The cronyism’s in the details

Here are excerpts from the Fiscal Note on Senate Bill 820 to greatly expand the Jobs Development Investment Grant (JDIG) program’s cap. Why would they do that? To help the N.C. Department of Commerce recruit “big boys with deep pockets who are out there looking” to relocate corporate headquarters, as Senate Finance Committee Chairman Jerry Tillman, R-Randolph, said in Carolina Journal.

A JDIG agreement may be up to 12 years and is a binding obligation of the State …. G.S. 143B-437.56(f) requires that each employee’s withholdingsused to calculate a total JDIG award be capped at $6,500. This requirement affects companies with employees earning more than $175,000 per year ($160,000 for projects in Tier 1 counties). For example, a company with an employee earning $200,000 per year could expect to report income tax withholdings of $10,165. Though 75% of $10,165 is $7,623, under current law, only $6,500 could be used to add to the company’s award. Under the proposed bill, the withholdings cap would increase to $16,000 per employee. The Department of Commerce could then use withholdings of employees earning up to approximately $410,000 per year to calculate companies’ JDIG awards.

We are supposed to believe that a company that would otherwise think it makes business sense to relocate or expand in North Carolina simply can’t if it “only” gets grants reimbursing it for its income-tax withholding for executive salaries up to $175,000. If the salaries are higher, the difference between the actual salaries and $175,000 isn’t reimbursed, we’re supposed to believe it’s “no sale” and therefore disastrous to the state’s economy.

We’re also supposed to believe that the few companies that this would actually affect are critical to the state’s economic growth, as opposed to further enhancing the state’s business climate by keeping regulatory and corporate tax burdens light for all employers.

And no doubt we’ll also be expected to believe the righteousness and sincerity of media and Democrats’ fulminations against corporate and personal income tax cuts even though they don’t question these sweetheart deals.

Jon Sanders / Research Editor and Senior Fellow, 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...