Now here's something that could prove interesting

Years and years ago, 24 in fact, I wrote of my disapproval of proposals to use tax incentives to spur investment in urban areas. After noting the failure of federal corporate tax cuts to improve the economy, I wrote:

The latest proposals to help our cities repeat the same pattern: They propose to cut business taxes in specified so-called "enterprise zones" in distressed urban areas to, their supporters say, spur investment in those areas and thus revitalize the cities. In other words, the same old story probably doomed to the same old failure.

There is another, more important reason for opposing these proposals: They contain no guidelines for or mechanisms for control over the type of source of investments to be made in those "enterprise zones." Lacking such controls, these zones would undoubtedly come to be dominated by the same narrow range of corporations whose ability to move capital around the country lets them - not small businesses - take the greatest advantage of any such tax goodies the federal government dispenses.

The danger in this is that those corporations, lacking any ties to the communities in which they operate, feel no responsibility to them. We saw the effects in January when US Steel closed a long-standing, profitable plant in Youngstown, Ohio because the profit was greater elsewhere and again in April when Ford announced it was closing its Mahwah assembly plant then admitted it had given no thought whatsoever to the economic effects on the community it was leaving behind.

Cities themselves, in turn, have usually tried to show a "commitment" to the corporations whose investments they're trying to attract by offering property and other tax abatements. Unfortunately, those cities often discover later that the cost of providing expanded services on an unexpanded tax base far exceeds the benefits of the new business, leaving them effectively worse off than before.

The corporations, meanwhile, continue on their way, using "mobile capital" to chase short-term profit around the country, often leaving wrecked communities in their wake. Current proposals to help our cities repeat the mistakes of the past and leave us and our cities open to the abuses of the past.

(Published September 2, 1980, this was part of the introduction to a series of proposals to support redevelopment of cities through support of small and mid-sized local businesses.)

In other words, using tax breaks to lure corporations to make investments was foolish, ineffective, and often left cities worse off than they were before.

Now, it turns out, at least some such programs may also be unconstitutional. The Knight-Ridder News Service reported on Friday that

[a] federal appeals court Thursday threw into question the arms race among states to secure new business investment and jobs through incentives, when it ruled that an investment tax credit Ohio gave DaimlerChrysler AG in 1998 to build a Jeep plant was unconstitutional.

The 6th U.S. Circuit Court of Appeals in Cincinnati, which also has jurisdiction over Michigan, Kentucky and Tennessee, said Ohio's investment tax credit gives preferential treatment to companies to locate in Ohio rather than in other states and therefore violates the interstate commerce clause of the U.S. Constitution.

The issue here is that the interpretation of the clause is "guided by a well-established anti-discrimination principle" that prohibits states from favoring or disfavoring investments depending on whether they are in-state or out of state.

"In short, while we may be sympathetic to efforts by the City of Toledo to attract industry into its economically depressed areas, we conclude that Ohio's investment tax credit cannot be upheld," Judge Martha Craig Daughtrey wrote for the unanimous three-judge panel.

"The business that chooses to expand its local presence will enjoy a reduced tax burden, based directly on its new in-state investment," she wrote, "while a competitor that invests out-of-state will face a comparatively higher tax burden because it will be ineligible for any credit against its Ohio tax."

The article says experts disagree on the impact of the suit, which was initiated by Ralph Nader and filed by 12 taxpayers and three small businesses to attack a version of corporate welfare. But if this goes to the Supreme Court, which is fairly certain, and if it's upheld, a much bigger if, it would dramatically alter the investment landscape of the country - and quite possibly prevent some well-intentioned city managers from cutting their own cities' throats.