Testimony of Peter D. Enrich on Cuno and Competitiveness: Where to Draw the Line Before the Subcommittee on International Trade of the Committee on Finance United States Senate

Abstract

In response to legal challenges to the constitutionality of many state tax incentives designed to influence business location decisions, federal legislation has been proposed that is designed to shelter a wide range of such incentives from Commerce Clause scrutiny. In this testimony, offered before the Senate Finance Committee's Subcommittee on International Trade, I present two reasons why Congress should approach the proposed legislation with great caution: First, the accelerating proliferation of state and local business tax incentives that are conditioned on business location and that discriminate in favor of in-state activity is contrary to the national interest and should not be encouraged by federal legislation. Second, the approach taken by the proposed legislation - which seeks to authorize certain location-based incentives, such as investment tax credits, while not authorizing other similar incentives of kinds previously invalidated by the courts - is doomed to failure, because the line it attempts to draw is arbitrary and insubstantial.