Where the Goldwater Institute and I Agree

Link: Arizona Capitol Times – Senator, others sue to stop tax subsidies.

"Six small-business-owners, including a Senator and a one-time legislative candidate, filed a lawsuit today challenging nearly $100 million in tax subsidies Phoenix gave to the developer of a planned mall.

The lawsuit, Turken v. Gordon, was filed in Maricopa County Superior Court and seeks an injunction against the subsidy and to restore the constitutional ban on subsidies.

If successful, the suit would tie the hands of city officials wishing to offer subsidies to lure companies away from neighboring cities.

The lawsuit argues tax subsides violate three provisions of the Arizona Constitution: the gift clause, which prohibits subsidies to corporations; the equal privileges and immunities clause, which says that if the government grants a privilege or immunity to one taxpayer, it must have a good reason for not granting it to all taxpayers; and the provision forbidding special laws that single out one corporation for benefits.

“All of those provisions were put in the Arizona Constitution to prohibit precisely the type of special- interest giveaways that CityNorth exemplifies,” said Clint Bolick, the director of the Goldwater Institute Scharf-Norton Center for Constitutional Litigation, which is representing the business owners in the lawsuit."

I very much agree with the view that tax bribes like this should not be used as a tool of economic development. It’s like a farmer eating his seed-corn and then reporting that his family’s diet is improving. Taxing authorities should compete on the basis of quality services and infrastructure, efficiency, work-force development, and business environment – not by racing each other to the bottom by giving away their tax base.

These deals are not only a form of institutional corruption and the product of special interest political deal-making, they are an insult to the hard-working men and women and small businesses of the community who pay the taxes they are assessed in order to support their communities. It is a gross distortion of the free marketplace and violation of basic fair play for larger economic interests to be able to basically negotiate their own tax rates. If the general rate isn’t fair, it should be changed for everyone, not just a wealthy and powerful few.

But the issue goes much deeper than fairness or the political down-side of such practices. The fundamental issue is the defense of free markets. It is most economically efficient to demand that localities compete on the basis of their general business environment, not on the sweetheart deals they can put together for favored business interests. A sustainable business relationship between a company and a community should be based on an objective evaluation of the long-term fit between the two entities, both of them bringing their best qualities to the partnership; a good business siting decision is like a good marriage, tax bribes are more like prostitution.