Giveaways to corporations stick regular taxpayers with hefty tab

Posted on May 20, 2007 | Type: In the News
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Scottsdale's Motor Mile just may be one of the most profitable corners of real estate in Arizona. Featuring luxury cars such as Bentley and Rolls-Royce, its a safe bet most Arizonans probably will spend more time dreaming about cars like these than driving them. So why are taxpayers footing bills for these dealerships? A few years ago, the Scottsdale City Council voted to give $1.5 million to 19 car dealers for an ad campaign to make the area the ultimate car buying destination. I guess 19 car dealerships weren't obvious enough.

Not to put too fine a point on it, but there are taxpayers out there having trouble keeping up with gas bills who might wonder whether this was really a necessary expense.

Advertising is the kind of thing millions of businesses pay for every day. Profits accrue to business owners, and most businesses gladly pay their own way. But Scottsdale is on the cutting edge of a disturbing trend where heavyweight corporations make deals behind closed doors, enriching themselves at the expense of regular taxpayers.

If the Scottsdale deal seems like a gift to the car dealers, it is. And it is exactly the reason Arizona has a constitutional prohibition, called the gift clause against schemes like this. The gift ban is absolute: Neither the state, nor any county, city, town, municipality shall ever make any donation or grant, by subsidy or otherwise, to any individual, association, or corporation.

Unfortunately, poor judicial decisions have eroded this rule, clearing a path for a tidal wave of schemes and corporate spoils.

Two recent giveaways are particularly egregious and have given a new sense of urgency for state action. Surprise has announced a quarter-billion-dollar sales tax rebate to Westcor, and Phoenix agreed to a $100 million deal for a private company to build a shopping complex.

Backers of these deals say failure to subsidize retail would send developers to other cities. But the case for mall subsidies has no basis in fact. Wherever there are residents, shopping follows on its own accord. The notion that taxpayers have to pay retailers to sell to them is ridiculous on its face.

To be fair, its hard to blame companies for trying. In todays tax and regulatory environment, a business would be foolish not to seek the best deal possible. But if taxes, building fees, impact fees, planning permit fees and other municipal fees are stifling new business, cities should lower taxes fees across-the-board. If its good policy for one company, why not all?

Deals for select companies reek of political favoritism. They also make it difficult for small businesses to compete. How can mom-and-pop shops compete when better connected developers are getting million-dollar subsidies?

Cities looking to compete should offer tax and regulatory relief. From enterprise zones to the Irish miracle, tax relief is a surefire way to fire up the local economy. In the meantime, city councils should resolve to treat all businesses equally under the law or face their day in court from legal challenges that are sure to arise.

The Goldwater Institute has spent years advancing tax relief and reform, but no proper reading of the state constitution permits government to advantage one company over another. Fair is fair, and justice under the law requires nothing less.

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