Corporate Welfare Weekly - March 1st, 2010 – Issue 39

Recent Announcements…

$60,000 in local incentives is being considered for Garmin for choosing to locate its first Triangle office in Cary. During the February 25 meeting, the Cary Town Council discussed incentives for the country’s largest maker of satellite navigation devices, but would not confirm whether Garmin was actually seeking them.

                ~ David Bracken, News & Observer, February 25, 2010

So let me get this straight. Garmin has already made the decision to locate its new office in Carywithout being offered incentives and there is no confirmation they ever asked for them. So why is theCary Town Council now talking about offering them? Isn’t one of the claims of incentives proponents that tax credits and grants are only offered to companies that would have chosen to locate elsewhere without them? What exactly is Garmin being incentivized to do if they have already decided for Cary?

Shouldn’t the horse be in front of the cart, not behind it?

Quotes of the week…

“…then the good judges might as well put a match to the state constitution.”

                Scott Mooneyham, The Daily Reflector, February 20, 2010

Local economists answer questions about five regions of the North Carolina economy for Business North Carolina magazine’s February cover story, “Ready for a Recovery.” Here are a few questions and answers from the article:

Did the Google data center in Lenoir have much of an impact in the western region of North Carolina?

 “No. It’s nice that they are there. It was a big investment, and it did provide a boost temporarily in construction and other activity. But I don’t think it’s going to have a significant impact over time.”

~ Todd Cherry, director of the Center for Economic Research & Policy Analysis at Appalachian State University. Business North Carolina cover story, Triad region, February 2010.

What lesson did the region learn from Dell?

“The major one is that it is difficult to predict what kind of industry you are going to need in the future. So you need to be careful about putting too much faith in industrial policy and trying to steer the economy, the needs can change quickly. Even big winners like Dell have seen their business model become antiquated. … You don’t want to put all your chips on a single bet.”

~ G. Donald Jud, emeritus professor in the Bryan School of Business and Economics at UNC Greensboro. Business North Carolina cover story, Western region, February 2010.

Will the Apple data center in Catawba County spawn other jobs?

“It is hard to say. … There is no real advantage to locating next to a data center.”

~ Mark Vitner, a Charlotte-based senior economist at Wells Fargo & Co.

Business North Carolina cover story, Charlotte region, February 2010.

Incentives ruling not decided on the merits of the case?

Scott Mooneyham, a columnist for Capitol Press Association, wrote in a February 20 editorial in theDaily Reflector that the recent North Carolina Appeals Court ruling that dismissed a lawsuit challenging the constitutionality of tax breaks and cash grants from government lacked context on unequal taxation.

“The questions raised by the decision were more basic, cutting to core issues of representative democracy: When do citizens have the right to challenge the constitutionality of laws? At what point are we, as taxpayers or voters or citizens, damaged by legislative and executive branch actions that may not be constitutional?

The case raised these questions because a three-member panel of the Court of Appeals — Judges Sam Ervin IV, John Martin and Barbara Jackson — didn’t decide the lawsuit on its merits. Rather, the judges ruled that the three taxpayers suing to stop incentives given to a Google server farm did not have the legal standing to bring the suit.

Essentially, the court said that the taxpayers’ relationship to the Google award was far too general, that they couldn’t suffer specific damage simply because they pay taxes that might make up some fraction of the money going to Google.

Somehow the judges decided to look at the relationship from the wrong direction.

The issue isn’t that some portion of these three taxpayers’ payments to the state — be it a dollar, a penny or a fraction of a penny — went to Google, and therefore the state subjected them to unequal taxation.

Unequal taxation occurs on the front end, not the back end. The issue is the hole left by companies like Google who essentially pay no tax or less tax because of incentive legislation, and how that may cause other taxpayers to pay more.

Interestingly enough, the decision never makes mention of last year’s $1 billion tax hike.

More troubling, Ervin, the author of the opinion, never provides any context about who could ever bring such a lawsuit. Who, under this court’s view of legal standing and incentives, could challenge a law that was clearly drafted to benefit one and only one company?

If the answer can only be dreamed up in the theoretical — oh, you know, another search engine company opening a server farm that was going to invest a half billion dollars here and, because of some technicality, didn’t get incentives — then the decision on its face is bad law.

And if, based on court decisions, classes of taxpayers become so narrow as to undo the whole concept of unequal taxation, then the good judges might as well put a match to the state constitution.”