Almost every city or state has to deal with it: a company comes with its hand held out, saying it will only move in or stick around if it gets tax breaks, subsidies or other special deals. Some people call this “economic development.” Mostly, though, it’s highway robbery and we, the taxpayers, end up paying the cost.

Today, the U.S. Supreme Court is going to hear arguments in a case called DaimlerChrysler v. Cuno, which looks at the issue. The New York Times gives an overview:

The Supreme Court takes up a major case today about the legality of tens of billions of dollars in tax breaks that states and local governments award businesses each year to build new factories or offices, or just to stay put.

Supporters consider the subsidies vital economic development tools while critics denounce them as corporate welfare that helps some towns but weakens the national economy.

The case before the Supreme Court was filed by a group of Ohio residents and small-business owners who are challenging $280 million in state and local tax breaks to DaimlerChrysler for investing $1.2 billion in Toledo to expand a Jeep factory in 1998.

Both sides say that if the court strikes down the Ohio subsidies it will lead to major changes in the use of state and local tax incentives to promote investment.

This is one of those big conundrums: how do communities and unions deal with demands that are essentially blackmail. It’s pretty typical stuff. From what I know of this issue, the record shows that (a) companies almost never meet the promises of jobs or revenues they say they will bring to the community in return for getting tax breaks or subsidies and (b) many of the companies, who claim they need tax breaks to operate somewhere, in fact have many other criteria that factor into the decision to locate in a community and simply demand tax breaks because communities are so frightened about jobs that they just put free money on the table and (c) when companies break deals they’ve made to get tax breaks and skip town anyway, most communities don’t have a legal basis to demand the money back.

The problem is kind of like an economic game of “chicken”: no city or community will pull out of the corporate blackmail cycyle for fear that elected politicians will be blamed for “losing” jobs. Instead, each of us ends up paying the freight for these deals. Think of it this way: this is one way your tax dollars are subsidizing the tens of millions of dollars that CEOs are pocketing in pay and benefits.

My colleague Greg LeRoy has expertly documented the whole phenomena in his book, The Great American Jobs Scam” and he also has a summary of the Cuno issues.

This is an important case to watch. We’ll keep our eyes on it.