MIDLAND — The U.S. 6th Circuit Court of Appeals today ruled that the state of Ohio’s investment tax credit program violated the United States Constitution’s commerce clause. The decision in Charlotte Cuno, et al., v. DaimlerChryser, Inc., et al., will likely have far-reaching implications for Michigan and other states that fall under the 6th Circuit Court’s jurisdiction.

“Lawmakers should focus on legally sound economic policies like broad-based tax cuts now that the Michigan Economic Growth Authority might be found unconstitutional,” said Michael LaFaive, director of fiscal policy with the Mackinac Center for Public Policy, a research institute in Midland, Mich. Professor Peter Enrich, one of the Ohio plaintiffs’ attorneys, told LaFaive today that given the decision, the MEGA program “is subject to very substantial doubt at this point.” Because Michigan is in the 6th Circuit, the MEGA program can be challenged by litigants citing the Cuno case.

The MEGA program is a 1995 creation of the Engler Administration. It was designed to offer targeted tax relief to a limited number of companies in the hope of retaining and creating new jobs. Through July 13 of this year, MEGA has offered over $1.7 billion in Single Business Tax relief for over 200 projects. This figure does not include the value of tax abatements, job-training subsidies and other incentives offered to firms in addition to their MEGA credits.

For more on this case see “Are Targeted Incentives Constitutional?” at www.mackinac.org/6681.