Government’s bad track record when placing bets with your tax dollars
This week, President Biden chose to kick off his Invest in America tour in Durham, North Carolina, stopping at Wolfspeed, a semiconductor facility that will focus on the electric vehicle market. Wolfspeed will receive around $1 billion in state and local grants, as well as direct appropriation funds from the General Assembly. It also announced it will apply for CHIPS Act subsidies, which will come from your tax dollars via a complicated web of rules.
Interestingly, despite the claims that American semiconductor facilities are of national security importance, the government has saddled these businesses with a host of requirements that have nothing to do with shoring up our semiconductor market. Instead the Biden administration has wedged issues like Diversity, Equity, Inclusion, and Accessibility (DEIA), environmental justice, childcare, housing, and union interests into the subsidy process, dangling the taxpayer-funded incentives like a carrot to get companies to comply with their social program.
Wolfspeed isn’t the only company the government has waved your money in front of to lure it into compliance, and it’s hardly the only example of how state, local, and federal politicians are gambling with your money, betting on select companies that may or may not be successful in boosting our economy. So, why are we forced to pay for their bets, whether they win or fold?
Betting with your tax dollars
During this moment of global financial uncertainty, the stakes for politicians to be wise stewards of taxpayers’ money is even higher. Every dollar the government taxes us is a de facto declaration that they believe they can spend that dollar better than we can. Yet, President Biden and Gov. Cooper continue to raise the stakes by giving taxpayer subsidies to select companies, a practice that translates into a tax burden the rest of the population must shoulder.
And to add a bit of insult to the unsavory business of politicians placing bets with your money, two of the counties with the highest taxpayer handouts are also among the top five wealthiest counties in the state: Wake and Mecklenburg, homes of Raleigh and Charlotte respectively. Both raked in well over $100 million in state grants compared to more rural and lower-income counties like Pasquotank and Bladen, which received less than $2 million each.
But even stepping back from the county comparisons, it’s worth looking at this matter from a basic fairness standpoint. There are several questions that deserve an answer. Is it fair for our elected officials to politically favor certain companies, like Apple, Wolfspeed, Credit Suisse, or VinFast, effectively gambling on them at our expense? Is it fair that other companies, including homegrown startups are excluded from such opportunities? And is it fair for this same government to forcibly kick families, businesses, and churches off their land to create infrastructure for these businesses they have made a gamble on?
Eminent domain for government-favored businesses
For dozens of North Carolina residents, these hypothetical questions became an awful reality when they learned the state government was exercising eminent domain against them on behalf of the behind-schedule VinFast facility. VinFast is a young Vietnamese electric vehicle startup founded in 2017. Last year, Gov. Cooper and local leaders announced a $1.25 billion tax incentives package if VinFast built and operated a manufacturing facility in Chatham County. Some of the families affected by the land grab have been in their homes for up to 70 years. Jack Sanderford, a homeowner who has been forced off his land, so VinFast can have a road to their eventual facility, said the government is “taking everything we got.”
Let’s take another recent example of politicians gambling with taxpayer money. With the failure of Silicon Valley Bank, financial institutions, particularly those that had a history of risky behavior, have been under greater scrutiny. Enter Credit Suisse, the company Gov. Cooper touted a $40 million incentives package for in 2017.
Even before North Carolina lured Credit Suisse in 2017, the bank had raised eyebrows over its risky behavior leading up to the financial crisis in 2008. And then, “In the fall [of 2022] Credit Suisse announced more than 27,000 layoffs as they attempted to restructure,” reported Theresa Opeka of Carolina Journal. In addition, the bank found itself in legal disputes in several countries, including settling a $495 million mortgage-backed securities dispute and a $243 million settlement in a French tax fraud case. Why is investing taxpayer dollars into a company settling fraud cases for hundreds of millions of dollars and laying off thousands of workers a good bet for North Carolinians?
And do you recall our politicians promising the moon to Jeff Bezos in an attempt to lock in Amazon’s HQ2? Bezos didn’t bite and it now appears we dodged a bullet, as Amazon is poised for another wave of thousands of layoffs. According to the Wall Street Journal, Amazon “cut back on projects and pulled investment in certain areas. Earlier this month it confirmed it was pausing construction on a massive corporate real estate complex near Washington D.C., that it calls its second headquarters, or HQ2.”
Even if our politicians were good at forecasting (they’re not) which companies were safe bets and which weren’t, it is far beyond their scope to make that call on behalf of taxpayers. North Carolina is an incredible state to do business in and companies recognize that. Our elected officials shouldn’t be in the business of deciding which ones are going to hit the tax incentive lottery and which are going to be edged out of the running. Let’s keep our state business friendly by being friendly to all businesses, not only the ones politicians want to attend ribbon cutting ceremonies for.