Media: We need to follow Alabama’s lead on incentives so we don’t end up like Alabama

Economic incentives packages — special tax breaks negotiated for particular companies or industries while all others continue to pay higher rates for the apparent crime of not closing up shop but continuing to employ North Carolinians and engage in commerce in this state — are among the worst examples of government cronyism.

If cronyism is wrong (and it is), then it is wrong no matter which political party engages in it. If the rightness or wrongness depends on a mix of which political party does it and what industry receives it, well, I’m glad I’m not beset with the shifting sands of relativism to suss out the “correct” morality of the day to figure it out.

Today’s article on incentives in WRAL provides a good discussion of the history and problem with incentives; nevertheless, its leading anecdote is about North Carolina losing an incentives battle in 1993 for a Mercedes-Benz plant that went to Alabama instead:

North Carolina lost the plant and its 1,500 jobs to Alabama. It was a turning point for the state, and in the two decades since, North Carolina leaders have created an arsenal of programs they say are necessary to compete for jobs with the rest of the South.

Yes, in fact it was such a turning point that last month, when the editors of The Charlotte Observer wished to berate state leaders for cutting taxes, the hell they predicted that would result was that you, North Carolina, will

become attractive mostly to companies that want cheaper labor that’s not particularly educated. You will be able to provide that because you will be at or near the bottom of the nation in education spending. You also will scrape the bottom in health statistics and poverty numbers and overall quality of living standards. You will be West Virginia or Mississippi or Arkansas. You will be Alabama.

And the month before last, North Carolina lost an incentives bid for another automobile manufacturer. Texas’ bid of $40 million in incentives somehow bested North Carolina’s bid that was over two and a half times larger ($107 million). How could that happen? As reported by, of all people, the Charlotte Observer:

[Commerce Secretary Sharon] Decker told the Observer that Texas’ low taxes meant the state didn’t have to offer as big an incentives package as North Carolina to be competitive.

“We were competing against a state without personal or corporate income taxes,” she said. “It’s a challenging competitive situation for sure.”

The Observer-friendly Decker solution was, of course, not getting rid of corporate income taxes altogether — which would become an all-comers economic incentive package that would cut costs on industries and job creators and drive investment spending into North Carolina (but not allow politicians to take the glory). Rather, it was to spend even more on incentives packages to select industries and cronies.

Jon Sanders / Director of Regulatory Studies

Jon Sanders studies regulatory policy, a veritable kudzu of invasive government and unintended consequences. As director of regulatory studies at the John Locke Foundation, Jo...

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