Today, Carolina Journal Radio’s Mitch Kokai discusses with Dean Webster, executive director of NC Institute for Constitutional Law, the legislature’s approval of targeted tax incentives packages for Goodyear and Bridgestone/Firestone. (Go to http://www.carolinajournal.com/cjradio/ to find a station near you or to learn about the weekly CJ Radio podcast.)
Kokai: Dean, shortly after this incentives deal was passed, largely for Goodyear and Bridgestone/Firestone, your organization put out a news release that said you expressed disapproval of this. What’s wrong with this package?
Webster: I can address it from two different perspectives. One is the policy perspective and one is the legal perspective. The two tend to coincide to some degree. From a policy standpoint, subsidies in general provided by the government are bad ideas. This kind of subsidy is, arguably, even a worse idea because it is not something that is generally available to a neutral group of potential recipients who might qualify. But rather, this particular Goodyear-Bridgestone/Firestone legislation was pretty much tailored just for two specific recipients — Goodyear and Bridgestone/Firestone. So you have not only the problem of subsidies and all the inefficiencies and unfairness of that, but then you also have the compounded problem of them — these particular subsidies — being available for two private for-profit corporations that were selected to be the recipients with the rest of us having to pick up the tab. So that is the policy argument, and I am sure I have left out some of the other policy arguments.
And then the legal argument is, under our state constitution, that this kind of legislation would violate what we call the public purposes requirement of the constitution and other similar restrictions on what the legislature can do. There has to be uniformity in taxation; taxation has to be fair and equitable. There is a prohibition against what is called exclusive emoluments, which are certain privileges. It all relates sort of to the public policy arguments we are talking [about]. But then, probably the most interesting one that we like to talk about is the public purposes requirement that says that taxation and expenditures have to be for a public purpose. Here we’ve got taxpayer dollars going to two private, for-profit corporations, which are not furnishing public amenities or public infrastructure or public social services. They are just doing their business like the rest of us, do but they are going to be getting money for it.
Kokai: Dean, your group has already filed suits against the incentives packages for Google and Dell. How is this latest package different, because this is different in terms especially of what’s involved in the incentive itself.
Webster: Yes. Mitch, in this particular new legislation pertaining to Goodyear and Bridgestone/Firestone, the subsidy — estimates as being as high as $60 million to be split between the recipients — can be available merely because these two businesses are remaining in North Carolina at their locales. Previous instances, in the Dell and the Google cases, were situations where the companies were coming to North Carolina after not having previously been here, whereas for Goodyear and Bridgestone/Firestone, those two companies have been here for years — Goodyear in Fayetteville, Bridgestone/Firestone in Wilson. So there can be no contention that we are inducing them to come. They’re already here. Further, there is not any requirement … that they increase employment at all. There is a requirement that they retain employment; I think it’s at something like 80 percent of its current level, which means they can reduce it by 20 percent. And there are some other requirements about how much, what the average pay has to be, and what some of the benefits are. But as you have noted, this is not going to be an exchange for any increased employment level for the entry into the market of some new business that had not already been here, but it’s all going to have to do with two businesses that have already been here. And it also is conditioned some on making certain dollar amounts of investments. In the case of Bridgestone/Firestone, I understand that some of the investments had already been made before this bill passed.
Kokai: So sort of ex post facto.
Webster: Exactly. That’s a good term. Ex post facto.
Kokai: Now what other difference, Dean, is in this case? We are not talking about tax credits or return of taxes. Aren’t we, in this case, talking about cash for these companies?
Webster: Exactly. In some of the other instances there might be cash grants, but there is also a large component of it is just not taxing the subsidy recipients.
Kokai: Or giving them taxes back they have paid, or something of that sort.
Webster: Yes, and in this case, as you mentioned, it is just a flat-out payment by we taxpayers in the state to the two businesses.
Kokai: Now one of the points we made at the top of the interview was the prospect that, with the Google and Dell suits in the works, that perhaps there might be another source of a legal challenge. Where do things stand at this point about potentially challenging this package in court?
Webster: We already have clientele lined up to pursue such a challenge. We are looking into it very seriously. We are happy to receive other inquiries from people that might be interested in presenting such a challenge. The Institute for Constitutional Law is a public interest law firm, a non-profit. We will do the legal work on a pro bono basis, which is to say we will not charge for our representation. And if anyone is interested in mounting the challenge or joining in the challenge, we would like for them to contact us. You can look us up on our Web site, or call.
Kokai: Their website is www.ncicl.org. Dean, when you look at this package, what is the one thing about this that bothers you most?
Webster: I think it’s basically that the government is presuming to know that these particular businesses deserve special treatment, and that there is some kind of benefit that can come from that that warrants forcing the rest of us to have to pay for it. I think there is just a degree of presumptuousness on the part of the government, and they are not recognizing the way the economy really works and thinking that they can fine-tune the economy by making these payments to certain businesses.