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Business and Regulations,Local Government,Opinion

Protecting Rights Doesn't Impede Growth

Mar. 15th, 2012
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RALEIGH – After the U.S. Supreme Court declined to protect private property from unjust government confiscation in its 2005 Kelo decision, the backlash from Americans across the political spectrum led many states to strengthen their protections against the abuse of eminent domain.

North Carolina is, unfortunately, not among them. Since 2006, there have been several attempts to send a property-rights constitutional amendment to the voters. All have fallen short. Not only has such an amendment failed to gain the necessary votes in the General Assembly, but to date the amendments drafted for consideration have remained too permissive of eminent-domain abuse.

As former JLF policy analyst Daren Bakst pointed out last year, North Carolina’s constitution is the only one among the 50 states that fails to address eminent domain. Two of our neighbors, South Carolina and Georgia, have recently amended their constitutions explicitly to forbid the gross violation of property rights that Suzanne Kelo and her neighbors endured in New London, Connecticut. “North Carolina has the weakest property rights protection in the country,” Bakst concluded.

Just to be clear: all states continue to allow government to take private property, as long as the taking is for public use and the owner is justly compensated. But in North Carolina, there is no real protection against the state or localities taking private property for the private use of some politically connected party, such as a developer or corporation. Local officials in the state don’t want such a protection erected, because they see broad eminent-domain power as a good thing – as a potential tool for economic development that can transfer land from homeowners or “undesirable” businesses to other owners who will earn more income and pay more taxes on it.

There’s a very good philosophical answer to this argument: mind your own business. You are entitled to speculate about how you might better use my property, but that does not entitle you to my property.

To those for whom appeals to personal freedom are insufficiently persuasive, however, I’ll offer you something else to think about: eminent domain is not the economic-development tool you think it is.

Have you been following the denouement of the Kelo case? Originally, the city of New London said it was taking the private property of Suzanne Kelo and other homeowners in order to benefit a private development expected to create thousands of jobs and more than $1 million in tax revenue to the city. None of it happened. The seized property lay vacant for a time, and is now quite literally a dump for storm debris.

More generally, there is no good evidence that states imposing tighter controls on eminent domain grow slower or create fewer jobs than states with more permissive eminent-domain rules. Just last month, Economic Development Quarterly published a study that compared economic performance of states with recent eminent-domain limitations – imposed by legislatures, voters, or state judicial decisions – to the economic performance of other states. The authors concluded that “adopting either moderate or major eminent domain restrictions appears to create no economic ill effects when analyzing differences in trends based on the type of legislation passed or scope of judicial decision.”

Even if government officials have the best of intentions, there is no empirical reason to believe that they have a better understanding of economic conditions or business opportunities than do private buyers and sellers of land bargaining in the marketplace. And frankly, not all government officials have the best of intentions. Some are personally or politically cozy with those who want to acquire other people’s property at cut-rate prices.

North Carolina should move forward with an eminent-domain amendment to the state constitution as soon as possible. There is no compelling economic rationale for waiting and a strong philosophical rationale for acting.

Hood is president of the John Locke Foundation.