Opinion: Daily Journal

Political fight could dim support for targeted tax giveaways

Gov. Roy Cooper announces targeted incentives for Infosys during a July 6, 2017, news conference. Photo taken from @NC_Governor Twitter account.
Gov. Roy Cooper announces targeted incentives for Infosys during a July 6, 2017, news conference. Photo taken from @NC_Governor Twitter account.

The current political spat between North Carolina’s governor and legislature has produced plenty of heated rhetoric. Plenty of accusations and counteraccusations involving misplaced priorities, hypocrisy, and at least a little mendacity.

If the people of North Carolina are lucky, the political infighting could end up striking a blow against the state’s use of targeted tax incentives.

There’s no guarantee of this positive outcome. But a recent Raleigh news conference offered a hint about how the turn against targeted incentives could take place.

First, a confession: It’s entirely possible that I’m engaging in a case of wishful thinking.

My colleagues at the John Locke Foundation have spent more than two decades fighting in North Carolina against tax breaks and other incentives that target individual companies and favored industries. We have argued that the best incentives for economic growth improve conditions for all economic actors. These include general tax rate cuts, reductions in the regulatory burden, and policies that enhance individual freedom.

The free-market arguments have encountered mixed success. In recent years, lawmakers have scrapped generous tax credits for the solar energy industry. They have converted an open-ended tax break for Hollywood filmmakers into a grant program with a set budget. They have cut funding for the Job Development Investment Grant program, a major pillar of state incentives.

At the same time, the General Assembly continues to debate new or revised incentives programs. Legislative leaders have touted a provision in the newly enacted state budget that offers special breaks for “transformative” economic development projects. These are projects that promise to bring at least 5,000 jobs and $4 billion of investment to North Carolina.

The following remarks from a June 27 committee debate in the N.C. House highlight a common legislative approach toward incentives.

“We have a top-rated business climate, a very competitive tax climate,” Rep. Susan Martin, R-Wilson, reminded colleagues. “The legal and regulatory environment has improved. We’re investing in a skilled work force, infrastructure for our growing state. Organic growth and the free market will play the largest part in us growing our economy.”

Then Martin added a caveat familiar to those who have followed the incentives debate for years. “Many of us are not enthusiastic about incentives in theory,” she said. “In practice, however, they are a current reality of competing globally and nationally.”

When even those who proclaim the benefits of free markets continue to support incentives, critics should expect a long, hard fight.

But perhaps Gov. Roy Cooper has offered some help.

The governor summoned supporters and reporters to the State Capitol Thursday. During a 25-minute ceremony, Cooper unveiled details of a $25 million incentives deal. It enticed a promise of 2,000 new jobs over the next five years from Infosys, an India-based global technology consulting firm.

Cooper stood before television cameras and welcomed the company to North Carolina. The president of Infosys addressed the assembled group. So did the president of Wake Technical Community College and the chairman of the Wake County commissioners.

As for the General Assembly, the group that approved the funding that made the $25 million tax giveaway possible, its sole spokesman was Sen. Jay Chaudhuri, D-Wake.

Not the N.C. House speaker nor the Senate leader. Nor the heads of House and Senate budget, tax, or business-oriented committees. Instead the only lawmaker who had a chance to bask in the glow of the public spotlight was Chaudhuri — a legislative newcomer, from the minority party, and a frequently caustic critic of Republican legislative leaders.

To be fair, Chaudhuri mentioned in his remarks that an Infosys executive had contacted him about three months earlier as the company was pursuing its site search. He appears to have had a more direct role in this deal than other lawmakers.

Still, it’s hard to imagine fellow legislators beaming with pride as Chaudhuri opened his remarks with, “Let me first, again, thank Gov. Cooper and his staff for his outstanding leadership in making this morning’s announcement possible.”

Thanks to Cooper, but no mention of the General Assembly’s commitment to the incentives program that made the Infosys deal possible.

Cooper’s press office was no more forthcoming than Chaudhuri with praise for legislators. The 12th and final paragraph in the official announcement of the Infosys deal listed the General Assembly as one of 10 “partners” in the project.

If lawmakers get little credit for their support of targeted incentives, it’s fair to ask how fervently they will commit themselves to those incentives in the future. Especially if, as Martin suggested, many of them approach incentives with no great degree of enthusiasm.

One should be careful not to read too much into one incentives announcement. Cooper might change course. He might invite leading legislators to help him celebrate future deals.

But that would represent a major political shift. Cooper has spent more time during his first six months in office berating legislative Republicans, rather than seeking common ground.

If heated political divisions prompt the governor to continue steering clear of his legislative antagonists, keeping the public spotlight for himself, it would not prove terribly surprising if lawmakers showed even less enthusiasm for targeted tax giveaways in the future.

That’s an outcome North Carolina taxpayers should welcome.

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



  • ProudlyUnaffiliated

    JLF is right, not one dime should ever be used for targeted incentives. If a deal is made, added infrastructure like added roads and such are fine but that is it, no cash, no tax breaks (they shouldn’t be paying corporate taxes anyway, eliminate that) and no other monkey business that Raleigh could pull to put taxpayers on the hook for business costs. Frankly, I’d like to see the General Assembly pass a law such that municipalities were barred from doing it either. Make North Carolina a wonderful place to live that lives within its means responsibility and you shoot right to the top of the heap quickly.