Judging from the concerns she expressed during oral arguments in Kelo v. New London, Justice Sandra Day O'Connor is not inclined to impose limits on the ability of local governments to reassign property rights in the name of economic development. But she did ask a question that highlighted the need for such limits.
Defending the condemnation of homes and businesses to make way for a grandiose redevelopment plan that includes a luxury hotel, condominiums, a health club, office space and a riverside esplanade, the city of New London, Conn., points to the taxes it expects these upscale properties to generate. If the prospect of higher tax revenue justifies the forced transfer of property from one owner to another, O'Connor asked, would it be appropriate for a city to decide that a Motel 6 must give way to a Ritz-Carlton?
"Yes, your honor, it would be," replied Wesley Horton, New London's lawyer.
Justice Antonin Scalia sought to clarify the principle guiding the city's use of eminent domain: "Are we saying you can take from A and give to B if B pays more taxes?"
"If they are significantly more," Horton said.
That qualification is comical, since politicians never have trouble predicting whatever benefits are needed to justify taking land on behalf of private developers. Displaced homes and businesses cannot be unbulldozed when the government's estimates prove to be wildly inaccurate.
In any case, as Institute for Justice lawyer Scott Bullock noted in his argument on behalf of the New London families who refuse to move, "Every home, church, or corner store would produce more jobs and tax revenue if it were a Costco or a shopping mall." If local governments can transfer property based on their judgment of which uses will produce the most taxes and jobs, no one's property is secure.
The Fifth Amendment, which says private property may not "be taken for public use without just compensation," is supposed to protect people from such arbitrary redistribution. But compensation often falls woefully short of just. In dictating the price, for example, the government does not consider the very thing that supposedly justifies the condemnation: the highly profitable use to which the developer will put the property.
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