April 16, 2014 10:50AM

No Honor Among Cronies: Maryland’s House of Cards Sequel

The state of Maryland has doled out more than $26 million in tax-credit subsidies to the hit Netflix series House of Cards, which films in the state. Last month in this space, my colleague David Boaz compared the arrangement itself to a House of Cards plot line: "It’s hard to imagine a better example of rent-seeking, crony capitalism, and conspiracy between the rich, the famous, and the powerful against the unorganized taxpayers."

Shortly after he wrote, the plot began taking further twists reminiscent of fiction. In response to demands from the show's producers for even steeper subsidies as the price of staying to film more seasons, some lawmakers decided to remind the Hollywood crowd who held the guns in the relationship:

Responding to a threat that the “House of Cards” television series may leave Maryland if it doesn’t get more tax credits, the House of Delegates adopted budget language ... requiring the state to seize the production company’s property if it stops filming in the state. …

Del. William Frick, a Montgomery County Democrat, proposed the provision, which orders the state to use the right of eminent domain to buy or condemn the property of any company that has claimed $10 million or more credits against the state income tax. The provision would appear to apply only to the Netflix series, which has gotten the bulk of the state credits.

This smash-'n'-grab approach to the use of eminent domain power is something of a local specialty in the Old Line State. In 1984, a bill was introduced in the Maryland legislature authorizing an eminent domain takeover of the Baltimore Colts, which had been eyeing the exits. In reaction, the owner packed the team into vans at night and moved to Indianapolis. In 2009, Gov. Martin O'Malley threatened eminent domain to keep the famed Preakness Stakes horse race, including its trademarks, copyrights, and contracts, from leaving Baltimore. (It stayed.)

On one level, it might seem like poetic justice for businesses that profit at taxpayer expense to come to grief through gross abuse of government power. But we should fear letting the power of eminent domain, dangerous enough when applied to land and rights of way, be asserted over intangible and movable assets. Once the state gets used to flexing that power, it will assuredly think of using it to seize enterprises whose entanglement with subsidies is less blatant and perhaps nonexistent. (Part of the answer, of course, is to stop the subsidy giveaways in the first place. And if the state can show that the producers somehow violated the terms applied heretofore to the deal, it would have a claim against them in more conventional litigation anyway.)  

Cato adjunct scholar Ilya Somin discussed eminent domain over moveable and intangible assets in this 2009 post. He writes, "condemning mobile assets is a losing proposition for state and local governments -- even if courts will let them do it," noting that "businesses would quickly flee any jurisdiction that started using eminent domain in this way. ... Moreover, other firms would forego the opportunity to move into the area in the first place."

But on to the sequel: Legislators in Annapolis killed the eminent domain proposal in conference committee, and then frantic negotiations on extending the subsidies failed to reach agreement as to a final $3.5 million before the end of the legislative session last week, which means the state's taxpayers may save that money (or save even more, if the show decides to leave).  

Isn't it nice when negotiations between two sets of rogues to fleece the rest of us break down? And it's a credit to the structure of our constitutional system that it often succeeds in blocking such negotiations.