by Jon Sanders
Research Editor and Senior Fellow, Regulatory Studies, John Locke Foundation
How should the State of North Carolina go about corporate taxation and corporate welfare? There are four possible policy combinations.
At the John Locke Foundation, we have consistently championed the Freedom & Growth combo. That approach joins low corporate taxation with low corporate welfare. It is an empirically sound way to realize the fastest economic growth and expansion. It also promotes the greatest human liberty.
Gov. Roy Cooper chooses the Central Planning & Cronyism combo. It’s an approach that combines high corporate taxes with high corporate welfare. That explains his seeming hypocrisy of doling out millions of dollars’ worth of incentives to corporations even as he vetoed the state budget for including a corporate tax cut (the outdated franchise tax, not the corporate income tax).
Just reviewing press releases from his office over the past year, you can see Cooper’s high corporate taxes/high corporate welfare combo in action:
January 8: announced $1.5 million to Design Foundry (Job Development Investment Grant, “JDIG”)
February 18: announced $1.4 million to AveXis, Inc. (JDIG)
February 20: announced $150,000 to BestCo LLC (One North Carolina grant, “OneNC”)
April 5: announced $300,000 to Pacon Manufacturing Corporation (OneNC)
April 17: announced $166,650 to Chewy (OneNC)
April 18: announced $38,000 to Superior Plastics Extrusion Company, Inc. (OneNC)
April 25: announced two dozen OneNC Small Business Program grants:
$50,000 to Adamas Nanotechnologies, Inc.
$50,000 to Altis Biosystems, Inc.
$34,986.50 to Arcato Laboratories, Inc.
$50,000 to Arrevus, Inc.
$50,000 to Energyxchain, LLC
$50,000 to Goldfinch Sensor Technologies and Analytics, LLC
$50,000 to Haw River Mushrooms, LLC
$50,000 to Ingateygen, LLC
$50,000 to Intelli-Products, Inc.
$50,000 to Isolere Bio, Inc.
$50,000 to Kepley Biosystems, Inc.
$50,000 to Praetego, Inc.
$50,000 to Primeneuro, Inc.
$50,000 to Rescindo Therapeutics, Inc.
$50,000 to Secmation, LLC
$48,958.50 to Sinnovatek, Inc.
$50,000 to Studio Hagler, LLC
$43,260 to Treadwell Corporation
$50,000 to Triangle Biotechnology, Inc.
$24,784.50 to United Protective Technologies, LLC
$50,000 to Upstream Biotechnology, Inc.
$50,000 to Vigilant Cyber Systems, Inc.
$50,000 to Voxel Innovations, Inc.
$50,000 to Zymeron Corporation
May 7: announced $1.2 million to Pella Corporation (JDIG)
May 9: announced $70,000 to Loba-Wakol, LLC (OneNC)
May 23: announced $500,000 to AmeriQual Aseptic (OneNC)
May 28: complained about corporate tax cuts
May 28: announced $150,000 to Broad River Retail, LLC (OneNC)
May 30: announced $3.3 million to Greenheck Group (JDIG)
May 30: announced $4.2 million to Parexel International Corporation (JDIG)
May 30: complained about corporate tax cuts
June 7: announced $200,000 to KriGen Pharmaceuticals, LLC (OneNC)
June 17: announced $2.2 million to JB Hamlet, LLC (JDIG)
June 19: complained about corporate tax cuts
June 20: announced $250,000 to CleanAire, LLC (OneNC)
June 21: complained about corporate tax cuts
June 24: complained about corporate tax cuts
June 25: complained about corporate tax breaks
June 27: announced $56.1 million to Lowe’s ($54.1 million JDIG; $2 million OneNC)
June 28: vetoed budget, citing corporate tax breaks as the first reason
July 9: complained about corporate tax cuts
July 10: announced $4.4 million to ABB, Inc. (JDIG)
July 25: complained about corporate tax cuts
July 26: complained about corporate tax cuts
August 5: complained about corporate tax cuts
August 6: announced $250,000 to Telephonics Corporation (OneNC)
August 13: announced $12.3 million to Xerox (JDIG)
August 19: complained about corporate tax breaks
August 28: announced $200,000 to Kitsbow (OneNC)
August 29: announced $1.2 million to Carvana (JDIG)
August 29: announced $5.0 million to Policygenius (JDIG)
September 9: announced $940,000 to PCB Piezotronics of North Carolina (JDIG)
September 12: announced $500,000 to Medline Industries, Incorporated (OneNC)
September 17: announced $3.5 million to Bharat Forge America, Inc. (JDIG)
September 23: complained about corporate tax breaks
September 30: boasted of North Carolina’s “excellent business climate with low costs and the nation’s lowest corporate income tax rate of 2.5%”
October 2: announced $100,000 to Pallet Consultants of North Carolina (OneNC)
October 4: announced $1.4 million to Ontic Engineering and Manufacturing, Inc. (JDIG)
October 24: complained about corporate tax breaks
October 24: announced $7.9 million to Microsoft Corp. (JDIG)
October 30: announced $55,000 to BrightFarms (OneNC)
November 8: complained about corporate tax cuts
November 12: announced $1.7 million to Pamlico Yachtworks (JDIG)
November 19: announced $3.4 million to Well Dot, Inc. (JDIG)
November 25: announced $500,000 to the Fresh Market (OneNC)
November 26: announced $75,000 to Polyhose Inc. (OneNC)
November 27: announced $9.6 million to Q2 Solutions ($4.3 million JDIG; $5.3 million JDIG)
December 3: announced $1.4 million to Little Leaf Farms, LLC. (JDIG)
December 4: announced $200,000 to Merck (OneNC)
December 5: announced $100,000 to Sunlight Batteries USA (OneNC)
December 10: announced $200,000 to Michael Aram, Inc. (OneNC)
December 17: announced $12.1 million to Microsoft Corp. (JDIG)
December 18: announced $1 million to Cataler North America (JDIG)
December 19: announced $4.8 million to Aircraft Solutions USA (JDIG)
In total, Cooper pledged $146 million in grants to individual corporations while vetoing a reduction to the corporate franchise tax that would have allowed businesses in North Carolina, including small Mom & Pop shops, to retain an estimated $255.2 million.
Those incentives programs have a poor track record. News analysis found that from 2009 to 2016, JDIG and OneNC awards resulted in just over half the expected jobs. About 37 percent of incentivized companies failed to create even a single job. These poor results were in keeping with established research into corporate incentives, as well as forthcoming new research.
The franchise tax is something that only 15 other states even have, and unlike the corporate income tax, it doesn’t tax companies’ earnings, it taxes their net worth. It’s basically a double tax on corporate assets because it levies a tax on business capital and equipment, things that are exempted from the income tax.
The governor’s Central Planning & Cronyism program of trying to direct resources to certain corporations while taxing all the rest doesn’t help North Carolina. A policy of Freedom & Growth is the better path.