2005 ADOPTED RESOLUTIONS
URBAN ECONOMY POLICY

URGING SUPPORT FOR THE ECONOMIC DEVELOPMENT ACT TO AFFIRM STATE LOCAL USE OF TAX INCENTIVES TO PROMOTE ECONOMIC DEVELOPMENT

WHEREAS, for many years state and local governments have widely used tax incentives to spur economic growth and create new jobs that benefit their citizens and the businesses community at large; and

WHEREAS, state and local governments have used tax incentives for many decades to encourage new business starts, to encourage companies to locate within their boundaries and to encourage existing companies to expand; and

WHEREAS, in order to encourage Daimler Chrysler Corporation to expand its Jeep Manufacturing plant in Toledo, the state of Ohio, the city of Toledo and the local school districts in the late 1990s provided a package of tax incentives which led to the company’s investment of $1.2 billion and the creation of 5,000 new jobs; and

WHEREAS, in 2000 a group of individuals and businesses from Michigan and Ohio filed a law suit in federal court challenging the legality of the package of tax incentive provided to Daimler Chrysler; and

WHEREAS, in September 2004 the Sixth Circuit Court of Appeals in Cuno v. Daimler Chrysler ruled that the package of tax incentives provided to Daimler Chrysler by the state of Ohio, the city of Toledo and the local school districts violated the “dormant” Commerce Clause of the U. S. Constitution; and

WHEREAS, in the past, Courts have relied on standards established in Complete Auto Transit, Inc. v. Brady to determine whether a state’s tax provision is unconstitutional under the Commerce Clause when Congress has not spoken; and

WHEREAS, in the Complete Auto Transit case the Court ruled that a state tax will be valid only if (1) “the tax is applied to an activity with a substantial nexus within the taxing state; (2) is fairly apportioned; (3) does not discriminate against interstate commerce; and (4) is fairly related to the services provided by the state;” and

WHEREAS, in effect, the Sixth Circuit held that because Congress had not authorized the states to use an investment tax credit computed by only considering what a company invest in the state versus everywhere, that tax credit discriminated against out-of-state investments and, thus, was an impermissible regulation of commerce under the Dormant Commerce Clause principle; and

WHEREAS, on May 18 Senator George Voinovich introduced the Economic Development Act, a proposal that will override the Sixth Circuit’s ruling and affirm the authority of state and local governments to provide tax incentives to promote economic growth,

NOW, THEREFORE, BE IT RESOLVED, that The U.S. Conference of Mayors urges all members of Congress and the Administration to support the Economic Development Act and work together to ensure its immediate passage.

©2005 The U.S. Conference of Mayors
Tom Cochran, Executive Director
1620 Eye Street, NW, Washington, DC 20006
Tel. 202.293.7330 ~ Fax 202.293.2352
info@usmayors.org