"The taxing power of government must be used to provide revenues for legitimate government purposes. It must not be used to regulate the economy or bring about social change."
-- President Ronald Reagan
State of the Union Message
Feb. 18, 1981
"(b) no portion of the proceeds of such issue is to be used to provide (including the provision of land for) any private
or commercial golf course, country club, massage parlor, hot tub facility, sun-
tan facility, racetrack or other facility used for gambling, or any store the principal business of which is the sale of alcoholic beverages for consumption off premises."
-- Title 26
Internal Revenue Code
(tax exemption requirements for qualified redevelopment bonds)
Well, yes, certainly no massage parlors. Or hot tubs, of course; one shudders to think what happens in those. And tanning facilities, too, are the devil's playgrounds. As for racetracks, although state governments promoting their lotteries are America's most energetic advocates of gambling, government should err on the side of caution when protecting whatever this tax provision protects by frowning on racetracks, hot tubs and other things.
This peculiar wrinkle in the tax code, first approved the year after President Reagan said the tax code should not be used to leverage social change, makes certain projects ineligible to be financed by industrial redevelopment bonds that are subsidized by preferential tax treatment. This provision recently popped back into the news, thanks to Hurricane Katrina.
That ill wind blew some (barely) offshore casinos onto the shores of the Gulf Coast. As part of the plan to "rebuild," as the saying goes, the damaged coast, such bonds are going to be issued. But not promiscuously. Some legislators do not want tax-subsidized bonds to finance the rebuilding of casinos.
Not that the casinos need help: They are rebounding briskly, even expanding. Still, government has a sorry record of dispensing billions in corporate welfare for flourishing businesses.
It is mysterious why states or localities that want casinos operating nearby -- and providing jobs and tax revenue -- also want them afloat, a few feet from a riverbank or ocean shore. (Mississippi has just decided to let them come ashore.) Does the narrow band of water provide a prophylactic against sin? The communities already have weighed the sin against the jobs and revenue and found the sin congenial.
But such awkward questions arise when government begins moralizing, especially about the minutiae of life, such as hot tubs. Which brings us to Reagan's 1981 statement about inappropriate uses of the tax code.