When it comes to recruiting industry, some local governments are giving away tax dollars without any assurances. That must stop.
The N.C. Justice Center says many cities and counties provide incentives to relocating and expanding businesses that say they will create jobs. But, those same governments don't take the precaution of getting those companies to turn their talk into contractual promises.
When the state provides incentives, it puts the deal in a contract. If the business provides the promised jobs and economic investment, and if it stays here for as long as the contract says, it gets the incentives. If not, the incentives are either not paid or, in some cases, they are taken back through what are known as "clawback" provisions, such as Winston-Salem and Forsyth County successfully used with Dell.
More local governments should put the same kind of provisions in their incentives deals, and the justice center recently suggested that the legislature write that into state law. We think this is a no-brainer. If local governments are giving away tax benefits and precious tax dollars, then local taxpayers should have assurances that they'll get something in return.
State action is necessary for several reasons: Local officials can lack the legal resources to negotiate effectively with high-powered corporate lawyers, and they also often feel under great pressure to bring jobs, even if they risk giving away too much in the process. By making this part of state law, the risk of providing incentives without assurances would be taken off the negotiating table.
The justice center report also advocated a return to a basic policy from two decades ago, when the state began providing incentives. Incentives should only be provided to companies bringing good, well-paying jobs here. The state has gotten away from this principle and, the center found, state and local incentives are now being used to recruit jobs that fail to pay a good wage, one that can support a family.
Incentives can help improve the state's job picture, but they must only be used wisely and with adequate assurances that they will produce the promised jobs.
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