Tuesday, January 18, 2011

How Dell 'incentives' backfired on N.C. taxpayers

Posted By on Tue, Jan 18, 2011 at 2:10 PM

One of the central parts of the state's “jobs program” is to keep pouring money into private companies that agree to relocate to North Carolina. Corporations these days routinely milk states’ budgets, and even play states off each other, in order to get paid to come to a state where their profits would rise even without incentives, due to lower labor costs. That type of corporate welfare is so entrenched that, at this stage of the game, not much can be done quickly to change it. The problem is making sure the jobs brought by the companies pay well, and stay here.

Gov. Perdue wants to get 90 more companies involved, in exchange for tax breaks, cash incentives or a mix of both. She calls this arrangement “public/private partnerships,” although there are precious few requirements imposed on the companies in return for the millions and millions of dollars they receive. Some "partnership."

For a good look at how N.C.’s lax requirements for our “private partners” (companies taking our money) can backfire, check out this story from Progressive Pulse about the Dell Computers debacle. Recap: North Carolina paid Dell to open a plant in Winston-Salem. Nearly 1,000 people were hired to assemble computers, and then three years into the deal, Dell got a better offer from Poland; so they closed up shop in Winston, where those 1,000 people lost their jobs. North Carolina lost about $7 million on the deal — money that could have been used to hire teachers, social workers, fire fighters, or simply to ease the state’s debt burden. The Progressive Pulse story links to an extensive review of a new book by David Cay Johnston on the “alarming growth of corporate welfare among state and local governments in the U.S.” Here’s an excerpt from the review:

Thomas tells how Dell moved a factory from Ireland to Poland in 2009 and then months later closed a four-year-old factory built in large part with North Carolina tax dollars. The Irish taxpayers gave €53.5 million to Dell, while North Carolina gave as much as $242 million. But when the Poles offered €54 million more, it was enough to get Dell to move about 1,900 jobs to Lodz.

And in case you’re thinking state handovers of tax money to corporations do a lot to stimulate foreign investment, be sure to read to the bottom of the  piece. It cites documented figures that in the past two decades, America’s share of global direct investment fell by two-thirds, while in the EU, where corporate welfare schemes are few and far between, foreign direct investment increased nearly 50 percent. Oh, and that three-years-and-out move by Dell? That can’t happen in the EU, where they have clawback clauses; in other words, if jobs aren’t maintained for at least five years, the subsidies have to be repaid. Surely something like that isn’t too much to ask of our corporate overlords when they want to move to North Carolina.


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