[Congressional Record Volume 143, Number 160 (Thursday, November 13, 1997)]
[Extensions of Remarks]
[Page E2358]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




              DISTORTING SUBSIDIES LIMITATION ACT OF 1997

                                 ______
                                 

                            HON. DAVID MINGE

                              of minnesota

                    in the house of representatives

                      Thursday, November 13, 1997

  Mr. MINGE. Mr. Speaker, I rise today to introduce the Distorting 
Subsidies Limitation Act of 1977 [DSLA]. The DSLA is a comprehensive 
legislative initiative which will attempt to curb the use of economic 
subsidies by state and local governments to lure or retain new or 
existing businesses. These governmental entities have engaged in the 
use of targeted subsidies which include grants, below market loans or 
rent, and tax deferrals, aimed at a particular private business entity 
in an attempt to entice a business to a particular municipality. State 
and local governments are being forced to compete against one another 
using scarce tax dollars that would otherwise be used for essential 
public goods and services such as schools, police and fire protection 
and road improvements. When this state and local competition takes the 
form of preferential treatment for a specific business, it interferes 
with interstate commerce, distorts the allocation of resources, and 
leaves states to provide too few public goods and services. This bill 
will encourage economic competition among states based on factors such 
as quality of services, reasonable and efficient regulatory policies 
and fair tax structures.
  Specifically, the legislation will do the following:


                        Taxability of Subsidies

  The bill creates a federal excise tax on businesses benefitting from 
these special targeted economic subsidies. If a business accepts the 
economic subsidy offered by the state or local government, the subsidy 
will be subject to the excise tax which will be computed on the 
aggregate value of the subsidy for calendar year in which it was 
received. The rate of the tax will be the same that applies in 
determining the regular income tax of a corporation. The excise tax 
will not apply if the subsidy is part of the long-term taxing and 
spending policies of the governmental unit or if the subsidy is 
available to all business entities.
  The economic subsidies which will be subject to the excise tax will 
include: any grants; any contribution of property or services; any 
right to use property or services; any loan made available to a 
business at rates below those commercially available to others; any tax 
deferrals or payment of any tax or fee; any guarantee of any payment of 
any loan or lease; or any reduction for fees or other charges for the 
use of governmental facilities such as roads, sewage treatment 
facilities and the like.
  There will be no excise tax rendered on the value of an economic 
subsidy which is provided for employee training or other educational 
programs. The legislation shall apply to any economic subsidy provided 
to a business 30 days after the date that this bill is enacted.


                       Tax Exempt Bond Financing

  The DSLA will also deny the exemption from tax for interest on bonds 
providing targeted state or local government development subsidies for 
a specific business entity. The legislation shall apply to bond 
obligations issued after the enactment of this bill.


                            Federal Funding

  The legislation will prohibit the use of federal funds by a state or 
local governmental unit for any targeted subsidies. The DSLA is not 
intended to deny the use of federal program dollars for economic 
development if the federal program dollars are available to all 
businesses or are used for an established federal economic development 
program such as an enterprise zone. If it is determined that federal 
funds have been used for targeted subsidies, the bill provides for 
recovery of those funds from the governmental unit or the business 
entity. The legislation shall apply to funds provided after the 
enactment of this bill.


                                Closing

  The Distorting Subsidies Limitation Act of 1997, would reduce the 
ever-increasing financial burdens placed on the citizenry of various 
taxing jurisdictions who are exploited by the race for business 
development. When enacted, it will allow state and local officials, who 
face exploitation by companies' threats to relocate, the ability to 
negotiate with businesses on a level playing field. The ever-increasing 
practice of giving targeted subsidies to demanding businesses is having 
a very detrimental effect on both the employment stability and fiscal 
stability of cities and states. We cannot allow the this short-term, 
targeted favoritism for a particular business to continue to skew the 
long term economic health of our communities.

                          ____________________