Home » Opinion » State incentives program flawed

State incentives program flawed

Let’s see if we’ve got this straight. The state of North Carolina helps the counties with economic incentives (tax breaks) based on need, as prescribed by the William S. Lee Act. That would seem to mean that smaller counties in less urban areas with less resources to lure industry should be considered for larger incentives. So, if you’re thinking Lincoln, Catawba and Gaston counties, Lincoln would seem to be the most needy. Right? Wrong. Lincoln is a “Tier 4 County” meaning it can offer only $1,000 per job from the program compared to “Tier 3” counties Catawba and Gaston, which can offer $3,000 per job.
This inequity is an issue for Lincoln County but the bigger problem is the ineffectiveness of the incentive program for the entire state of North Carolina. This isn’t a news flash. The problem has been known for some time and was documented in a study by Ernest & Young back in 2002. That study concluded that many businesses are locating in surrounding southeastern states because the state’s incentive packages are not working.
Another analysis found that a small group of corporations are claiming the bulk of the $35 million per year program. The Department of Commerce found in a 2003 examination that five or six corporations account for almost a third of the credits claimed. An additional 15 to 20 account for another. That means a few dozen firms account for two-thirds of the benefits.
Barry Matherly, executive director of the Lincoln Economic Development Association, pointed out this flawed program during a LEDA meeting in Lincolnton last week. Even though the extra incentive packages are available, the overwhelming investments are still being made in Tier 5 counties like Mecklenburg.
Matherly said counties would be better off if the tier system was eliminated and every county was given equal incentives.
“In the end it usually boils down to one or two counties in separate states,” he said. The decision usually doesn’t come down to a Tier 1 and Tier 5 county.
If there ever was any merit to this program it was lost in the constant political tinkering of the tier system. It has been changed so many times it is hardly comprehensible as an economic tool.
It’s past time to go back to the drawing board.

You must be logged in to post a comment Login