Especially now, no way to justify incentives

Dec 4th, 2010
by Robert F. Orr
from The Raleigh News & Observer


Politicians talk about creating jobs for people as a rationale for giving incentives worth millions of dollars to selected corporations. Why give away huge chunks of our tax base at the state and local level in order to create jobs while cutting thousands of jobs in the public sector? Until the public gets a good answer to that question, state leaders should take a huge step back from the current incentives policy.


State government is poised to eliminate jobs and cut spending in order to balance the state budget as required by the N.C. Constitution. In addition, the proposed funding cuts likely to be imposed in the face of an estimated $3 billion budget shortfall will undoubtedly result in additional job losses in the private sector that depends on government projects.


A front-page story in the Nov. 23 N&O detailed potential budget cuts in a variety of state agencies that would inevitably result in lost services and lost jobs. From state parks to the community colleges, from the university system to health and human services, from the prison system to the courts, the effect of a tax revenue stream that at best is not growing and at worst is shrinking is evident.


According to another Nov. 23 article, statewide projections estimate the loss of over 4,300 classroom teachers along with nearly 6,800 teacher assistants across North Carolina if there is a 5 percent budget cut. A 10 percent cut raises those projections to over 5,300 teachers and over 13,000 teacher assistants.


These potential job losses will result in a negative effect on public education and public services for our citizens. Now juxtapose those losses with the other lead story in that day's Triangle & Co. section. A powerboat company headquartered in Florida announced an expansion in Beaufort County, promising to create 411 jobs over the next five years. For this magnanimous act, the taxpayers of the state are further depleting revenues by $6.1 million through an incentive given to the company. This follows on the heels of Hatteras Yacht Company being awarded close to $3 million in incentives with its recent promise to expand.


These incentives to the boating industry add to the ever-growing depletion of state and local revenue through the incentives game. Malt-O-Meal gobbles up $5 million for 80 jobs in Asheboro; SPX, a Charlotte-based industrial manufacturer, gets $9 million for 180 jobs; Facebook befriends the state and Rutherford County for $11.4 million for fewer than 50 jobs. The list goes on and on, and the cost to the state's treasury goes higher and higher.


But we're creating jobs, proponents exclaim! No, the private sector is creating those jobs and not for any charitable purpose. These companies are expanding because they expect to make a profit out of that expansion, and if the politicians are gullible enough to subsidize that business decision from the public coffers then even better. It just means more money to the corporate bottom line and less to North Carolina's.


No one likes to pay taxes, but most North Carolinians don't object to paying their fair share if tax revenue is used wisely and the tax burden is fairly applied. When the governor hands out cash and tax breaks to multibillion-dollar corporations as incentives, and the likes of Apple, Google, IBM, Caterpillar and others shirk their fair share of paying taxes, then others are rightfully more reluctant to shoulder an increased burden of taxation.


When it comes to job creation, government leaders have a choice to make. Keep depleting state revenue through special incentives and explain to all those teachers and other state employees why they couldn't find the money to keep them. Or reform the incentives practice and enact a modern, uniform system of taxation.


A fair tax system, excellent schools, honest government and innovative economic development that assists small startup businesses will result in job creation that is the envy of our fellow states. North Carolina doesn't have to, and shouldn't, pay huge companies to create jobs.


Former state Supreme Court Justice Robert Orr is executive director of the N.C. Institute for Constitutional Law.