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Economic Incentives Move Toward Final Vote In NC House

NC_Capitol.jpg
Jim Bowen
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A bill containing tax breaks to lure businesses to North Carolina passed its first vote in the state House of Representatives, although it divided both parties. The bill expands several economic incentives, but sponsors emphasized one goal in particular: to lure a carmaker to the state.

When a business is considering moving or expanding, North Carolina has a fund to encourage it to do it here. But deals over the past two years have depleted that fund, and Governor Pat McCrory has said he needs more.

The bill would completely replenish the fund, adding over $20 million for this year alone. Representative Jeff Collins, a Nash County Republican and bill sponsor, told lawmakers that infusion is for a specific deal.

“We’re not talking about a philosophical situation folks,” said Collins. “This bill is being propounded right now and it’s time sensitive because we do finally have three auto manufacturers looking at locating in North Carolina.”

Surrounding states Tennessee, South Carolina, and Georgia have car manufacturers, but they’ve been a white whale for North Carolina. Collins called the manufacturing jobs and investment from an automaker a “game changer.”

He suggested, in response to this question from Rep. Millis, that the entire $20 million could be used to get one.

Millis asked, “Are we just voting on your game changer? Or are we voting on raising the threshold of something we’ve been doing for decades in this state?”

“I would say we are making that game changer possible,” Collins replied. “And if there’s any money left, the answer to the rest of your question will be yes.”

Other provisions of the bill were designed with car manufacturers in mind, Collins says.

It makes $20 million available to subsidize infrastructure when businesses develop new sites and cuts the share of corporate taxes some large manufacturing facilities pay for land and personnel.

But debate hinged on the economic development fund.

“Statisticians teach us that correlation does not imply causation,” said Rep. Paul Stam, the Speaker Pro Tem and one of several Republicans who broke with their party to oppose the bill.

Stam pointed to studies, by liberal, conservative, and academic organizations that economic incentives don’t work.

“There’s not net income to the region by doing this, and it’s very expensive,” said Stam.

Others argued the fund doesn’t do enough to help rural areas—the state’s most economically distressed—despite several provisions designed to encourage it.

Representative Charles Jeter, another bill sponsor, said he understood the objections and agreed, philosophically. But Jeter says North Carolina needs incentives, if it wants to compete with other states that offer them.

“It would be nice if we lived in the world we wanted to live in,” said Jeter. “We’ve got to understand how important these things are.”

Most in the chamber agreed. The bill passed 87-32 and requires one more vote, scheduled Thursday, before moving to the Senate.

Tax break for American Airlines

The bill also extends a cap on fuel taxes airlines pay in North Carolina. A law that requires airlines to pay no more than $2.5 million in fuel taxes each year will expire at the end of 2015. American Airlines has lobbied lawmakers for the extension, and Representative Bob Steinburg hinted the airline suggested it could leave Charlotte.

“There are some issues of urgency as it relates to the transportation issues, airline issues in Charlotte,” said Steinburg. “I am not going to try and put words in the airlines mouths  … but I do know that losing that hub would be critical.”

The union Unite Here, among others, has opposed the fuel tax cap. The union argues it costs taxpayers $10 million a year, while American earned $3 billion last year.

The bill extends the cap through 2020.

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