RALEIGH — The North Carolina General Assembly will reportedly come back to Raleigh next week. No, lawmakers aren’t going to draw their districts yet again. Perhaps that will occur in January. This time around, they are going to discuss economic development issues.
More to the point, they’ll be asked to approve specialized incentive packages for a possible Boeing plant in Kinston, an R.J. Reynolds expansion in Winston-Salem, and perhaps other industrial prospects.
I’ve already written a great deal about why this approach to economic development is flawed and likely to cost more jobs than it creates. But there’s another problem worth considering: that holding a legislative session in which elected representatives agree to finance specific private businesses (whatever the legal language of the legislation says, that’s what legislators would be doing) is, or should be, illegal.
Yes, there has already been a state court ruling on incentives, in the celebrated Maready case a few years back. But this Supreme Court decision was abominable, embarrassing, and deserving of reconsideration. It hinged on the justices concluding that when a private business hires someone, the act can be considered a “public service” and a “public purpose” and thus justify a subsidy with taxpayer money.
This language is important because of two provisions of the state constitution that are supposed to bind the hand of lawmakers eager to give away your money to other private individuals or businesses. The first, found in the constitution’s Declaration of Rights, states that, “No person or set of persons is entitled to exclusive or separate emoluments or privileges from the community but in consideration of public services.” Certainly a package of subsidies or tax incentives for a specific company — Boeing, for example — would qualify as a “separate emolument or privilege.” But what defenders of this odious practice say is that job creation is a public service, and so the special treatment is constitutional.
The explanation should be filed under the heading of “delimiting the limit.” The phrase refers to a standard rule of interpretation: if a law or regulation intended to limit a practice or behavior is construed in such a way that nothing or virtually nothing is, in fact, limited, the interpretation can’t be correct. Presumably, if lawmakers or the voters of a polity decide to pass a law to keep something from happening, their intention is to affect its likelihood. Constitutional provisions can’t be mere inkblots.
The problem with construing the creation of jobs by a single private company as constituting a “public service” is that if it is true, virtually anything private individuals do for their own benefit can be considered a “public service.” When consumers buy goods and services, they help to create private-sector jobs. When homeowners hire teenagers to mow their laws, they are creating private-sector jobs. What exactly is the state government prohibited from giving a special privilege or subsidy to, under this definition?
A related legal issue is the state constitution’s language authorizing the collection of taxes. Article 5, Section 2 begins with the statement that, “The power of taxation shall be exercised in a just and equitable manner, for public purposes only. . .” Using the plain language of this constitutional protection, there is nothing just and equitable about taxing some companies or individuals more than others based on a promise of job creation. Moreover, the same objection from above applies to the idea that it is a “public purpose” to accommodate an airplane manufacturer’s business needs or help an embattled cigarette manufacturer accomplish a merger.
I’m not suggesting that North Carolinians wouldn’t benefit from the Boeing investment or the continued existence of RJR in Winston-Salem. But to suggest that any private action that has spill-overs — or positive externalities, to use the economic term-of-art — becomes a public action is to so widen the definition of “public” as to make it a meaningless modifier.
Lawmakers tempted by all the excitable rhetoric about what every other state is doing should use a little common sense here. If it looks like a special privilege and acts like an inequity and quacks like an unjust giveaway, it probably is. If our state constitution is to have any meaning, and to fulfill its central role of protecting the citizens of the state from abuse by politicians (whether well-meaning or corrupt), then we will have to demand that it be interpreted in a serious and consistent manner, without regard to whether the resulting legal decision will be popular or convenient for grasping politicians.
If the demand isn’t satisfied, we’ll at least establish once and for all that we can’t rely on the state constitution to safeguard our rights. It would be nice to know, one way or the other. Hate to harbor false hopes.
Hood is president of the John Locke Foundation and publisher of Carolina Journal.