Regifting the Gift Clause: How the Arizona Constitution Can End Corporate Subsidies

Arizona cities are at war with each other in a high-stakes bid to lure such retailers as Cabela’s, Cadillac, and Costco. To win the corporate spoils, cities offer incentive packages that include everything from land grants to a share of sales tax revenue. In this bidding game, however, the only winners are the corporations. Cities and taxpayers lose money, and existing businesses face unfair competition.

This phenomenon, however, is hardly new to Arizona. In the 1800s, the Arizona Territory experimented liberally with subsidies. Railroads promised substantial bounties if they were subsidized, but left taxpayers holding the bill. Having learned the lessons of such subsidy deals, the framers of the state constitution included what is known as the “gift clause.” Its purpose was to safeguard future generations of Arizonans from similar abuses. The framers of Arizona’s constitution purposefully decided to protect taxpayers against a wide variety of subsidization schemes, with a decided preference for keeping government out of the affairs of private enterprise.

The gift clause should act as a perpetual reminder and check on government authority to interfere with the operation of the free market. As understood by the framers of the Arizona Constitution, government subsidies interfere with economic liberty, retarding the progress of private enterprise.