court disagreed with the taxpayers' argument that their local and state tax burdens were increased by the tax breaks.
"A taxpayer-plaintiff has no right to insist that the government dispose of any increased revenue it might experience as a result of his suit by decreasing his tax liability or bolstering programs that benefit him," the chief justice wrote. "To the contrary, the decision of how to allocate any such savings is the very epitome of a policy judgment."
A core constitutional concept is that someone filing a lawsuit must allege personal injury traceable to the defendant's allegedly unlawful conduct and is likely to be redressed by the requested relief.
The Toledo taxpayers also claimed standing by virtue of being municipal taxpayers, but such an argument is "yet another level of conjecture to their already hypothetical claim of injury," Roberts wrote.
In all, DaimlerChrysler received nearly $300 million in property and investment tax benefits.
In a few more years, the ruling won't matter in Ohio because the tax credit is being phased out in favor of a low-rate tax on all business revenue.
DaimlerChrysler and the National Association of Manufacturers said they both will push for legislation that reinforces the use of tax incentives. Sen. George Voinovich of Ohio has proposed giving states the authority to grant tax incentives that would otherwise interfere with interstate commerce.