No Amazon HQ2 in NC

RALEIGH – The wait is over, the decision has been made; Amazon has picked a two -city option for its HQ2 in selecting New York and Northern Virginia.

For the last year or more economic developers all across the country have been scrambling to convince E-commerce giant Amazon to locate its estimated $5 billion, 50,000 job second headquarters in their state or city. The Old North State, and local developers within it, were in the thick of it, rightly presenting our state as a great location for future investment.

While those developers, politicians, and corollary interests are undoubtedly disappointed in the result, the North Carolina taxpayer can take comfort in the fact that the news means they’ll avoid the tab for a Big Government incentive package.

In North Carolina there are both statutory and discretionary incentives for businesses. Statutorily, tax credits are given to qualifying businesses for job creation, training and investment with total amounts dependent on the size of the investment. With a installation like Amazon’s, that was sure to be a hefty amount of tax credits.

The discretionary incentives come in the form of cold hard cash grants targeted at job creation, but also job retention. Programs like the Job Development Investment Grant (JDIG) pay out per job rates.

Beyond the standard programs are more recent mega incentives for big investments, with triggers lowered to $1 billion and 5,000 jobs. How much do you think taxpayers would have ended up paying to lure Amazon HQ2, at $5 billion/50,000 jobs?

There are recent examples of states baiting companies with mega incentives to give us an idea. Wisconsin “won” the new American installation for Foxconn last year, a key Apple iPhone builder bringing 13,000 jobs to the state. How much did Wisconsinites pay for those 13,000 jobs?


That works out to more than $300,000 in taxpayer incentives for each job, at around $50,000 a job. Let’s say North Carolina didn’t go that crazy, merely offered Amazon the equivalent of $100,000 a job in tax incentives. That’d be $5 billion.

Such landmark investments usually get released from all sorts of regulations as well, including environmental regulations.

Big catches like Amazon or Apple grab headlines, but overall these incentives don’t even live up to the hype politicians put on them. Some experts have pointed to evidence that tax incented companies actually report the same OR FEWER jobs after the tax credits. They advised that the corporate rate was noncompetitive to lawmakers in 2013, and fortunately lawmakers have substantially lowered the business tax.

Unfortunately, that same expert recommended ramping up big discretionary incentives, and the lawmakers have done so. The cash grants, like JDIG can give a company up to 25 years of freebies while Joe the Taxpayer foots the bill for infrastructure upgrades and the like.

Details will eventually come out about what power brokers were offering on behalf of North Carolina’s taxpayers. We’ll be surprised if it’s cheap.

So while much of the media laments that North Carolina “lost” out on the Amazon deal, we’ll take it as a bullet dodged by taxpayers of the Old North State. Instead of government largess, maybe lawmakers can return to cutting taxes for EVERYONE, big or small, so that companies want to come be where they can keep their capital.

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