If They Can't Tax It, They'll Just Take It

Politicians Increasingly Use Property Grabs to Pad Government's Bottom Line

More and more politicians at all levels of government have been stretching and abusing the Constitutionally outlined power of eminent domain in attempts to generate higher tax revenues, according to a new study released by the 350,000-member National Taxpayers Union (NTU) today.

"From sweetheart corporate deals to publicly funded sports stadiums, taxpayers — even those not directly victimized by eminent domain abuse — almost always stand to lose when governments misuse their power to pad their bottom lines," said NTU Director of Congressional Relations and study author Paul Gessing. "Such land-grab redevelopment schemes rarely serve the 'public good' necessary to justify eminent domain, and instead often lead to higher taxes, a reduced tax base, and further stagnation."

According to the study, a Michigan State Supreme Court decision, which allowed the city of Detroit to uproot families and businesses in the Poletown neighborhood to build a GM factory, has been used by governments around the country to clear the way for "redevelopment" of areas that aren't seen as generating enough tax revenue.

Among the many examples detailed in the study:
  • Brooklyn, New York: Well-connected developer Bruce Ratner's ambitious proposal (four office towers, 300,000 sq. ft. of retail, 4,500 housing units, six acres of parks, and a publicly funded stadium for the New Jersey Nets) to redevelop the "Atlantic Yards" area of Brooklyn will kick out 150 tax paying homeowners and ring up nearly $1 billion in subsidies on the taxpayer's tab.

  • Toledo, Ohio: City officials offered to acquire nearly 160 acres of residential and commercial property — including 83 homes — in an attempt to persuade DaimlerChrysler not to relocate their manufacturing facility elsewhere. But the 4,900 jobs the city hoped to save dropped to 2,100 since the new plant was fully automated. Toledo taxpayers are left to pay off a $26.7 million relocation loan and cover a $47,000 rebate for each worker now employed.

  • Pittsburgh, Pennsylvania: Using subsidies and city- financed loans adding up to over $50 million — $150 for every person living in Pittsburgh — Mayor Tom Murphy lured Lazarus and Lord & Taylor to relocate in the city. However, both upscale department stores closed before they even reached the sales target that would require them to start payments on their taxpayer- financed loans.
The author contends that the growing number of citizen-based tax revolts may be one reason why politicians are turning to eminent domain as a way to raise revenues without actually raising tax rates. Yet according to Gessing, the failure of such eminent domain schemes will bring these cities full circle. "Trying to lure businesses back through wasteful spending won't address the high taxes that helped to drive the businesses out of these locations in the first place," Gessing said. "Eminent domain is often just a means for politically powerful special interests to steal from property owners and taxpayers alike," Gessing concluded. "If your local officials start talking about grand redevelopment schemes and eminent domain, the next 'taking' to occur is likely to be cash out of your wallet."

NTU is a non-partisan, non-profit organization working for lower taxes, less wasteful spending, and more accountability from government officials at all levels.

NTU Issue Brief 148, Eminent Domain Abuse: If They Can't Tax It, They'll Just Take It, is available online at http://www.ntu.org.

California Eminent Domain