A Roadblock For The Corporate Driven Race To The Bottom

In order to get a corporation to locate a new facility in a given location, it has become the habit of major corporations to extort tax breaks from those localities. It is a no-win situation for the localities who either have to forego taxes that they cannot afford to forego, or they have to forego the chance for economic development.

This competition between localities in different states would seem to me to be a definition if interstate commerce.

There is the commerce clause in The USA Consitution.

Article I, Section 8, Clause 3:[3]

[The Congress shall have Power] To regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes;

This gives me an idea for a new federal tax on corporations. If a corporation negotiates a tax break by pitting localities in one state against localities in other states, the new federal tax should equal the size of the tax break that the corporation received from the winning locality. The amount of the tax collected could be distributed to all the states whose localities did not win the competition. Usually much of the tax break comes from real-estate taxes that will not be collected over some extended period of time. The sum of all taxes foregone by the “winning” locality over this extended period of time should be collected immediately by the federal government and redistributed to the “losers”.

Since the Federal government can only regulate interstate commerce, I suppose that any corporation that limits the competition to a single state might be legally able to avoid the federal tax. It would be up to each state to enact a tax for competitions that occur solely in its state.

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