Fitzsimon File

The speculation continues about a possible gubernatorial veto of legislation passed at the end of the General Assembly session that would give Goodyear up to $40 million to keep its plant in Fayetteville.

Governor Mike Easley has until midnight Saturday to decide on a veto. Easley and his Department of Commerce have been aggressive about giving companies like Dell and Google hundreds of millions of dollars, but it is clear Easley is not fond of the next logical step in the corporate welfare business, trying to bribe companies to stay in the state.

The most telling statement in the whole debacle came in an offhand comment from Senate Majority Tony Rand, who is from Fayetteville and was the sponsor of the Goodyear giveaway in the Senate. 

A Charlotte Observer account of a meeting between Rand, Rep. Rick Glazier from Fayetteville, the lobbyist for Goodyear, and Easley’s staff says that Commerce officials made it clear that incentives were designed to attract new jobs, not protect existing ones. Tax credits are the most common incentive and apparently Goodyear isn’t eligible for those anyway because of its low taxable income.

Rand told the Observer that “they were saying it didn’t fit the formula, and I said there’s never been a formula.” That pretty much sums up not just the Goodyear debate, but the state’s incentive program overall.

There have been plenty of new business incentive programs created and plenty of modifications made to existing programs, but when it comes down it Rand is right. There never has been a formula.  The Commerce Department and the General Assembly both seem to come up with new ways to give tax breaks to corporations every session.

For many years, the William S. Lee Act was the vehicle of choice. It was designed to help poor areas of the state attract jobs by providing bigger tax credits for companies that located in areas of the state that were struggling.

But a study of the Lee Act in 2003 found that the majority of jobs created under the Act went to the state’s wealthy urban areas, not the poor rural counties.  Even more troubling was another report that found that 96 percent of workers hired by companies that received breaks under the Lee Act would have been hired anyway.

The state has developed new incentive programs since then, most notably the Job Development Investment Grant Program (JDIG) that gives companies grants based the state income tax paid by its employees.

Even those programs are rarely enough, and most big projects like Dell and Google spawn all sorts of concessions in special incentive legislation and millions more in local tax breaks.

Earlier this spring a report from the N.C. Budget and Tax Center concluded that state officials are using a flawed economic model that may be vastly overselling the benefits to the state of the huge incentive deals.

The Center is also opposed to the Goodyear legislation that Easley is now considering and offers some sane advice in a report detailing the problems with giving an existing company as much as $40 million; step back and conduct an honest study of corporate incentives and in the meantime, invest public dollars in improving schools, water and sewer systems, and the transportation infrastructure.

Now there’s a formula.

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This entry was posted on Tuesday, August 28th, 2007 at 5:31 pm and is filed under Fitzsimon File. You can follow any responses to this entry through the RSS 2.0 feed.