Civitas Review Online

Graciously, Dell has decided to keep its doors open until July of this year.  You remember Dell, the company that the state gave in excess of $250 million worth of tax incentives and promises to in late 2004 to lure into the state.  With only five years gone by since Dell opened its doors here in North Carolina, I doubt that many of the politicians who pushed for such an ambitious package are proud of the results.

Our elected officials in Raleigh apparently realize that tax breaks will lure more business into the state.  What amazes me is that they do not understand that lowering the corporate tax rate will render these incentive deals unnecessary because the general business climate in the state will be more attractive.

Following up on Chad’s post, check out this new article at nccivitas.org listing North Carolina’s 10 largest corporate welfare deals. When you begin to add up the promised tax breaks and handouts, the numbers become a bit staggering. The Dell deal tops the list with a total state deal of $260 million (how’d that work out?), followed by the recycling firm Nucor at $161 million. (NOTE: most of these deals also include local government incentives, but those are not included in the totals.)

Adding up the top ten deals, the state of North Carolina has promised more than a billion dollars in targeted tax breaks and handouts to well-connected corporations over the last dozen years. Imagine what that total is for all of the state’s incentive deals.

But as I wrote previously, the cost of the incentives game goes beyond just the dollar figures of the tax breaks and handouts.

The continued use of government business incentives serves to further politicize the economy, distorting the allocation of resources and stifling adaptation and innovation. Worse still, it fosters a dangerously cozy relationship between business executives and politicians, a relationship that should alarm all advocates of liberty and economic progress.

It shouldn’t come as a surprise to anyone, although it still does somehow, that incentives aren’t really working.  After the Parton fiasco, the Dell dilemma and the horrific performance of dozens of local and state incentive giveaways we now have a group saying that even GoldenLeaf (yeah, I’m trying to keep a straight face too) has some problems.

A Rocky Mount-based foundation that uses money from cigarette companies to award economic development grants needs better oversight to ensure the grants are producing results, according to a state audit released Monday. State auditors also scolded Golden LEAF for awarding some grants behind closed doors and for limiting access to its records. “Due to the lack of data verification and systematic use of consistent monitoring functions, Golden LEAF could waste state funds by failing to timely identify funded programs that are not achieving desired results,” the audit states.

Ouch!  Why not simply stop the silly game of giving away money because we’re so ashamed of the rest of our state and start actually working on the issues (like crime, taxes and education) that would make North Carolina one of the most desirable places to do business?  The state doesn’t want the Cherokees to have gambling casinos, doesn’t want to call our lottery gambling but certainly doesn’t mind spinning the wheel of fortune when it comes to tax money and incentives.

In what has to be seen as a somewhat bizarre and highly questionable decision, the NC DOT has decided to continue with its plans to expand a Winston-Salem road that leads to the soon to be empty Dell manufacturing plant.  From today’s W-S Journal:

Even though Dell said earlier this month that it will close the plant early next year, DOT officials say they are moving ahead with the Union Cross Road plans. They say that present and future traffic needs justify the expense.

The cost to widen the road?  $53 million.

Oh and the traffic counts the DOT is basing the need for widening on, they were done at the height of Dell’s employment and use of the road in 2007.

So is this the “critical needs” that the General Assembly used to justify raising the gas tax by 2 cents per gallon on July 1?  I sure hope not.

Gambling is always more fun when you’re using other people’s money isn’t it? Well, for Sen. David Hoyle (D-Gaston) playing a game of craps with your tax dollars is perfectly acceptable.

After the failure of Dell has rightly focused attention on the use of incentives to recruit business, Hoyle equates the incentive game to gambling:

“They could have succeeded. It’s a gamble,” said Sen. David Hoyle, D-Gaston, the primary sponsor of the state incentives package targeting Dell that was approved hastily in a one-day legislative session in November 2004. “You take a chance, and you roll the dice.”

Gamble? Roll the dice?  He does realize he’s using our tax dollars as his bankroll, right?

The next time Hoyle and his all-knowing buddies in the General Assembly get an itch for gambling, I suggest they head up to Cherokee to get their rocks off.  And leave the state’s checkbook at home.

November 8th, 2004 lest we forget:

RALEIGH, N.C. — Gov. Mike Easley signed into law on Friday an incentives package designed to lure Dell Inc. to build an East Coast computer manufacturing plant in the Triad. The bill, which provides for most of the $242 million deal being offered by North Carolina to the computer giant, was given final approval by lawmakers Thursday night. Easley called the legislators back to Raleigh just two days after the election because he said the targeted company wants to start building as soon as possible. Administration officials have said the plant could generate more than 2,300 jobs – 2,000 of them permanent.

Will anyone believe them next time?  Chris Hayes hit it on the head, albeit in his own snarky way.  But the failure of the Dell deal is HUGE!  905 jobs and $315 million according to the Winston-Salem Journal.

This is what Dell said in March:

The company told top Winston-Salem leaders that the cuts at the computer  plant would affect a small percentage of its 1,400 workers, Mayor Allen Joines said Wednesday afternoon.

And this is what Secretary Keith Chrisco over at the North Carolina Department of Commerce said in July:

Asked whether the Dell (NASDAQ: DELL) recruitment was a success, Crisco replied, “It has not been yet.” But, he said, “We need three to four years to judge it in total.” Of Dell, he said, “That’s the kind of company we need to be all over (recruiting) in this state.”

This is the deal that the NC Legislature worked on at taxpayer expense to make happen.  It was supposed to have a monumental impact on the job creation front with ancillary job creation to take place over ten years or more.  Dell even had threatening comments to make about how thankful North Carolina should be to have the plant built here.  An excerpt from the Winston-Salem Journal:

The plant is considered as the largest and highest profile incentive project in Triad history, with Dell eligible for up to $315 million in local and state incentives.  Dell said in a statement that it will continue to fully comply with the terms of incentive agreements with the citizens of North Carolina.

Once again, the Department of Commerce, the Governor and the Legislature look like fools for taking this one.  Don’t pick winners and losers, stay out of the private sector, pay attention to what government should be doing.  Truth is, government doesn’t create jobs or protect them, it just stands in the way.  Maybe we should conduct a ribbon cutting to celebrate government incentive failure.  Hey, what’s up with the Global Transpark again???

Like we couldn’t see this one coming…

Per the N&O:

Dell plans to close its computer manufacturing plant in Winston-Salem by January, and lay off 905 employees.

Dell opened the assembly plant in 2005 and was offered a massive incentives package valued at $305 million if it met hiring and investment goals. The project was seen as a major economic development victory by supporters and a huge waste of taxpayer money by critics.

Really? Incentives didn’t work.  Gee, who woulda thunk it?