Saturday, March 11, 2006

George Will inadvertantly disproves conservatism

In this past week's Newsweek, George Will writes a column about a state tax credit/interstate commerce case that the Supreme Court is hearing. Now, to me the case is nothing new, as I am a state tax consultant and have been following the case for a couple of years now (not closely, mind you but it effects some people that I work with).

At the heart of the matter, as Will describes:

In 1998, Ohio granted DaimlerChrysler substantial tax benefits—all states offer similar incentives—to expand a Jeep assembly plant in Toledo rather than moving operations to Michigan. A federal appeals court disapproved the deal, ruling that it unconstitutionally interfered with interstate commerce by favoring companies expanding in one state. The case was brought to court by some Ohio and Michigan taxpayers who said—correctly, but irrelevantly as regards [to] the Constitution—that such state policies shift tax burdens from businesses to individuals.

Now, to my colleagues, this means that if the SCOTUS deems this type of state tax credit unconstitutional because it violates the commerce clause, they are essentially out of a job This is due to the fact that most state tax credits for businesses, including those for making investments, building new facilities, hiring new employees in that state, just to name a few would then be eliminated. And while it would make it less attractive for businesses to relocate or expand in a particular state, it does not necessarily mean that the businesses would expand in the state they currently are in, or would create the same or similar jobs in the state they are currently in.

However, if it is found that the taxpayers have a case that they can sue on, then Will (in my mind correctly) states that many issues will arise between the states with respect to their environmental laws, tax laws, and other regulations that have an effect on interstate commerce. Whether there will be numerous suits arising from this is hardly a guarantee either. But it is an interesting issue, at least to me.

And then Will hits right on the core problem with conservatism with his next comments:

Does the Supreme Court really want to inundate itself with cases requiring it to make thousands of rulings about which state laws and actions do and do not violate some standard—which the court has yet to devise—for permissible state actions that affect commercial practices? Does Ralph Nader, who favors the taxpayers' suit, really want states' differences in environmental and other policies, with their different impacts on commerce, to become constitutionally problematic?

Well, actually, some liberals do want that: They think it would prevent what they consider a "race to the bottom" and conservatives consider a "race to rationality" — competition between the states to reduce taxes and other costs borne by businesses.

That really is it right there. Conservatives think it is rational to have states compete to reduce business taxes, thereby shifting the state tax burdens from businesses to individuals. And we saw during the Reagan/Bush 41 years and now for the past 5 years is the following formula:

Favoring business and corporate rights over individuals +
Major focus on military +
Shifting tax burden to individuals =
Fucked taxpayers and terrible economy.

Then Will goes on to compare this to other types of "entrepreneurial federalism" and gives examples of Nevada and other states lowering the residency rules for marriage and divorce, or legalizing gambling. But the end result of that was not higher taxes for individuals at the expense of businesses (Nevada doesn't even have a personal income tax).

But that isn't the point. Nor is it the point that the Ohio taxpayers that sued in this case are correct, even if irrelevant to the Constitution (at least not with respect to conservatism). The point is, as Will points out, conservatism is for having states compete to give corporations the benefit of tax breaks at the expense of individuals.

And favoring businesses or corporations over individuals is precisely the problem with conservatism.

Thanks, George.

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