Delaware Will Keep the Corporations Because It Must

For most of the 1800s, US states restricted the power of corporations to expand into new businesses or across state lines, merge with other corporations or otherwise get too big for their britches. These limitations increasingly came to cramp the style of the nation’s rising industrial tycoons, and in the late 1880s a corporate lawyer who practiced in New York City but lived in New Jersey had the brilliant idea of getting his home-state lawmakers to adopt reforms that effectively amounted to telling corporate leaders, “Hey guys, come here and do whatever you want.”

Crucially, corporations did not have to move their operations to New Jersey to take advantage of its permissive corporate laws, just their legal domicile. Corporations based in New York and elsewhere soon did so, in great numbers. By the early 1900s, corporate franchise taxes and charter fees were providing the majority of New Jersey’s government revenue, allowing the state to do away with property taxes. (Can you imagine that, New Jersey homeowners?)