Opinion: Daily Journal

You Can Do It, Governor

RALEIGH – Go ahead, Gov. Easley. You can do it.

As a longtime advocate of forcing North Carolina taxpayers to subsidize new private business ventures, you have slid down pretty far from the top of the leadership hill. But when the General Assembly enacted legislation this session to give Fayetteville’s existing Goodyear plant $40 million in direct and indirect incentives, it unwittingly discovered a ledge for you on that otherwise-slippery slope. Now, governor, you can find your footing and veto the bill. You’ve got until Saturday to make up your mind.

Need some convincing? Think about the precedent the Goodyear incentives will set. Unlike recent (and larger) high-profile incentive packages for Dell and Google, the Goodyear package can’t be spun as necessary to secure a new economic-development project. The plant has operated in Fayetteville for many years.

The argument is that, without incentives, the Goodyear plant will dramatically downsize or even close, and that saving a doomed job is economically indistinguishable from creating a new job. True enough in a microcosm, but we live in the macrocosm. There are dozens of major manufacturing and distribution facilities in North Carolina, run by companies with uncertain or even dismal long-term prospects. If Goodyear gets its taxpayer largesse, thanks to the Jones Street pull of Sen. Tony Rand and Rep. Rick Glazier, what is the logical stopping place? Why shouldn’t each of these other major employers in the state demand a special deal of their own? What happens when the state chooses to stiff one of these firms, perhaps precisely because it isn’t located in a district represented by a legislative leader? Is that likely to improve the state’s reputation?

The cost of government in North Carolina is an impediment to our economic competitiveness. Most states in our region impose lower costs on taxpayers, while delivering roughly comparable service outcomes. And it has never made sense to levy a corporate income tax on top of taxes imposed on the incomes of stockholders and employees, so I’m all in favor of reforming the business-tax code. But that would increase the attractiveness of North Carolina to all employers: big and small, urban and rural, the politically connected and the blissfully uninvolved.

Governor, if you really believe this old twaddle about North Carolina having one of the lowest business-tax burdens in the nation, please catch up with the public discourse and disabuse yourself of the notion. It’s based on a flawed study, which its authors admit was misinterpreted. North Carolina has been a laggard, not a leader, in economic growth. I know you believe that spending more tax dollars in education is the same thing as having an economic-growth plan, but even if you are right your strategy will only pay off in the long run (and I have my doubts). The short run matters, too.

Your major short-run strategy appears to have been based on striking incentive deals. But it’s time to recover some healthy skepticism. You’re a canny former prosecutor. You’ve surely heard all sorts of flashy promises and elaborate rationalizations in your time. Economic-development consultants are full of them. For the most part, they are also full of it.

The incentives game has been bad enough for North Carolina – bad for sound fiscal and economic, bad for fairness, bad for constitutional government – without opening a new door to existing state mega-businesses to try to negotiate their effective tax rates. This is a game that state government will never win. It will always lack the information to know which existing firms to “bet” on, which firms are serious about their downsizing threats and which will be around for 10 years to justify the government’s “bet.”

Forget the politics. Forget what the scam artists promise or prognosticate. Do the right thing. Keep North Carolina from slipping all the way down the corporate-subsidy slope. Veto the bill. Fayetteville, the tire industry, and the North Carolina economy will survive.

Hood is president of the John Locke Foundation.

Update: A CJO reader reminded me Wednesday morning of a fact I meant to include in this piece — there is a major Bridgestone/Firestone plant in Wilson whose executives aren’t at all happy about the prospect of the state subsidizing their competitor. Just something else to keep in mind, Guv.