Most Corporate Welfare in NC Goes to the Wealthiest Counties | Eastern North Carolina Now | Economic development incentives divert taxpayer money to politically favored companies at the expense of the rest of the state

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    Publisher's Note: This post appears here courtesy of the John Locke Foundation. The author of this post is Paige Terryberry.

  • Economic development incentives divert taxpayer money to politically favored companies at the expense of the rest of the state
  • These programs themselves do not create jobs and are a minor factor in the companies' decision to move or expand in the state
  • Even so, politicians send significantly more funding to the wealthiest counties with the lowest unemployment: the five counties with the lowest unemployment rates received twice as much in incentives as the 95 remaining counties combined

    Overview

    Economic development programs divert scarce taxpayer resources away from productive uses to politically favored companies. "Economic development" can be better described as special privileges to localities or favored businesses at the expense of the rest of the state.

    As my colleague Jon Sanders wrote, "The insurmountable fallacy of 'economic development' policy is that it requires belief that politicians are better managers of people's and local businesses' resources than the people and businesses themselves."

    Contrary to what one might hear at a ribbon-cutting ceremony, politicians do not create jobs.

    North Carolina has a fertile business climate. And once our corporate income tax rate reaches zero, as it is scheduled to do in 2029, we will be the state with the fifth-best business climate according to the Tax Foundation's Business Climate Index.

    Corporate giveaways labeled "economic development" waste scarce taxpayer resources. Even so, North Carolina's state leaders continue to ogle companies and promise taxpayer money.

    In 2021 alone, Gov. Roy Cooper pledged $1.3 billion to corporations. The cost to taxpayers per job creditable to the state will be as much as $586,432 per job by my colleague's calculations, hardly a responsible use of funds.

    In 2022, the appetite in Raleigh for such giveaways appears to be even bigger.

    Earlier this year, state and local governments pledged $1.25 billion over 32 years to just one company, Vietnamese electric carmaker VinFast. Leaders at the General Assembly lauded this move, but the incentives package is a wasteful and disrespectful use of taxpayer money. This announcement came on the heels of other major giveaways to Toyota and Boom Supersonic.

    Politicians are not in the marketing business. Politicians do not create jobs.

    Instead, political leaders should know their state's comparative advantage and pursue real economic growth policies such as low taxes and deregulation that allow businesses to flourish in the first place.

    Methodology

    If economic development spending is believed to create jobs, however, it would make sense for political leaders to send funding to areas of high need.

    There is a wide disparity across North Carolina in terms of unemployment rates. Average unemployment rates over the last 18 months ranged from a low of 3.2% in Orange County to 9.0% in Scotland County.

    It is worth taking a look at where the economic development incentives are going. For example, are they going to areas with low unemployment?

    I examined each economic development incentive from the state's two major incentive programs, the Job Development Investment Grant (JDIG) and One North Carolina (OneNC) grant programs, from 2021 and the first half of 2022 and categorized each grant according to the county of the receiving company's location. Next, I totaled the grants to see how many grants, and how much total money, was promised to each county over the 18-month period.

    I then mapped the state according to the average unemployment rate of each county for the 18-month period. I overlayed the corporate giveaways in bubbles according to their size over the map.

    Analysis

    Wake County, with the fifth-lowest unemployment rate, received the most funding by far at $899 million. The counties with the next highest funding, Randolph and Chatham, received $316 million each. Chatham County had the second-lowest unemployment rate in the state over the period at 3.3%, just behind Orange County at 3.2%.

    The ten counties with the highest unemployment rates received just $5.6 million's worth of incentive deals combined, while the ten counties with the lowest unemployment rates received $1.2 billion, or 214 times more. And the five counties with the lowest unemployment rates received twice as much in incentives as the 95 remaining counties combined.

    All told, wealthier counties with low unemployment received the majority of these corporate giveaways.

    Out of the state's 100 counties, 64 received no grant in the study period. Fourteen counties received one grant, while 22 counties received more than one grant. Wake County received seven grants over the 18-month period.

    We know these grants prevent more jobs than they create and should be eliminated altogether. But if Gov. Roy Cooper still believes they work, why is he sending significantly more money to counties like Wake?

    Implications

    Economic development incentives are harmful to North Carolina.

    Recent budget adjustments appear to be accelerating this misuse of taxpayer funds. The budget would add $876 million to the Economic Development Project Reserve, with a carveout specifically earmarked for a "transformative" electric vehicle project in Chatham County, likely referring to VinFast. The budget would also allocate $12 million to the Department of Commerce to administer the economic development funds.

    Diverting limited taxpayer resources to "create jobs" in North Carolina's wealthiest and least-need counties is certainly reckless. This central planning scheme is bad for North Carolina and it discredits the pro-growth policies that have allowed the state to flourish.

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