Commentary: N.Carolina too reliant on tax incentives

This editorial appeared in The Charlotte Observer.

Left hand, durst thou knowest what the right hand is doing?

Evidently not, because a Senate committee co-chairman who three weeks ago helped launch a laudable and overdue tax reform initiative aimed at limiting tax loopholes is pushing a measure through the Senate that expands corporate tax incentives for a few companies. It's the sort of thing that makes the state's tax code unfair to companies that don't benefit.

It also indicates once again, as if it were needed, how difficult it is to change the state's tax system in a structural way. It is widely understood that North Carolina's revenue system is outdated and outmoded. But whenever a significant rewriting of the tax code pops up, some corporate and individual interests spend a lot of time trying to shoot it down.

And, as Thursday's Senate session showed, even the state's strongest supporters of tax reform find it hard to resist offering special deals to economic development prospects who might bring a batch of new jobs to the state. Senate Finance Co-chairs Dan Clodfelter, D-Mecklenburg; David Hoyle, D-Gaston, and Clark Jenkins, D-Edgecombe, all supported, with a large majority of both Democrats and Republicans, a bill that would change the way income taxes for capital intensive corporations are computed. It passed 40-7 and will be on the calendar for a final vote this week. In effect it allows such corporations to use only their sales when computing their tax liability.

Why do such a thing? Because the state Department of Commerce evidently has a hot corporate prospect with low in-state sales on its hands and wants to offer it an appropriate incentive to land the deal. No one has publicly identified the corporation, but the legislative gossip is that it's Apple Computer. Lawmakers remember the effect that Google had when it built a large facility in Lenoir, and they're hoping for another infusion of investment, perhaps $1 billion, and new jobs. As the bill's key sponsor, Hoyle, put it, "We must be prepared and also be willing to do whatever is necessary to bring economic development and jobs to North Carolina."

To read the complete editorial, visit The Charlotte Observer.