Corporate Tax Incentives Little More Than Extortion
Readers may be surprised to learn that following the public outcry over the state of North Carolina’s unprecedented $242.5 million corporate incentives package to lure Dell to Winston-Salem, the General Assembly is considering a bill to perpetuate the system of state tax breaks to companies that locate here.
The so-called Business Growth and Investment Act of 2005 replaces the William S. Lee Quality Jobs and Establishment and Business Expansion Act, named for a former CEO of Duke Power and passed in 1996 to address the decline in the textile, apparel, tobacco and furniture industries, and compete with the use of incentives by neighboring states.
The bill continues the policy of the William S. Lee Act by promising tax breaks to companies for new jobs ‘— $12,500 per job in economically distressed areas, $5,000 per job in less distressed areas and $1,000 per job in other areas ‘— tax breaks for investments in machinery, and tax breaks for investments in real property. The bill also includes tax breaks for companies that pay the average state wage, provide health insurance, maintain a clean environmental bill of health and have no outstanding worker safety problems.
We on the YES! Weekly editorial board believe it’s time to ask why companies like Dell, Wal-Mart and Federal Express should continue to receive tax breaks merely for doing business. Those tax breaks fall on the backs of wage earners and small business owners who are forced to assume a greater share of the tax burden. In a time when state budgets for education, health care and other social needs are strained and when CEO salaries are higher than ever, it is absurd that these companies should be asking for handouts.
Of course, we know the answer: If we don’t fork over the cash, these companies will go do business and hire workers in Virginia or South Carolina ‘— or worse, in China. Not surprisingly, ordinary taxpayers in Virginia and South Carolina are over the same barrel as they court jobs-creating companies that threaten to jump over to the Tar Heel State if the deal isn’t sweet enough.
Here’s a suggestion: States in the Southeast need to seriously explore the idea of establishing a regional economic development compact in which they would agree to not compete with each other. We have a mutual interest in not being extorted. That way all the states could free up tax money to spend on infrastructure, education and quality of life amenities ‘— the things that really motivate companies to relocate.
As for the threat of companies relocating overseas if we don’t give them the tax breaks they want, let ’em go. North Carolina will never again compete with China in textiles or with the Dominican Republic in apparel production anyway. Besides, do we really want the kind of corporate citizens that are always asking for tax breaks and cheap labor anyway?
We know that ending the system of corporate tax incentives won’t be easy; it’s probably as complex as figuring out how to withdraw from Iraq. But it’s time to change course, and choosing more of the same with the Business Growth and Investment Act is the wrong move.