North Carolina’s conservative Senate leadership are grossly exaggerating the benefits of a new bill in a clear attempt to fool the public.
Senate sponsors claim their rewrite of HB 334, the JOBS Grants and Tax Relief bill, will assist businesses most in need with grant funding and proposed tax cuts to corporations will trickle down to the average North Carolinian. Do not buy it. These claims could not be further from the truth. Here are five hard truths about the proposal:
#1 – HB 334 won’t help businesses that need it the most
The JOBS Grant program would be funded with $1 billion in American Rescue Plan Fiscal Recovery Fund dollars to help businesses with disruptions and costs incurred by COVID-19. This is roughly 20 percent of all American Rescue Plan monies coming to the state to meet a range of public health and economic challenges. While this is beneficial at face value, money will only be awarded to businesses that received “eligible” funding from previous state or federal recovery programs (e.g., PPP Loans). If bill drafters are claiming HB 334 helps businesses most in need, wouldn’t it make most sense to target those that were unable to secure prior aid monies? Why not help these businesses stabilize their operations, re-open, and re-hire?
#2 – HB 334 would reinforce previous failings in business aid
Proponents claim the JOBS Grant Program would support businesses owned by people of color and women, but the bill falls well short of delivering on that promise. Overwhelming evidence shows these businesses were disproportionately denied or unable to access support from federal and state programs. Instead, funds from recovery programs were disproportionately directed to higher-income communities with existing resources, while businesses with existing relationships with financial institutions received more assistance, most of whom were disproportionately white.
One of the few programs that targeted women- and Black, Indigenous, People of Color (BIPOC)-owned businesses specifically was North Carolina’s ReTOOLNC, but this was not explicitly mentioned in HB 334 as a program that would allow prior recipients to engage in this new funding opportunity. At the very least, shouldn’t an effort be made to include our state’s lone women- and BIPOC-owned business initiative in the bill’s language?
There has been poignant pushback from the right as it pertains to targeted programs, particularly those with an emphasis on marginalized groups. One of many reasons for this is the desire to be “fair” and equal (as opposed to true equity.) That is why it is baffling they would give additional monies to people who have already received assistance. None of this seems very fair at all.
#3 – JOBS Grants are being used to hide a bigger gift for profitable corporations and their shareholders
The JOBS Grant program is flawed, but worse yet, it is being used to distract from a sweetheart deal for corporations. HB 334 includes the complete elimination of the corporate income tax by 2028 and a change to the base subject to the franchise tax that benefits large, profitable, multi-state businesses with high value property. But North Carolina has a history of being lenient towards corporations.
To begin, our state already has one of the lowest corporate income tax rates in the United States. A recent report published by North Carolina’s Department of Revenue shows corporations only make up 2.9 percent of the state’s tax revenue, total tax liabilities for both C-Corporations and S-Corporations have trended downwards, and North Carolina’s corporate income tax rate has decreased 5 percentage points over last two decades. Corporations operating exclusively in North Carolina only account for 8.8 percent of all tax liabilities, meaning most corporate tax revenue is coming from multi-state entities. The “savings” from proposed tax cuts will equate to more money for shareholders that are largely out-of-state.
#4 – Corporate tax cuts will likely benefit rich, white, and older shareholders the most
President Trump claimed his 2017 corporate tax cuts would help people, spark investments, and translate into a $4,000 raise for the average household. Instead, we have seen an overwhelming majority of these savings going to shareholders, a slowing in private investments, and more than 55 the nation’s largest corporations paying no federal income taxes at all. This should be a lesson learned.
It is also concerning that many of the biggest corporations which do business in North Carolina saw record profits during the pandemic. If history has taught us anything “tax relief” will simply allow these entities and their shareholders, which are disproportionately older and white, to increase their wealth. The rich get richer while the average North Carolinian continues to struggle.
Source: Board of Governors of the Federal Reserve System
Source: Board of Governors of the Federal Reserve System
It is an insult to claim HB 334 is helping all North Carolinians recover and become financially secure. It is not helping businesses with the greatest need, and it is not helping the average person or household. The only ones being helped are those that are already well-off.
#5 – There is a better way to build an inclusive recovery
If elected officials truly have their constituents’ best interests in mind, they would focus on building a truly inclusive economy. For example, 85 percent of North Carolina’s new job growth stems from in-state businesses. If this is the case, all North Carolina businesses, not just those that received prior aid, should be eligible for recovery grant monies. Those that have not received any aid, like the disproportionate number of HUB-certified firms and other women- and BIPOC-owned businesses, should rightfully be prioritized. This helps all of our businesses, their employees, and their respective communities.
We could also drop the outdated rhetoric and stop offering tax cuts to multi-state corporations. Instead, we could think about implementing a statewide livable wage, health care for all, and improvements to our public education system. Corporations, the same ones legislators are trying to appease with these ludicrous tax cuts, believe overall quality-of-life is more important than corporate tax rates when making site selections. North Carolina should be doing the same instead of shortchanging its residents.
Parker Martin is a Policy Analyst with the Budget & Tax Center, a project of the NC Justice Center.