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A threat to state business incentives?By Jenny Price
The U.S. Supreme Court is scheduled to hear arguments in March in the case, which centers on a federal appeals court ruling striking down $280 million in tax credits and exemptions that the state offered to DaimlerChrysler AG to build a Jeep assembly plant in Toledo. Plaintiffs in the case argue the arrangement violates the commerce clause of the U.S. Constitution, saying it interferes with interstate commerce by giving preference to companies that expand within the state but not elsewhere. And, the opponents of such tax breaks say they drain resources from schools, local governments and other services needed for economic growth. But the National Association of Manufacturers contends local communities rely on the tax incentives and points out the Supreme Court has previously ruled the Constitution does not prohibit states from using their tax systems to encourage local industrial development. Quentin Riegel, an attorney for the group, has argued the appeals court decision threatens programs all over the country that states employ to help businesses grow and thrive. That would include programs like those carried out by the Wisconsin Department of Commerce providing tax credits for companies that expand and create new jobs in areas designated as technology zones. Fitchburg-based Jenkins Research & Manufacturing Corp. got a major boost from the state's Technology Zone program. The company, which specializes in custom machining, welding, and fabricating parts for the medical devices industry, received $90,000 in tax credits to help purchase new equipment and hire and train workers after some customers scaled back orders. "Without it, there was a question whether we would have survived," said Ken LeVake, project manager for Jenkins. "We really turned the ship around." The company has since more than doubled its workforce from 16 to 33 and won new customers thanks to increased efficiency that resulted from the investments it has made. "We could go out in the marketplace and get things that previously we didn't have the abilities to produce," LeVake said. Wisconsin's Technology Zone program provides tax credits to high-technology businesses locating or expanding within any of eight designated areas statewide; $5 million in tax credits are available in each zone. State officials won't speculate on the impact the Ohio case could have on Wisconsin until it's resolved before the U.S. Supreme Court. Riegel's group claims programs that provide training grants to businesses, which Wisconsin has, might also be in danger because of the Ohio lawsuit. Wisconsin has given General Motors Corp. $10 million in incentives since 2003, including one grant for more than $5 million for training and investments at the automaker's Janesville assembly plant. But overall, the state is not known for using large tax incentives to lure companies, said Todd Berry, president of the Wisconsin Taxpayers Alliance. Other states, especially those in the South, have been much more aggressive, he said. Alabama has used hundreds of millions of dollars in tax incentives to attract foreign auto manufacturers, including $253 million for Mercedes-Benz to open the state's first plant and $252 million in tax breaks and incentives to attract Hyundai to Montgomery. If the court agrees that Ohio went too far to win over DaimlerChrysler, it could force major changes in what economic incentives states, including Wisconsin, can offer to attract and retain companies. jenny.price@gmail.com madison.com ©2009 Capital Newspapers. All rights reserved. |
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