The following article is reprinted from The Insider, Afternoon Addition
By Patrick Gannon, Monday, March 2, 2015
RALEIGH – If history is a guide, the economic incentives package that begins a trek through the General Assembly this week won't face an easy path.

The "NC Competes Act," expected to be debated first by the House, includes an expansion of a widely used incentive based on job creation, the extension of a sales tax refund on jet fuel for American Airlines and a sales tax break on electricity for large data centers, among other provisions.

Expect the bill to face scrutiny not only for what's in it, but what's not. Incentives legislation is never a sure thing in the conservative legislature, and different lawmakers have different causes they want to support with special perks. Others say they dislike carve-outs or exemptions for any industry, instead favoring lower tax rates for all.

The legislation's biggest hurdle could come from the 50-member Senate.

Even before the House begins its debate, the Senate Finance Committee scheduled meetings to examine its provisions. At the first meeting, Republican senators asked pointed questions about the effectiveness, cost and other aspects of the Job Development Investment Grant (JDIG) program, which awards companies incentives based on a percentage of tax withholdings for new jobs.

The bill would add more money to the JDIG fund and change the program's name. Gov. Pat McCrory wants more money in the program to sweeten the pot for prospective employers eying other states in addition to North Carolina.

Among the criticisms of JDIG is that its grants disproportionately go to companies that choose Wake, Mecklenburg or Durham counties, while few go to more rural areas. That is likely to pit rural legislators against their urban counterparts. Also, Sen. Bob Rucho of Mecklenburg County, a Finance Committee Chairman, made sure to point out that any money spent on the program would go against dollars available for next year's budget.

The bill also would extend for four years a sales tax refund on jet fuel to American Airlines, which is set to expire in 2016. An extension would save the company $15 million or more each year, but it also would fly -- no pun intended -- in the face of the stated goal of legislative leaders to eliminate as many tax breaks as possible in favor of a simpler, fairer tax system.

In recent years, the GOP-led General Assembly nixed such breaks, deductions and exemptions for bakeries, chiropractors, newspaper companies, oyster shell recyclers and dozens of other taxpayers and industries. Last year, lawmakers allowed generous perks for the film industry and the preservation of historic buildings to expire. If the airline tax break is allowed to continue, supporters for those other industries surely will question why that business gets special treatment.

Incentives legislation also has been known to divide the 120-member House, as it did last year. This bill won't be different. Of the 38 lawmakers who had co-sponsored the bill at the time of this writing, 15 were Democrats. In other words, many Republicans didn't sign their names to it.
Don't be surprised if House Bill 117 looks much different when it hits McCrory's desk, if it makes it there at all.

By the way, reporters will listen closely as lawmakers talk for and against specific incentives proposals. We'll keep our ears open for when "Lawmaker A" supports a tax break for one industry, then turns around and argues against a boost for another.

If there's ever a time when elected officials talk out of both sides of their mouths, here it comes.

Posted
AuthorDavid Crawford