Incentives, phantom jobs, and more in North Carolina

[Deadbolt]

Interesting article from WRAL:

By Tyler Dukes

Raleigh, N.C. — At groundbreaking ceremonies, ribbon cuttings and company-wide announcements, governors in North Carolina have for decades appeared alongside corporate executives to herald the coming of new jobs.

They're aided by millions in taxpayer dollars that North Carolina, much like other states, uses to lure and retain businesses.

As the state dug out from the depths of the recession, the projects were seen as bright spots in the slowly recovering economy.

But years after these jobs were announced by executives and state leaders, most failed to fully materialize, a WRAL News analysis found. More than 100 companies named in job announcements since 2009 have since reported no new jobs. Some have laid off workers or closed up shop altogether...

Read more at http://www.wral.com/job-incentives-often-fail/14052627/#h5sHksqJdMgrQKDQ.99

 

[WakeandBake]

I dont hear any trickling

Maybe they were all women's studies majors and so they couldnt fill the jobs

 

[Deadbolt]

I dont hear any trickling

Maybe they were all women's studies majors and so they couldnt fill the jobs

You don't hear the trickle. You feel the trickle.

 

[PhDeac]

You don't hear the trickle. You feel the trickle.

 

[Deacon923]

Overall I think that article paints a fairly positive picture of the state level incentives programs. WRAL would have loved to find some instances where the state actually paid for jobs that didn't materialize, but they didn't find that. They just found situations where the jobs weren't created and so the state didn't pay out. I am 100% anti-incentive but they are a necessary evil right now, and that article seems to indicate the NC program is fairly well run. Begs the question of why McCrory and company want to overhaul it, but anyway...

On the other hand, that article says nothing about the various incentives that counties and cities also shell out to get companies to relocate. Sometimes you have situations where the "incentive" is not cash but rather the city/county having to give the company land or more often, build a big road and intersections and run utilities to the site, which the city/county then has to maintain in perpetuity. I don't have a sense of how cost-effective those kinds of spending are. Anecdotally, I know of some situations where the cities/counties paid out and the company closed up shop in a short time, they may pay back the cash incentives (sometimes not) but the county is still out of pocket for the infrastructure and now they have to maintain it forever.

 

[Deadbolt]

Overall I think that article paints a fairly positive picture of the state level incentives programs. WRAL would have loved to find some instances where the state actually paid for jobs that didn't materialize, but they didn't find that. They just found situations where the jobs weren't created and so the state didn't pay out. I am 100% anti-incentive but they are a necessary evil right now, and that article seems to indicate the NC program is fairly well run. Begs the question of why McCrory and company want to overhaul it, but anyway...

On the other hand, that article says nothing about the various incentives that counties and cities also shell out to get companies to relocate. Sometimes you have situations where the "incentive" is not cash but rather the city/county having to give the company land or more often, build a big road and intersections and run utilities to the site, which the city/county then has to maintain in perpetuity. I don't have a sense of how cost-effective those kinds of spending are. Anecdotally, I know of some situations where the cities/counties paid out and the company closed up shop in a short time, they may pay back the cash incentives (sometimes not) but the county is still out of pocket for the infrastructure and now they have to maintain it forever.

My question while reading was where does the money that doesn't get spent go? We're talking millions of dollars earmarked for incentives that doesn't get spent...so why are we in a constant budget shortfall? Is it just an accounting issue?

 

[PhDeac]

I thought it was a neutral picture of state level programs. The state isn't paying for jobs because incentives aren't leading to job creation. It's good that the state isn't just throwing money out there, but it doesn't look good for the basic idea that incentives are key to job creation. It's hit or miss.

 

[Biff Tannen]

My question while reading was where does the money that doesn't get spent go? We're talking millions of dollars earmarked for incentives that doesn't get spent...so why are we in a constant budget shortfall? Is it just an accounting issue?

A lot of it is tax incentive, so the company just doesn't realize the tax savings that were to occur.

 

[Biff Tannen]

Overall I think that article paints a fairly positive picture of the state level incentives programs. WRAL would have loved to find some instances where the state actually paid for jobs that didn't materialize, but they didn't find that. They just found situations where the jobs weren't created and so the state didn't pay out. I am 100% anti-incentive but they are a necessary evil right now, and that article seems to indicate the NC program is fairly well run. Begs the question of why McCrory and company want to overhaul it, but anyway...

On the other hand, that article says nothing about the various incentives that counties and cities also shell out to get companies to relocate. Sometimes you have situations where the "incentive" is not cash but rather the city/county having to give the company land or more often, build a big road and intersections and run utilities to the site, which the city/county then has to maintain in perpetuity. I don't have a sense of how cost-effective those kinds of spending are. Anecdotally, I know of some situations where the cities/counties paid out and the company closed up shop in a short time, they may pay back the cash incentives (sometimes not) but the county is still out of pocket for the infrastructure and now they have to maintain it forever.

Yeah, and when I hear a member of the Charlotte City Council sit and rail against incentives for businesses and how the market should pick winners and losers when thousands of jobs relocated in York and Lancaster counties from Charlotte I wonder if this guy is living in the real world. He'd rather be ideologically pure than compete in the actual world. Not smart.

 

[WakeandBake]

Is there really a net gain for the state anyway though? I don't know, Im asking. Citizens get some jobs but lose revenue, the state cuts back on services, etc.

 

[myDeaconmyhand]

Is there really a net gain for the state anyway though? I don't know, Im asking. Citizens get some jobs but lose revenue, the state cuts back on services, etc.

I would like to see a comparison between the income tax revenue gained (per job created) vs the corporate tax revenue lost (per job created).

 

[WakeandBake]

I would like to see a comparison between the income tax revenue gained (per job created) vs the corporate tax revenue lost (per job created).

then there are the indirect costs of reduction in services.

 

[Deacon923]

If you read the article, it states:

That reduces the projected cost per job from about $8,000 to an actual cost of $2,500 per job.


Read more at http://www.wral.com/job-incentives-often-fail/14052627/#eiLPkMdkyR6BTKgi.99

It is difficult to estimate the real payback the state government gets by spending $2500 per job. It obviously depends on how highly paid the job is and thus how much in income and sales taxes the new employee pays back to the state. It also depends on the circumstances of the individual employees - were they unemployed (and drawing state benefits) before the job? If so, double benefit to the state. Were they employed and just changed jobs? If so, when they left their old job were they replaced? Difficult analysis.

My guess is that at $2500/job, the state is probably coming out ahead most of the time. That does not address the issues of local incentives. Remember, counties/munis don't collect income tax, so they are relying on sales tax and property taxes for their payback. There have been situations in other states where big box stores get incentives and infrastructure build by desperate cities, then turn around and sue the city to get the tax value of their big box reduced.

Now my statement above that the state is coming out ahead comes with a gigantic caveat, which is that if the job would have been created anyway by spending $0, then that $2500 is obviously wasted money. The fact is that in almost all cases, that job is either being moved from another state (so that state is losing revenue) or would be created somewhere no matter what. Businesses do not decide to expand because of incentives, they decide to expand for business reasons and then go looking for the best incentive deal.

So on a national basis, the US taxpayer is being completely ripped off by the practice of corporate welfare to "buy jobs". Allowing states to give away their taxpayers money to bribe profitable businesses in this manner is unconscionable, which is why I'm 100% against incentives in principle. Unfortunately, until Congress passes a law banning this kind of practice (I won't hold my breath) it's a dirty little game North Carolina is forced to play.

 

[RJKarl]

Interesting article from WRAL:

By Tyler Dukes

Raleigh, N.C. — At groundbreaking ceremonies, ribbon cuttings and company-wide announcements, governors in North Carolina have for decades appeared alongside corporate executives to herald the coming of new jobs.

They're aided by millions in taxpayer dollars that North Carolina, much like other states, uses to lure and retain businesses.

As the state dug out from the depths of the recession, the projects were seen as bright spots in the slowly recovering economy.

But years after these jobs were announced by executives and state leaders, most failed to fully materialize, a WRAL News analysis found. More than 100 companies named in job announcements since 2009 have since reported no new jobs. Some have laid off workers or closed up shop altogether...

Read more at http://www.wral.com/job-incentives-often-fail/14052627/#h5sHksqJdMgrQKDQ.99

This is not surprising at all. Some companies grow. Some don't. In a five year, it is inevitable that some businesses will fail and some will succeed.