The Millionaire’s Club: Sweetheart deals between cities and private companies violate constitution

Goldwater Institute ^

[Reagan Fellow]

A few weeks ago, the Phoenix City Council agreed to give Thomas J. Klutznick Co. $100 million for building a high-end shopping center. Backers of the deal say failure to subsidize retail would send developers to other cities or to Arizona’s Indian reservations.

With a total sales tax of 8.1 percent, Phoenix has the highest sales tax rate of competitor cities. It may very well be true that Phoenix is losing business to neighboring cities. Poor tax policy has that effect.

If taxes are stifling new business, the city should lower rates across the board. But tax deals for select companies reek of political favoritism and enrich the well-connected. How can mom-and-pop businesses compete when big developers are getting million-dollar subsidies?

Deals like this are the reason Arizona has a constitutional prohibition on corporate spoils. The ban on subsidies 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.”

Judicial decisions have eroded this clause’s power, which can and should be remedied by a simple legislative act restating the law, or court decisions that return to the constitution’s plain meaning.

The Goldwater Institute has spent years advancing tax relief and tax reform. But no proper reading of the constitution permits cities to advantage select companies. We would like to welcome Klutznick Co. to Phoenix, but only by the same rules and on the same playing field as everyone else.

[urtax$@work]

In Kansas City, a recent news article explained that subsidies, TIFS (tax breaks) to businesses downtown have reduced
tax coffers. Therefore the city will have shortfalls
for fire & police etc. I think this also is caused by
bonds issued for private/public construction.

link here: http://www.kansascity.com/274/story/84088.html <>

Excerpt follows: Put another way, 11.1 percent of every sales-tax dollar created in Kansas City now goes to pay for TIF projects. The figure was 8.8 percent four years ago, which was already a stunning amount. And the amount will continue to zoom higher. That’s because Barnes and the current council have approved a large number of Super TIF projects (such as the Power & Light District) that keep 100 percent of all city sales-tax dollars. Regular TIF projects keep “just” 50 percent. Here’s how the more than 50 city TIF projects affect agencies that get sales-tax dollars. Take the Police Department. Voters in 2002 approved a quarter-cent tax to help build police facilities. The tax is expected to raise $16.9 million this year. But the police won’t get that much. City officials acknowledge that $2 million will be “redirected” to TIF projects, leaving less money to pay for police building upgrades.

[TChris]

Money and power trump the law. It's a sad fact that has been growing exponentially over time.

The Clintons are the poster children of this principle.

[Semper Vigilantis]

Sounds like both Phoenix and KC are finding out that being a sanctuary city and providing social programs and special perks (see KC taxi driver foot baths articles) costs more than the tax payers are willing to pay.