Corporate Welfare Weekly - July 31, 2009 – Issue 9
Jul 31st, 2009
Recent Announcements…
$1,700,000 will be allocated to North Carolina A&T State University for the research and development of a plan to build a Starfleet Academy Complex. If this makes you think of Star Trek, you’re on the right track. The $1.7 million will only be used to build the academy, but to buy the land and create the plan to build on it. Rep. Earl Jones introduced House Bill 1623 on May 6, 2009. The first reading of the bill was approved on May 7th and has been referred to the House Appropriations Committee. Rep. Jones claims the center could create over 1,000 jobs for the area. The state is partnering with a local Greensboro company, Scientific and Economic Development, Inc., for the project. The company markets its vision as: “…to become the international leader in the development of Science Fiction based Educational mixed-use urban renewal and regional redevelopment projects.”
~Francis De Luca, Civitas Institute, July 24, 2009
~Staff Writer, Fox 8 News, July 29, 2009
The Civitas Institute created a great parody about this amusing story called “Star Fleet Academy in North Carolina.”
The City of Maiden has finalized the $1 billion Apple deal. They have completed all of the necessary steps in order to go forward with the project. Apple will receive $20.7 million in tax breaks from Catawba County and the Town of Maiden over the next 10 years as well as $46 million in tax breaks from the State over the next 10 years.
~John Dayberry, Hickory Daily Record, July 21, 2009
$1,300,000 earmarked for corporate incentives in the Guilford County budget.
~Gerald Witt, News & Record, July 7, 2009
North Carolina Republican House Leader Paul Stam has been fighting to keep North Carolina’s taxes from being raised during this economic recession. While he suggests a long list of spending cuts that would help to balance the State’s budget deficit, a couple of cuts related to corporate welfare are worth mentioning:
Cut $5,000,000 from the Apple incentives deal
Cut $40,000,000 from the Film Credit incentives expansion
~Posted by Chad Barefoot, Paul Stam’s Information Website, July 28, 2009
While this is a good start, we should take these suggested cuts much farther than this.
Quotes of the week…
“To boldly give away your tax dollars as no man has done before. Once again a bill is attempting to disguise ‘pork barrel’ spending as ‘job creation’ except this bill is way out there in more than the usual way.”
~Francis De Luca, Civitas Institute, July 24, 2009 article regarding HB 1623 and
“The Star Fleet Academy Complex” at NC A&T State University.
Guilford County Commissioners regarding the county budget:
“This whole thing has become so convoluted that there’s no right or wrong about it … Steve is pushing the economic incentive thing … he says he’s not really for (community group spending), it’s just politics. Are we here for politics or are we here to represent the people and what’s right and wrong?”
~ Billy Yow, Guilford County Commissioner, News & Record
“I have some strong misgivings about the $1.3 million that’s in for Steve Arnold’s incentive plan.”
~ Paul Gibson, Guilford County Commissioner, News & Record
“Although the money is in the budget, a policy has yet to be formulated. And we hope to do that before the fiscal year (begins on July 1), and we want to put together an economic development proposal for everyone adding to commercial tax value.”
~Steve Arnold, Vice Chairman of the Guilford County Board of Commissioners,
General Tidbit…
Laura Graff’s July 30, 2009 Winston-Salem Journal article on the City’s baseball stadium project explains the many problems a state or local municipality may experience when corporate incentive grants are given and things don’t go as planned. In the case of the baseball stadium, the City of Winston-Salem has already handed over $12 million to stadium developer Billy Prim. So when the city’s share of the burden increased 130% to $27.7 million, due to the economic downturn and to Billy Prim’s family problems, they couldn’t just back out of the deal or they would forfeit their initial $12 million investment. City officials took the gamble that the people involved and the economy would behave in their favor.
Discouraging Tidbit…
Charlotte City Council member John Lassiter is running to replace outgoing mayor Pat McCrory as mayor of Charlotte. While Lassiter says a priority for him is to reduce taxes, he has also committed to increasing the availability of local corporate incentives to corporations. His goal is to recruit as many corporate headquarters to the city as he can.
~News Channel 36 Staff, WCNC.com, July 15, 2009
Editorial Economic Viewpoint…
By: Shelley Gonzales
Graduate student in Economics
North Carolina State University
Are You a Free-Rider or a Forced-Rider?
Governments should only be allowed to spend taxpayer money on true public goods that are provided for the public interest. A true public good is non-excludable and non-rival. If a good is non-excludable and non-rival, every citizen would benefit equally and one could not be excluded from those benefits, even if they do not help to pay for them. An example of this is national defense. Whether you pay taxes or not, every person within the borders of the United States benefits from national defense policies. Those that don’t pay taxes and still benefit are called “free riders.”
Goods or services that businesses provide are private goods. A private good is both excludable and rivalrous. Not everyone person will benefit from the goods or services provided by a company. Charging for a good is one mechanism to exclude many from experiencing the benefits that a particular good or service has to offer. In the case of corporate welfare, government is forcing every taxpayer to pay for a good or service that they may not benefit from. In this case, a state or local government is using coercive measures to create a “forced-rider” problem. Forced-riders do not have the option not to contribute. Consider the recent Apple incentives deal. The only beneficiaries of this new data center will be the new workers hired to work at the plant and citizens and businesses in the immediate surrounding area. The rest of the state will not receive any benefits for their forced tax contribution.
It is an unjust practice to provide handouts to a few chosen corporations at the expense of the rest. Corporate welfare has not been proven to produce positive net benefits, but it does promote unfair competition in the marketplace. Governments have a long record of disrupting efficient market competition by cherry-picking a few companies they want to push to the top of the corporate ladder. And this is done at the expense of the companies left at the bottom of that corporate ladder.