Supreme Court Won't Allow Ohio Taxpayers to Challenge Tax Breaks

WASHINGTON – Taxpayers have no right to challenge nearly $300 million in tax breaks that Ohio's elected officials used to entice DaimlerChrysler AG to build a new plant in Toledo, the Supreme Court ruled unanimously Monday.

By ruling that the taxpayers had no right to sue, the justices avoided deciding whether tax incentive programs are constitutional.

The high court's decision could have had a significant impact nationally because nearly every state uses billions of dollars in tax breaks to attract companies.

Two years ago, the 6th U.S. Circuit Court of Appeals struck down Ohio's tax credit on new equipment, saying the practice hinders interstate commerce because the incentives are available only to businesses that invest in Ohio.

In a 9-0 decision, Chief Justice John Roberts said, "State taxpayers have no standing ... to challenge state tax or spending decisions simply by virtue of their status as taxpayers."

To lure a $1.2 billion Jeep assembly plant to the area, the city of Toledo and two local school districts gave the company a 10-year exemption from property taxes, and the company received additional investment tax credits against the state's corporate franchise tax.

Some taxpayers in Ohio sued, alleging that their local and state tax burdens were increased by the tax breaks.

Roberts said the alleged injury to the taxpayers is hypothetical.

"A taxpayer-plaintiff has no right to insist that the government dispose of any increased revenue it might experience as a result of his suit by decreasing his tax liability or bolstering programs that benefit him," the chief justice wrote. "To the contrary, the decision of how to allocate any such savings is the very epitome of a policy judgment."

The taxpayers said their status as municipal taxpayers from Toledo gave them grounds to have their case heard, but the court disagreed.

The taxpayers are challenging state law and state decision-making and their claim of status by virtue of being municipal taxpayers simply introduces "yet another level of conjecture to their already hypothetical claim of injury," the ruling stated.

In all, DaimlerChrysler received nearly $300 million in property and investment tax benefits.

Business groups and lawmakers in several states said in friend-of-the-court filings that a ruling against Ohio and DaimlerChrysler would hurt economic development throughout the nation and put U.S. manufacturing at a disadvantage against foreign competitors.

The cases are DaimlerChrysler Corp. v. Cuno, 04-1704, and Wilkins v. Cuno, 04-1724.