A Conversation with
Representative Daniel T. Blue, Jr.
House of Representatives Raleigh, North Carolina
Rep. Blue has represented Raleigh-area Wake County in the North
Carolina House since 1980. From 1991 until Republicans gained control of
the House in the election of 1993, Blue served as Speaker of the House.
His current committee assignments include the committee on Business and
Labor, among others. Blue is managing partner of the Raleigh law firm of
Thigpen, Blue, Stephens, and Fellers.
Incentives vs. Investments
The concept of doling out money to industry by way of tremendous tax breaks,
tax incentives, or tax offsets, not to mention just handing out cash is
foreign to my idea of what the government's role ought to be. The whole
reason for incentives is to lure specific industries. In my mind, this is
a misuse of funds. Whatever the government provides must be broadly available
to all.
Let me give you an example of where I set my limits. When I was Speaker,
the General Assembly wrestled with what kinds of incentives might be appropriate
to offer Mercedes in response to what
Alabama and South Carolina and some of the other southern states were offering.
The way that we looked at it then probably captures my philosophy about
incentives as well as anything. I was perfectly willing, and I think the
House in general was perfectly willing, to strengthen existing institutions
in the state, such as our long-standing use of community colleges for industry-specific
training.
Our notion was to locate a multi-million dollar training facility adjacent
to the proposed $800 million manufacturing plant that would be a "center
of excellence" in high-tech manufacturing processes. The facility was
to have been owned by the state, since the taxpayers were paying for it,
and available to train Mercedes workers as well as others involved in high-tech
production. It would have been an annex, if you will, of the local community
college with ties to the engineering schools at surrounding universities,
all connected into the state's information superhighway via fiberoptic trunk.
I don't view this as specifically preferential; although no doubt Mercedes
stood to benefit because of its proximity to the facility. But we were seeking
to set up similar centers of excellence throughout the community college
system in a variety of different fields. We had already created one relating
to furniture. We created one relating to textiles. So it was in the context
of these ongoing educational efforts. The Mercedes proposal fit in perfectly
with our notion of an appropriate investment.
Moreover, together with the local community, we were willing to help improve
roads, put in rail lines, help lay the foundations for a cutting-edge information
infrastructure -- the fiberoptic trunk lines -- that would make their facility
state of the art. Here I'm talking about funding ongoing state activity
to make the state competitive both in its educational infrastructure as
well as its physical infrastructure. I thought the information superhighway
part of it was the most ingenious because you're providing a big firm like
a Mercedes with something of tremendous benefit, but the existence of such
network capabilities could be a boon to all businesses, small, medium or
large.
Walk-around Money
Right here in my district, I've seen how the misuse of incentives for specific
firms can lead to harm. I'm from one of the rather more prosperous counties
and we've had instances with the governor's competitive fund of giving incentives
to businesses to relocate from one county to the other. A couple of industries
took money from the state fund and then took their jobs out of my county
when they relocated to an adjoining county. We raised these issues with
the Commerce Department and, supposedly, they have taken
steps to prevent that from happening again.
Frankly, I'd like to see the elimination of these cash giveaways period.
That's been my position from the moment the Competitive Fund was created.
Harold Brubaker [current House Speaker and Republican Representative] likes
to call it the Governor's Walk-around money, but that's a phrase we [House
Democrats] came up with long before he was using it.
Community Building
I'm told that we have to do something to stay competitive. But the fact
that incentives are common practice in other states doesn't mean anything
except that other states like Alabama and South Carolina feel they must
gamble. Anytime you get into a specific incentive war, for whatever size
project, the have-nots will keep bidding up the price if they've already
decided that this is the game they have to play.
When you rely on incentives targeted to specific firms, you don't
build the kind of loyalty to the community that makes a firm want to
stay put and invest in the people that are part of your company. The firms
attention gets focused on the cash, the bottom line. But also, the government
ends up diverting dollars that ought to be used to improve the skills of
your people and make them more trainable and cross-trainable in a lot of
given areas. Those dollars aren't available to educate your workforce or
to build the kind of infrastructure that may help other industries and businesses
emerge on their own.
Small businesses, by the way, provide 80 or so percent of the jobs. Where
are the incentives to boost these kinds of businesses?
I'm not opposed to a broadly-based tax policy that's not specifically geared
toward any one or any very small number of identifiable private firms. For
example, we give tax breaks to families when they buy a home, every family,
not just the Jones's or the Smith's. I happen to be very supportive of that.
Then there's Chapter 105 of our tax code, riddled with property tax exemptions
for various industries, whether the pig industry or poultry or tobacco or
lumber. Now, I've worked to overturn these for a very long time, but they're
tough to attack precisely because they're industry-wide; they aren't targeting
a specific producer or a small number of producers. I don't like them, but
I don't consider them direct gifts offered to one particular business operation.
How far down the road?
But such policies still makes me wary of going down the road to greater
acceptance of the necessity of specific incentives. Once you open the door,
there's always going to be pressure to open it a little further, and a little
further, and a little further. Once you cross over the line, the purity
of your motives dissipates.
We were the state that was basically adding more manufacturing facilities
than any other in the early 1990s. Ohio may be leading the country now but
we've been doing it without giveaways. I know you always have to change
your method because whatever you're doing that's worked in the past is going
to be copied by everybody. You've got to figure out how to stay ahead of
the game.
By the same token, if you are adding jobs and adding new facilities quicker
than almost anybody else, you know there have to be some other reasons for
these companies to come rather than what you are willing to give them upfront.
My suggestion is to keep your sights focused on the quality of the labor
force, and particularly, strong support for the kind of broadly-available
information infrastructure that will help prepare our people for whatever
the future brings.
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