The new North Carolina chapter of the Institute for Justice, a Washington-based public-interest law firm, is already making a splash with its first case, an action to stop the state Commerce Department from carrying out what I think is clearly an unconstitutional incentives program.
As described by a story on the AP wire Thursday night, the IJ lawsuit challenges a program the state legislature approved in 2000 to give movie production companies cash grants of up to 15 percent of the money they spend in the state, up to $200,000 per production. The program received $500,000 in state funding last year, but no grants have been made because the department hasn’t come up with the rules, yet.
Michael Byrne, the executive director of the North Carolina IJ chapter, illustrated the absurdity of subsidizing movie production with tax money that is supposed, under our constitution, to be devoted only to service public purposes. “It’s taking money out of the pockets of average North Carolinians and putting it in the pockets of rich, Hollywood producers,” Byrne said. “It’s hard to see any public benefit to North Carolina.”
Naturally, the various defenders of corporate welfare are already trotting out the usual “lemming argument.” That is, it would be great if all other states stopped subsidizing businesses, but until they do so we have to play along and follow them off the economic cliff. I believe that this argument lacks any real empirical or logical basis. I also believe it to be off-point.
We’re not talking about a debate in the legislature on the merits of incentives. We’re not talking about conducting a cost-benefit analysis. We are, instead, talking about a constitutional claim. IJ is suing in court, not trying to persuade lawmakers to adopt other, broader-based policies (such as reducing the overall tax burden) instead of making selective, secretive deals. Its claim goes to the very heart of constitutional government: What does the state exist to do? Can lawmakers enact whatever they want, and fund whatever they want with tax money, or do constitutional principles limit the legitimate use of those dollars?
It’s not enough to argue, as some do, that incentives benefit “the public” because they might possibly create jobs. This argument proves too much. It is a case of “delimiting the limit” – of defining a legal prohibition so narrowly that it fails effectively to prohibit anything. If the framers of the state constitution meant for its limits on government’s tax power to have any legal force at all, then it must be possible for some potential programs not to meet the constitution’s test. But to define “public services” such that any activity that creates even a single hour of work for a single person can be considered an appropriate recipient of government largesse is rule literally nothing out. So it can’t be the right definition.
The IJ lawsuit, one hopes the first of many along similar lines, is apparently designed to invite our courts to either find a rationale for this delimited limit or come up with a new (old) formulation that restores the limited-government principles of our constitutional order. It’s about the Constitution, stupid.
Hood is president of the John Locke Foundation and publisher of Carolina Journal.