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Nathan Newman on March 1, 2006 - 9:26am
State governments offer businesses tens of billions in tax incentives each year to invest in their states-- corporate subsidies that many advocates see as wasteful giveways but that others see as a lifeline for their communities. But the political debate could be irrelevant if the Supreme Court upholds a lower court's decision which declared an Ohio subsidy program unconstitutional. Challengers to the Ohio tax system cite the "negative Commerce Clause" powers of the federal government as preventing states from giving tax preferences to in-state investments. This is part of a constitutional trend that has increasingly gutted state powers to regulate economic activity in their states, whether in the name of federal Commerce Clause powers or under federal laws regulating "free trade." Progressive advocates are divided on the merits of such tax subsidies -- especially since the tax breaks to businesses actually exceed the corporate income taxes paid to the states -- but the larger trend of federal court and legislative preemption of state powers is disturbing.