There was a good deal of fanfare last week as the North Carolina General Assembly passed Senate Bill 820 – High-Pay JDIG Job Cap Modification – which was quickly followed by the announcement that Honeywell will be moving its headquarters from New Jersey to the Charlotte area.
But should we be celebrating? The evidence seems to be lacking for a ticker tape parade.
First, let’s figure out what Senate Bill 820 does. According to the bill summary, “Senate Bill 820 would increase the per job grant maximum for the Job Development Investment Grant Program (JDIG) from $6,500 per job to $16,000 per job.”
In other words, the state Department of Commerce will be able to offer more substantial per-employee incentive payments to companies to lure them to North Carolina or entice them to expand here.
What does that have to do with Honeywell?
State legislators from both parties, arguing in favor of Senate Bill 820, said that the bill was critical to bringing “high-paying job creators” to North Carolina and that our state needed to be able to play “in the headquarters game.”
Never mind the fact that North Carolina is already home to 12 Fortune 500 and 26 Fortune 1000 headquarters. Six of the Fortune 500 company headquarters are in Charlotte.
On the same day that Gov. Cooper signed Senate Bill 820 into law, the state Department of Commerce announced that Honeywell – a Fortune 100 tech company based in New Jersey – will be relocating its headquarters to Mecklenburg County. However, Honeywell isn’t moving to Charlotte because of its proximity to western North Carolina barbecue.
According to the Department of Commerce:
Honeywell’s headquarters location in Mecklenburg County will be facilitated, in part, by a Job Development Investment Grant (JDIG) approved by the state’s Economic Investment Committee Monday evening. Over the course of the 12-year term of this grant, the project will grow the state’s economy by an estimated $7.9 billion. Using a formula that accounts for the new tax revenues generated by the new jobs, the JDIG agreement authorizes the potential reimbursement to the company of up to $42,450,000 spread over 12 years.
A tax reduction of $42.45 million is no small thing, but the move and amount left people in New Jersey perplexed.
According to NJ.com:
The planned relocation comes just three years after the company received a $40 million tax credit to keep its headquarters in New Jersey, in a deal brokered and heralded by then-Gov. Chris Christie.
It seems that Honeywell’s New Jersey tax credit ran out, and they found another tax credit in North Carolina for around the same amount.
So, did Honeywell move to North Carolina for good, or is our state government renting Honeywell for the next 12 years to the tune of $42 million?
Unfortunately, taxpayers likely won’t find out for another 12 years, but this situation points to one of the many problems with cronyist subsidies.
Corporate tax giveaways (which Gov. Roy Cooper has railed against, but has accelerated instead of stopped; see here and here) are bribes to corporations under the guise of tax cuts. While tax cuts aid in job creation, these incentives are an unfair use of the tax code by letting the government pick winners and losers, while the rest of us must pay artificially higher tax rates.
If a corporation comes to North Carolina for the money, they’ll leave for the money as well. It’s time for North Carolina to get out of the corrupt game of unfair job incentives and lower taxes for all businesses. Eventually, taxpayers are going to get tired of being fleeced so that politicians can have a photo-op at a ribbon cutting.
Let’s hope when it comes to unfair tax policies the North Carolinians wake up sooner rather than later to the bipartisan racket going on in Raleigh.