U.S. Supreme Court rejects challenge to Ohio tax break
May 16, 2006
The U.S. Supreme Court on May 15 overturned a Cincinnati appeals court ruling that had thrown out Ohio’s investment tax credit as a violation of the constitution’s interstate commerce clause. It did not act on the merits of the case, but said those who brought it lacked standing to do so. The case was closely watched by those seeking fair and effective economic development policies.
When states offer tax credits, it often undercuts funding for important public sector programs, including education and other things vital to economic development. These tax breaks are not a large factor in corporate location decisions. But as long as other states are offering these credits, it can be hard to avoid what is often called a race to the bottom. Advocates for smarter economic development policy had hoped that the Supreme Court would reduce this negative competition. The court’s unwillingness to rule on the tax break itself means that – for now, at least – state and local tax breaks will continue to proliferate.