by Brian Balfour
Senior Vice President of Research, John Locke Foundation
We already know that corporate welfare programs – also known as government economic incentives – are unfair. Imagine being a business owner paying your full tax bill for years only to see an international, billion-dollar corporation get a massive taxpayer handout approved by your elected representative.
Corporate welfare schemes also invite political corruption. Big corporations can deliver campaign donations in exchange for taxpayer handouts.
It also shifts our economy toward central planning, with the political class overriding the preferences of consumers by granting unfair advantages to those companies with the best lobbyists.
In addition, as this N&O article reminds us, most corporate welfare deals fail to deliver their promised jobs.
Since the state began awarding JDIGs (Job Development Investment Grants) in 2003, 164 companies have exited their agreements early. This compares to 37 companies that have completed their agreements …
Between 2003 and 2015, in all but one year, the majority of JDIGs awarded eventually ended prematurely, a News & Observer analysis of state incentive performance data found. For example, 10 of the 11 companies that entered grant agreements in 2005 never reached their minimum job and investment promises. Of the 22 awardees in 2011, 16 left their agreements early, one completed, and five remain active.
I’ve highlighted previous investigations that found a similarly poor track record for corporate handouts.
Of course, the announcements and ribbon-cutting ceremonies make headlines when a new deal is secured, but when the projects fail they do so in silence.
With North Carolina phasing out its corporate income tax, there’s no reason to continue the unfair, consistently failing practice of corporate welfare that invites political corruption.
Level the playing field and let businesses compete based on the most efficient means of satisfying consumer desires, not on who hires the best lobbyists.