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NC Budget and Tax Center

It is becoming ever clearer that recent tax cuts have not endeared North Carolina to the entire business community. Proponents of the 2013 tax cuts argued that they would create a more competitive and business-friendly climate. Looking at recent business climate rankings, however, undermines this argument in two key ways.

First, multinational corporations already liked North Carolina just fine before the latest tax cuts. Second, the tax cuts have undermined our economic competitiveness in other important areas.

The 2014 Top Competitive States ranking by Site Selection, in which North Carolina is ranked #1, suggests that the tax cuts worked. However, North Carolina has consistently been at or near the top of the Site Selection rankings for a decade, including being #1 in some years prior to the 2013 round of tax changes. This ranking is largely based on the level of private capital investment a state secures, the number of jobs created, and a state’s tax climate – as determined by the conservative Tax Foundation. Essentially, low tax rates and high levels of capital investments – made possible in part due to generous economic incentives provided to corporations by state governments – benefits a state’s performance in this ranking. Read More

Commentary

In case you missed it earlier this week, Raleigh’s News & Observer is featuring Chris Fitzsimon’s excellent column from earlier in the week under the headline “In NC, a Republican lawmaker finds room to rethink.”

In it, Chris highlights the recent comments of conservative GOP state representative Bob Setinburg who, amazingly enough, stood up in public recently and admitted that the facts he had learned while governing in Raleigh had forced him to rethink one of his hardline, ideology-based positions — this one on business incentives. Let’s hope it’s just the start. As Chris writes:

“Steinburg used to think that but he knows better now because he has been meeting with constituents, hearing from his community leaders and local businesses and people who are looking for jobs.

Their struggles are more important to him than an economic treatise by a right-wing scholar on the shelf of a Raleigh think tank. And they ought to be.  That’s why Steinburg and his colleagues in the House and Senate are in Raleigh, to represent the people in their districts.

Think of how much better off we’d all be if Steinburg’s reasoning for rethinking his view of incentives was expanded to other issues facing the General Assembly.

Imagine if Senator Bob Rucho and his fellow lawmakers spent some time with folks who are still looking for a job and who have lost their unemployment insurance that used to help keep their lights on and gas in their car. Read More

News

As Chris Fitzsimon reported in this morning’s “Monday numbers,” analyst Allan Freyer of the N.C. Justice Center has released a new and damning report today on North Carolina’s business incentives programs. This is from the release that accompanied the report (“Picking Losers: Why the Majority of NC’s Incentives Programs End in Failure”):

“If North Carolina continues to use incentives to pick winners and losers in economic development, the state needs to do a much better job of picking winners. More than half of all firms receiving incentive awards from the state’s Job Development Investment Grant (JDIG) program since its inception in 2002 have failed to live up to their promises of job creation, investment, or wages. These failed projects have forced the Department of Commerce to cancel those grants and even occasionally take back funds already given to these underperforming firms, according to an analysis of program reports.

Given the troubling number of failed projects, now is not the time to accept recent proposals to expand JDIG and create a new “catalyst fund” for closing new incentive deals. All told, the state has cancelled 60 percent of JDIG projects after recipient firms failed to honor their promises, with even higher rates of failed projects in the rural and most economically distressed areas of state. The disparity in performance between projects in urban and rural counties is even more striking in light of the signifi cantly lower incentive investments made in those rural areas—rural counties are seeing more project failure despite having fewer and smaller investments.

To address these problems, legislators should resist adding to the state’s incentive programs and instead focus on strengthening the performance standards that hold recipient fi rms accountable for the promises they make. Without these critical accountability measures, each one of these unsuccessful projects would have continued to receive millions in public subsidies, despite failing to create promised jobs and investment. Additionally, policy makers should improve the evaluation process for prospective JDIG projects. Currently, the cost-benefit analysis every project must undergo is clearly letting too many bad projects slip through the cracks. Future incentive grants should go to firms in targeted industries that are poised for robust growth rather than those that are in decline, and grants should be designed to bring infrastructure development and job training resources to the rural counties that most need assistance. Lastly, there is no need to create a new “closing” fund because there is already a similarly designed incentive program that governors have traditionally used to help close projects—namely, the OneNC program.”

Click here to read the entire report.

Commentary
United Van Lines

Image: www.unitedvanlines.com

Politicians love to take credit for good things that happen while they are in office — whether they bear any real responsibility or not. As reported in this morning’s edition of the Weekly Briefing, North Carolina Lieutenant Governor Dan Forest, of all people, is even taking credit for the state’s falling unemployment rate and high rating in Site Selection magazine. As noted in the same space last month, however, the truth of such matters is a lot less clear cut:

“Except in times of profound crisis when extraordinary powers may occasionally be conferred, it is extremely rare that a political leader can do much more than make gradual tweaks and adjustments that will bear fruit (or not, as the case may be) somewhere down the road.

Meanwhile, the trends so busily tracked and catalogued by analysts each month – jobs, unemployment, incomes, retail sales, corporate profits and the like – are just as likely to be the byproduct of decades-long patterns (e.g. the exportation of jobs overseas and the evolution of the Internet) or recent unforeseen events (e.g. bad weather, a failed crop or a new invention) as they are of comparatively recent public policies like a new tax cut or a business incentive.”

New confirmation of this complex reality comes in the latest household moving numbers from United Van Lines. According to the just released annual study, North Carolina ranked Number 3 nationally of “top destination states.” Read More

Uncategorized

1036693826_8a11e4ac03_oThe Christian organization Answers in Genesis, known for its rigorous campaigning against “secular evolutionists” through young earth creationist propaganda, has been struggling financially over the years to raise enough funds to build its $150 million Noah’s Ark theme park. But thankfully Kentucky, one of the few states that can apparently compete with North Carolina when it comes to flawed budget and tax policy, has come to the rescue by approving $18 million in new tax breaks for the project. Meanwhile, 27% of the state’s children live in poverty.

Unless the state means to show blatant religious favoritism, which would obviously be unconstitutional (if not, perhaps, terribly surprising), we will just assume that the officials behind the subsidy are intending to bring in more tourists in order to promote economic development.

So, given that as a backdrop (and awkwardly sidestep the question of whether state-funded creationist propaganda is good for the scientific literacy of the general populace) let’s assess whether this is a fiscally responsible plan.

Initial signs are not terribly encouraging. Read More