The Greensboro News & Record reports that Dell intends to repay the $26.5 million in local tax dollars they received. Similarly, Gov. Perdue declared that Dell will pay back every “red cent” Dell received from the State.
Many observers will view this as a “no harm, no foul” situation because the tax dollar showered on Dell will be paid back. Indeed, the Governor insists that the state will continue the corporate welfare game – if for no better reason than ‘everyone else is doing it.’
But I point out in today’s Lincoln Tribune that the government incentives game has other, harder to detect, costs to North Carolina’s economy:
The economy is a constantly evolving process in which entrepreneurs compete with each other for scarce resources in order to produce a good or service at a price consumers are willing to pay. Government disruption of this process with its preferential treatment of specific companies serves to impede progress.
Moreover, the practice of granting targeted tax breaks often results in propping up companies that wouldn’t otherwise be profitable. Sustaining such unprofitable companies subverts the economy’s natural process of weeding out inefficient businesses. This weeding out process makes an economy more adaptive to changing conditions, and thus more dynamic and innovative.