The News & Observer
March 18, 1996
Favors for business . . .
Copyright © 1996, The News & Observer
Business recruiters have found five friends on the North Carolina Supreme
Court: the five justices who bought the argument that public officials do
a good thing by handing out tax dollars as "incentives" for industries
to relocate or expand.
Their majority opinion, written by Justice Willis Whichard, gave short
shrift - really no shrift -to the view of critics, who say such giveaways
have little or no public benefit.
The state and its communities, however, would make a mistake to celebrate
this ruling with a spending frenzy in the name of economic development.
The court majority may believe that incentives, such as cash grants, land,
buildings, parking lots and on-the-job training, serve a "public purpose"
under the state constitution. But this is not the same as saying they inevitably
are a net plus to the public and should be allowed to grow unchecked.
William Maready, the Winston-Salem lawyer whose lawsuit led to the ruling,
lost his case but still raised valid questions about how much the public
gains when incentives are bait for industry. Despite Whichard's ruling,
there is little evidence that incentives create jobs that wouldn't exist
otherwise or that growth in the tax base is greater than the costs of new
schools and other services for employees.
In fact, spending tax dollars on business incentives may leave less
money for broader investments that truly serve all citizens.
What's also troubling about the incentives game is how it encourages
communities to bid against each other, while industries wring out all the
advantage they can. Justice Robert Orr, dissenting in the Maready case,
was justifiably bothered by "the economic loss and devastation to smaller
North Carolina communities that lose valued industry to larger, wealthier
Though the court case addressed only incentives offered by local governments,
the same zero-sum situations occur when states compete. In fact, recruiters
in North Carolina always mention the need to keep up with other states as
the main reason for spending millions in tax dollars on private industry.
Now some companies no doubt will take the recent ruling as an invitation
to press for even costlier packages.
The state and its localities need to resist. Governor Hunt was right
last year to agree to restraints on the incentive money in his "competitiveness
fund" to make sure companies live up to their job-creation promises.
Local governments would be wise to adopt similar guidelines for their own
Meanwhile, for its own sake, the state ought to press for a national
solution to this problem. Until then, this ruling is not likely to silence
Maready and other skeptics - nor should it.
Used with permission.
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Copyright © 1996, The News & Observer.
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