According to “Good Jobs First,” an organization that tracks taxpayer money used to subsidize private business, Mississippi has given almost $3 billion to entice wealthy corporations to locate in Mississippi. The free money consists of grants, low cost loans, tax credits, training reimbursements and who knows what else. Amazing, the poorest state in the union that depends on handouts from the feds for 49 percent of their budget forks over $3 billion of taxpayers’ money. The Nissan auto plant outside Canton received $1.3 billion.

Mississippi has approximately four dozen programs that provide incentives to private business. The most flagrant is the Mississippi Advantage Jobs Incentive Program, a program in which an employer gets a rebate of a portion of the state withholding taxes deducted from the paychecks of workers. In April 2012 “Good Jobs First” reported that the 25-year $160 million Advantage Jobs deal granted to Nissan was the largest withholding tax subsidy ever awarded.

The spending is explained as legal because they are for a “public purpose.” The Public Purpose Doctrine was not created to provide the government an excuse to spend taxpayer dollars on whatever they choose. The premise of the doctrine is simple: Public monies may only be spent for “public purposes”, a clear-cut rule.

Currently, governments’ role in financing economic development goes unquestioned. State courts have reasoned that subsidizing private corporations is a legitimate function of government. Additionally, they’ve allowed the legislature to define public purpose, asserting that they are more competent and accountable. This renders the Public Purpose Doctrine useless; legislatures are tempted to grant benefits to small special groups while dispersing hidden costs among the general public.

It is important to cite the origin and history of the public purpose doctrine. Most of the constitutional provisions were responses to past events. In the 1820’s and 1830’s states – infatuated with the Erie Canal – invested heavily in private transportation companies. Years later, many states were in serious debt and several defaulted on payments. The resulting amendments and the public purpose doctrine remained permanently enshrined in states’ constitutions long after the crisis passed.

SECTION 183 of Miss. Constitution states: “No county, city, town, or other municipal corporation shall hereafter become a subscriber to the capital stock of any railroad or other corporation or association, or make appropriation, or loan its credit in aid of such corporation or association.”

SECTION 258 of Miss. Constitution states: “The credit of the State shall not be pledged or loaned in aid of any person, association, or corporation.”

In spite of the restrictions, state and local governments have been busy throwing massive amounts of our money at private enterprises, in the name of economic development.

Revenue bonds greatly contributed to the death of the public purpose doctrine. Revenue bonds issued by a public entity are not considered as debt; nor do they require voter approval as do general obligation bonds. In theory the tax payers are not on the hook for repayment, but in reality a default will be picked up by the taxpayers. They are not identified in the budge as debt, which distorts the true amount of debt of state and local governments.

By: Jeff Smith