No one should miss Cooper’s misuse of ‘giveaway’

Gov. Roy Cooper will move out of North Carolina’s Executive Mansion in less than eight months.

Supporters might be sad to see the state’s most popular Democrat depart state government. Critics might celebrate, depending on the outcome of November’s election.

For those who crave honest policy debates, Cooper’s exit offers at least one reason for hope. Perhaps we will no longer hear our state’s governor regularly misuse the word “giveaway.”

Unveiling his final state budget proposal on April 24, Cooper committed what has become a regular verbal error. He lamented the Republican-led General Assembly’s “tax giveaways for corporations and the wealthy.”

Giveaways are unpopular. They make little sense from a public policy perspective.

Here’s the problem. When Cooper talks about giveaways, he means tax rate cuts that apply equally to everyone. Yet universal rate cuts cannot amount to giveaways — unless you consider money generated by higher tax rates to belong to the government instead of the people who are taxed.

Cooper has misused the term “giveaway” consistently over the years. This commentator first devoted attention to the governor’s misstatements in 2018. Looking back, concerns expressed six years ago remain valid today.

At the same time that Cooper and his ideological allies decried “giveaways,” they extolled the benefits of targeted tax incentives for favored businesses and industries.

State government gives away special tax breaks to favored corporations while making those same breaks unavailable to others. Combine “corporations” and “giveaways,” and it’s hard to judge those incentives to be anything other than “corporate giveaways.”

In 2017, Cooper’s first year as North Carolina’s governor, “the state struck deals to potentially grant as much as $185 million in incentives to 54 companies,” according to the Raleigh News and Observer. In comparison, the state granted about $67 million in targeted incentives in 2016, the newspaper reported. That was the last year of Republican Pat McCrory’s administration.

Cooper’s questionable rhetoric attracted early attention from groups like North Carolina’s chapter of Americans for Prosperity. AFP launched a “Reverse Robin Hood Cooper” campaign. It highlighted the apparent contradiction between the governor’s words and his administration’s actions.

“I think he’s misusing terms,” said Donald Bryson, then AFP state director and now CEO of the John Locke Foundation. “The problem is that the governor is using when we cut the rate evenly for all corporations — when we treat Bill’s Plumbing the same as we treat Bank of America — with the same corporate tax rate, he says that’s a corporate tax giveaway. However, he’ll go off and give these special incentive deals to specific companies, usually politically connected companies.”

The newspaper article comparing incentives deals under Cooper and McCrory also asked whether special incentives — actual giveaways — tend to work. The newspaper quoted both the research director of the “left-leaning” Economic Policy Institute and a University of Texas professor who founded the Economic Development Incentive Evaluation Project. Neither expert gave incentives high marks.

Meanwhile, the story is different for broad-based tax rate cuts that Cooper mislabels as “corporate giveaways.” Those rate cuts “consistently yield results,” said Mike Walden, a North Carolina State University economist who has since retired.

“There is much literature to support the idea that lowering the state corporate tax rate does have a positive impact on state-level economic growth,” Walden told the newspaper.

Speaking of “economic growth,” it’s important to distinguish that term from “economic development.” Targeting growth is better than pursuing development.

Economic development involves government interfering with decisions best left to private actors. “It necessarily entails an effort by the state to pick winners and losers in the marketplace by using tax breaks and direct subsidies to promote specifically targeted businesses and industries,” said Roy Cordato, Locke’s former vice president for research. “This in fact is what ‘crony capitalism’ is all about.”

State government economic development policies over the years have promoted tourism, films, sports, telecommunications, biotechnology, health care, financial services, and auto manufacturing. Businesses outside the government’s target areas have enjoyed no access to special corporate giveaways.

“In reality, economic development is simply a disguised form of state central planning of the economy, and it should be abandoned,” Cordato argued.

Promoting economic growth requires much different government actions, Cordato said. “The policy approach is usually very broad, applying to everyone — tax breaks for all, regulatory breaks across the board for bigger companies and smaller companies,” he said. “Not targeted, but an equal-opportunity approach with respect to entrepreneurs and entrepreneurship.”

Cooper never embraced the growth-based philosophy underlying broad-focused tax breaks. He still calls them giveaways. Perhaps the next occupant of North Carolina’s Executive Mansion will bring a new perspective.

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