November 14, 2005
For immediate release
Contact: William Ahern (202) 464-5101
WASHINGTON, D.C.—In a brief submitted today, the Tax Foundation urged the Supreme Court to overturn an Ohio decision that struck down an ordinary investment tax credit as unconstitutional. (Read full brief here.)
In the Cuno case, plaintiffs challenged Ohio’s investment tax credit in court, alleging that it discriminated against interstate commerce by denying a tax preference to out-of-state firms that it gives to firms that build facilities in Ohio.
The Tax Foundation brief, written by Chris Atkins of the Tax Foundation and Kyle Sollie of Dechert LLP, contends that as a threshold matter, the plaintiffs in Cuno did not even have standing to bring the lawsuit for two reasons: the credit did not discriminate against them personally, and the plaintiffs did not show how a favorable court ruling would redress their alleged injuries.
The brief asserts that while investment tax credits may often be counterproductive, a debate over that issue must occur in the legislature, not the courts.
“We agree, as a matter of tax policy, that tax credits make little sense,” said Atkins. “However, to strike them down because they ‘encourage investment’ in Ohio goes too far. Many features of a state’s tax system ‘encourage investment,’ including low tax rates.”
The Sixth Circuit’s reasoning would, in the end, require tax conformity among the states, a result that cannot be squared with state sovereignty and federalism.
“There are over 37,000 tax jurisdictions in the United States,” said Sollie, “and they all levy different mixes of sales, income and property taxes. To suggest that none of these different tax systems can ‘encourage’ investment is to say that they must have identical tax systems.”
The Tax Foundation is a nonpartisan, nonprofit organization that has monitored fiscal policy at the federal, state and local levels since 1937.
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