Monday, May 9, 2005

RE: 2005 Taxpayer Advocate of The Year

CONTACT: Mike Jerman, Vice President, 972-8814 or 808-8814 (cell)

Supreme Court Decision Violates Civil Rights and Sound Tax Policy

The U.S. Supreme Court’s decision in Kelo et al v. City of NewLondon violates basic American civil rights and allows cities to continue the insidious practice of using eminent domain to steal tax base from other cities and to grant preferential treatment to well-connected developers and businesses.

Tax policy plays a crucial role in economic development, and tax competition has its benefits. Tax competition discourages governments from overtaxing their households and businesses because taxpayers can move to state and cities with more favorable tax climates. “However, government should not be allowed to take private property in order to grant subsidies and preferences to a specific business under the guise of economic development, especially when the incentivized economic activity will occur on its own somewhere in the state anyway”, stated Mike Jerman, vice president of the Utah Taxpayers Association.

Use of eminent domain for building and expanding public infrastructure such as transportation has always been recognized as proper tool for government, provided that it is used as a last resort. The Court’s decision now allows government to use a normally legitimate tool for an illegitimate purpose.

While the Court’s decision allows local governments to continue to abuse property owners and taxpayers through eminent domain, usually as part of various tax increment financing schemes, the ruling does not prohibit state legislatures from enacting legislation to prohibit these actions. “Despite the Court’s ruling, Utah lawmakers still have the legal right and obligation to restrict or eliminate eminent domain abuses. Fortunately, the Court’s decision does not require states to allow cities’ use of eminent domain to benefit a private entity in the name of so-called economic development”, Jerman concluded.