The North Carolina Senate Finance Committee unanimously approved Senate Bill 820, a bill to expand tax incentives for high-paying jobs through the state’s Job Development Investment Grant (JDIG) program. Republican Senators Jerry Tillman (Moore), Paul Newton (Cabarrus), and John Alexander (Wake) sponsored the bill. The bill will next be heard in the Senate Rules committee.
If adopted, the bill would raise the cap on incentive grants from $6,500 to $16,000 per job created. Bill sponsors made no secret that the bill was aimed at making the state more competitive when vying for corporate headquarter relocations.
Did we learn nothing from the Amazon debacle?
JDIG is one of the state’s primary “economic development” programs. It gives tax breaks to specific companies to entice them to locate or expand in North Carolina. In essence, the incentives use taxpayer money to bolster the profits of hand-picked private businesses.
In his defense of the bill, Sen. Newton stressed that JDIG is required to be a net-benefit for the state. This means that the taxpayer dollars handed out to the corporations from the incentives are more than recouped by the state through increased income taxes from the new employees and other economic impacts of the company.
That condition does not justify the existence of the program. The requirements may create positive tax revenue for the state, but the JDIG program still has glaring, insurmountable flaws. JDIG and other corporate welfare programs:
- Give the recipient companies an unfair advantage over their competitors through government favoritism.
- Foster an environment of political patronage.
- Prioritize targeted handouts and tax breaks over the more fair approach of lowering taxes on all businesses.
- Do not usually play a deciding role in corporate relocation decisions, and can often times just be a handout to a company that would have located here anyway.
Government should not be involved in picking winners and losers in the private sector. Doing so is fundamentally unjust and ultimately causes more harm than good for our state’s economy.
Corporate welfare packages are popular because they allow politicians to claim credit for specific jobs entering the state. This is misguided. Politicians who want to attract jobs should work to ensure state tax policy, regulatory environment and educational systems are friendly to fostering business creation and expansion. If so, these conditions will create a thriving business climate that naturally attracts jobs. This may be less politically advantageous for lawmakers and executives but is always better for the economy and taxpayers.
Thankfully, the tide of public opinion seems to be turning away from wasteful incentives. The best way to grow the state’s economy is through across-the-board tax cuts that fairly impact all businesses. Maybe one day state leaders will trade their ribbon cuttings for a true free-market friendly business environment.