Minnesota

From GrandForksHerald.com and the AP:

Challengers to two of Gov. Tim Pawlenty's favored economic development programs had their day in court, arguing the Job Opportunity Building Zones and Bioscience Zones unfairly favor a few businesses at the expense of all taxpayers.

Lawyers for both the opponents and the state argued for summary judgment Monday before Ramsey County District Judge Mary Beth Dorn.

The JOBZ and biotech program, created in 2003 at Pawlenty's urging, give state and local officials the power to choose which companies get tax breaks in exchange for investing in depressed areas.

The plaintiffs - Alec Olson, a former lieutenant governor, state senator and congressman, and Butterworth Limited Partnership, which owns and runs a Bloomington mobile home park - said that the zones violate the law by making contracts with individual entities that allow them to avoid taxation.

Such tax breaks should go to a "uniform class," for example home owners, said plaintiff's attorney Stephen Rathke. Instead, they were given to companies that answered a call of, in Rathke's characterization: "Who wants a tax break?"

The program gives income, sales or property tax exemptions to companies for as much as 12 years to relocate or expand in areas with depressed job markets. It will cost taxpayers $8 million this year and $29.2 million more through 2009, according to estimates from the Minnesota Department of Revenue.

As of January, 125 JOBZ deals had been approved, with the state estimating a return of 5,000 additional jobs and $165.8 million in capital investments.

Rita Coyle DeMeules, a lawyer for the state, argued that the plaintiffs had no standing to bring the lawsuit because they have no direct interest in the programs beyond taxpayer status, and are unable to identify how they've been affected.

Responding to the plaintiff's argument that there's no uniform class, Coyle DeMeules said the class is defined as companies that will locate to particular geographic areas and increase their employment there.

Arguing that such economic development incentives are not illegal or even unusual, Coyle DeMeules characterized the lawsuit as a "policy disagreement" that should be remedied at the polls, not in the courtroom.

This is big news. I really like the fact that the plaintiffs attacked the lack of uniformity of these tax breaks. That's a basic premise behind this blog: lawmakers should not be in the business of picking and choosing which companies do and do not get tax breaks.

This blog began after the Cuno decision, where the U.S. Supreme Court held that plaintiffs contesting an Ohio tax break to DaimlerChrysler did not have standing and the case was dismissed. I doubt the plaintiffs in this Minnesota case spent much time getting into dormant Commerce Clause issues, which was the claim for the Cuno plaintiffs. The Minnsota plaintiffs likely got more into state law and hopefully this will increase their chance of overcoming the initial hurdle of standing.