Lawmakers pushing for a state constitutional amendment to limit eminent domain power can point to the following passage from Thomas Sowell‘s new third edition of Basic Economics: A Common Sense Guide To the Economy:
One way of raising local tax revenues without raising local tax rates is to replace low-valued property with higher-valued property. This can be done by condemning as “blighted” the housing and businesses in low-income or even moderate-income neighborhoods, acquiring the property through the power of eminent domain and then transferring it to some enterprise that will build a shopping mall, hotels, or casinos, which will generate more tax revenue than the existing home owners and business owners were paying.
The outraged homeowners and business owners, who typically receive far less in compensation than the market value of their demolished property, are usually a sufficiently small percentage of the voting population that local officials can gain votes on net balance — if they calculate accurately. It is often possible to convince others in the media and the public that is these dispossessed tenants, homeowners, and business owners who are “selfish” in opposing “progress” for the whole community.
After recounting some of the details of the 2005 U.S. Supreme Court decision in Kelo v. New London, Sowell explains why this form of eminent domain abuse is bad for the economy as a whole:
What this means economically, in terms of the allocation of scarce resources which have alternative uses, is that the alternative uses no longer have to be of higher value, since the alternative users no longer have to bid the property away when they can rely on government officials to simply take the property under the power of eminent domain and sell it to them for less than they would have had to pay the existing property owners to transfer the property to them voluntarily.
