PONDERING A PUBLIC PURPOSE
Bob Orr is a former Supreme Court justice with incentives to sue
02/06/05
Jack Betts
RALEIGH - In 1996, then-Associate Justice Robert Orr wrote a pointed dissent in a landmark N.C. Supreme Court decision upholding taxpayer incentives to recruit businesses to the state as long as they have a public benefit such as new jobs or a bigger tax base.

Orr, joined in the dissent by then-Associate Justice I. Beverly Lake Jr., wasn't buying the argument that a public purpose benefit is enough to justify using taxpayers' money to recruit new industry.

"[W]hat can a government not do if the end result will entice a company to produce new jobs and raise the tax base? If a potential corporate entity is considering a move to Winston-Salem but will come only if country club memberships are provided to its executives, do we sanction the use of tax revenue to facilitate the move?"

Nine years later, Orr is no longer on the Supreme Court. Lake, his fellow dissenter, is now chief justice of the Supreme Court. The court had five Democrats and two Republicans in 1996 -- Lake and Orr. This year the makeup is six Republicans, one Democrat.

Orr, the new executive director and senior counsel of the N.C. Institute for Constitutional Law, is preparing to sue over the kinds of financial incentives granted to Dell Inc. to build a computer plant in Winston-Salem.

The institute was created by the John William Pope Foundation, which has funded a number of conservative public policy institutions such as the John Locke Foundation. Much of its money comes from the Pope family's business, Variety Wholesalers, which operates a large number of retail stores. The Institute for Constitutional Law was created -- and Orr was hired -- to advocate for limited government and compliance with constitutional restraints on government.

Orr was a member of the appellate judiciary in North Carolina for 18 years. An ally of former Republican Gov. Jim Martin, Orr is often given credit for opening up the court system to Republicans. When he first became a judge, Democrats dominated the courts; when Orr retired last summer after writing the majority opinion in a long-running school funding case, the Supreme Court was overwhelmingly Republican, and the party's judicial candidates routinely win their races.

But Orr may become better known for the questions he is raising about financial incentives that state and local governments are offering to entice companies to build new plants.

Orr believes that in their enthusiastic pursuit of jobs, politicians and governments have lost sight of who gains and who loses. If one community gains jobs and a larger tax base -- satisfying the public purposes clause of the state Constitution -- what about a community that loses jobs and loses tax base?

He also worries about the costs of incentives arrangements, such as the $242 million package the state awarded Dell if it creates at least 1,500 jobs. State officials argue those incentives are justified, because Dell doesn't get any tax benefits until it creates the jobs and begins manufacturing computers and paying workers.

Orr isn't buying that. "Who is really benefiting? The money saved by not paying taxes accrues to Dell and its stockholders at the expense of the general taxpayer. Who benefits from the jobs? Dell does, because they are creating the jobs to make money for Dell and its stockholders. It is a pretty tenuous public purpose."

Many of the Dell manufacturing jobs won't pay all that much. "Maybe the people who make $28,000 in those jobs have a couple of kids and don't pay any income taxes," he says. "Maybe the people who make $28,000 have to rent rather than own because they can't afford a house, and they don't pay property taxes."

The institute has its eye on a federal case in Ohio that found certain tax credits run afoul of the U.S. Constitution's commerce clause. If that case is held to apply nationwide, it could strike at the heart of North Carolina's tax incentives program.

For years, economic developers have bemoaned the ever-increasing pace of tax incentives, Orr says. "Everybody says this is bad public policy, that `I don't like doing it but I have to because everybody else does it.' Well, not only would North Carolina be better off, but the country would be better off without it as well."

If tax incentives were sharply limited, he believes, North Carolina would be in good shape, because its traditional incentives, such as a willing workforce, good environment and plenty of community college training, give it advantages that some states just don't have. But if incentives remain in use, the giveaway game will just get worse.

"It is out of control, and the Dell case is the poster child for how out of control it is," Orr says. "I don't know which is worse -- the big packages like Dell's, or those little, by comparison, deals that local governments are making ... all over the state."

As a former candidate who has run and won -- and lost -- statewide races, Orr says it's part of a costly political game.

"I think it has everything to do with politics -- the desire of a politician to say, `Look what I'm doing for you. I'm bringing jobs to our state.' "

Meanwhile, he says, corporations have drawn a different conclusion. They say, "Look, we can play these suckers against one another."

Jack Betts
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Jack Betts is an Observer associate editor based in Raleigh. Reach him at Jbetts@charlotteobserver.com