State and Local Tax Policy: Challenging the Use of Tax Credits and Other Incentives.

ATA Journal of Legal Tax Research, Vol. 4, 32-43 (2006)

12 Pages Posted: 25 Nov 2013 Last revised: 27 Dec 2013

See all articles by William A. Raabe

William A. Raabe

University of Wisconsin - Whitewater - College of Business and Economics

Roby B. Sawyers

North Carolina State University - Department of Accounting

Date Written: 2006

Abstract

A recent Sixth Circuit case challenged the validity under the Commerce Clause of the U.S. Constitution of an Ohio income tax credit. Although the Supreme Court overruled the decision on May 15, holding that the plaintiffs in the case did not have standing to challenge the incentives in federal court, the ruling did little to quell the debate concerning the constitutionality of the credits in question. While the Supreme Court ruling was not unanticipated, many observers were hoping for a more definitive resolution to the issue. As it stands, the Supreme Court decision leaves open the critical question of the constitutionality of incentives like that offered by the state of Ohio.

Tax credits and other incentives offered by the states and local municipalities have been used as part of an economic development strategy, often to recruit or retain business activity within the borders. While some of these subsidies may be subject to challenge under notions of uniformity of equity, in this paper we argue that it is improper to challenge the credit under review in this case.

Keywords: commerce clause, economic development, tax credits, tax incentives

JEL Classification: E62, H21, H22, H23, H25, H71, H72, K34, O11, O16

Suggested Citation

Raabe, William A. and Sawyers, Roby B., State and Local Tax Policy: Challenging the Use of Tax Credits and Other Incentives. (2006). ATA Journal of Legal Tax Research, Vol. 4, 32-43 (2006). Available at SSRN: https://ssrn.com/abstract=1604053

William A. Raabe (Contact Author)

University of Wisconsin - Whitewater - College of Business and Economics ( email )

Whitewater, WI 53190
United States

HOME PAGE: http://billraabetax.com

Roby B. Sawyers

North Carolina State University - Department of Accounting ( email )

Campus Box 8113
Raleigh, NC 27695-8113
United States
919-515-4443 (Phone)
919-515-4446 (Fax)

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