Opinion: Daily Journal

Clash between economic growth, development plays out in incentives debate

It’s a safe bet that state Rep. Jonathan Jordan agrees with Republican colleagues Bill Brawley, Susan Martin, and Scott Stone much more often than he agrees with Alexandria Ocasio-Cortez, the incoming New York congresswoman and newly elevated champion of the political left.

But not on the issue of targeted tax incentives.

When the conservative Jordan quipped recently, “I’m agreeing with a democratic socialist,” he did more than generate a few chuckles on the floor of the N.C. House of Representatives. Jordan, R-Ashe, also exposed a key dividing line within today’s Republican Party.

Jordan’s comments emerged during the House’s Nov. 29 debate over Senate Bill 820. That measure increased the cap on the amount of money a company could collect for each job created in connection with a state Job Development Investment Grant. The cap had been set at $6,500 per job. S.B. 820 boosted the limit to $16,000.

The bill had sailed through the Senate in less than five minutes with a unanimous, bipartisan 43-0 vote. House critics offered more resistance.

“One of the biggest corporate welfare and crony capitalism bills I think I’ve ever seen.” That was Jordan’s opening salvo. He then launched into a critique of the measure that lasted longer than the entire Senate discussion of S.B. 820.

The increased cap represented “a 246 percent increase in the bounty or price that jobs are going for now,” Jordan said.

“We’re told that the state makes money on this deal,” he added. “If that’s the case, why don’t we put this in place for every job? The small businesses in your communities, when they create jobs, when the local electrician hires an assistant, when landscapers hire workers, restaurants hire workers — kitchen and service staff — where’s their $16,000 per job? They created jobs for our communities. But only the big guys get the money.”

Jordan continued to speak up for the “little guy.” “If you’re for this bill, then you’re against the 99 percent — the 99 percent of businesses in this state that produce employment, the small businesses who are getting nothing from this.”

Cue the reference to Ocasio-Cortez. She has attracted national attention for her criticism of New York’s decision to award targeted tax incentives for Amazon’s HQ2 project. “She tweeted: Amazon is a billion-dollar company,” Jordan reminded colleagues. “The idea that it will receive hundreds of millions of dollars in tax breaks at a time when our subway is crumbling and our communities need more investment, not less, is extremely concerning to residents here.”

Jordan agreed. He was happy to find common cause on the issue. “Left and right, they’re against this,” he said. “Taxpayers ought to be against this, too, giving away their money to corporations. How dare we? How dare we do that?”

Division over S.B. 820 didn’t break along party lines. After every Senate Democrat supported the measure, all but two House Democrats followed suit. The only Democrat who spoke during the House debate used less than two minutes. He supported raising the per-job incentive cap.

Meanwhile, several fellow Republicans challenged Jordan’s arguments. Brawley, R-Mecklenburg, contended that lawmakers already had settled the incentives debate. S.B. 820 dealt with details, not the fundamental issue of using or rejecting incentives.

“What we are changing is what is the amount per job that we can pay for a corporate headquarters or a high-skill facility, where wages are higher than about $150,000 a year,” Brawley said. “And while I’m not in danger of being recruited for a high six- or seven-figure job, I certainly think the state is helped by having those jobs come to North Carolina rather than Atlanta so that we can collect those taxes — not another state.”

Stone, R-Mecklenburg, compared the incentive change to a signing bonus he might offer a new hire at his business. “What difference does it make to the employees who are being paid a fair market value and are getting a fair deal already if we’re recruiting somebody from the outside to come and make our company better?”

Martin, R-Wilson, suggested that opposition to targeted incentives works only in theory. “Unfortunately, the incentives are required,” she said. “This is the time that we need to be competing for these opportunities. They’re not always available.”

North Carolina must pair some incentive with other positive changes lawmakers have made in state tax rates and the business climate, Martin said. “This is peanuts compared to the other pieces, but it does matter.”

Martin’s side prevailed, 39-21, among House Republicans voting on S.B. 820. But Jordan was not alone in speaking against the bill.

“For years, I heard Republicans complain about corporate welfare and how we ought to take over state government and get rid of that,” said Rep. Larry Pittman, R-Cabarrus. “Then we take control and take it over as our own. I’ve never understood that or been willing to be part of it.”

Forbes has rated us again as the best place in the country to do business,” Pittman continued. “A big part of that is how we’ve reduced taxes and regulations. What we need to do — the right way to handle things — is to keep doing that.”

Neither Jordan nor Pittman used this language, but both argued essentially for state policies promoting broad-based economic growth, as opposed to narrow, targeted economic development.

North Carolina should continue cutting corporate taxes for all businesses, not offer targeted breaks, Pittman said. “This is like reversing Robin Hood,” he said. “This is like being on Prince John’s side and robbing from the poor to give to the rich.”

Rep. Michael Speciale, R-Craven, rebutted Stone’s comparison of a targeted tax break to a private-sector signing bonus. “If you’re the employer, that’s your money,” he explained. “You can spend your money any way you like. But we’re not spending our money. We’re spending taxpayer money.”

Speciale reminded GOP colleagues of their promises to voters. “When you campaigned, you said, ‘I believe in smaller government, and I want to keep your money in your pocket, and corporate welfare is a bad idea,’” he said. “But I forget that this is the end of November. The election is over.”

While 2018 legislative elections are over, there’s no end in sight for the internal GOP debate over incentives.

Mitch Kokai is senior political analyst for the John Locke Foundation.