The real winner in the Apple sweepstakes: North Carolina

by Rick Henderson, Editor-in-chief, Carolina Journal and NC SPIN panelist, December 21, 2018.

Was Apple’s choice of Austin, Texas, over the Research Triangle for its new, $1 billion campus a win or a loss for North Carolina? 

The answer isn’t as obvious as local boosters would have you believe. Sure, the sudden infusion of capital investment and (eventually) high-paying, high-skilled jobs would have been a boon for the immediate area. But there was a price tag, as my John Locke Foundation colleague Jon Sanders noted: massive tax incentives. 

They included: 

• Refunds of as much as 90 percent of the company’s withholding taxes for new hires for 40 years
• Tax-funded water, sewer, and rail hookups
• Local property tax exemptions for 30 years

Offering these massive giveaways wasn’t enough to reel Apple in. The rejection led to a rare joint statement from Gov. Roy Cooper, Senate leader Phil Berger, and House Speaker Tim Moore: 

“We’re on pace to add thousands of good-paying jobs this year with more expected next year. There’s no better place to find a top-tier IT workforce and legislative leaders have worked closely with the administration to attract large employers and technology companies like Apple. We’ll keep doing everything we can to bring more good jobs to North Carolina,” they said. 

By “doing everything we can,” with taxpayer handouts, the state’s leaders are implicitly rejecting the policies which have boosted North Carolina’s standing as one of the nation’s best places to do business — lower taxes at a single rate; streamlined regulations; increased spending on education which rewards improved classroom performance; highway spending intended to move people and products more efficiently; cutting debt and increasing savings. 

In November, Forbes named North Carolina the nation’s No. 1 state for business. We earned that designation even though Apple didn’t come here, Amazon passed us by for its second corporate headquarters, and we still haven’t secured the elusive auto assembly plant. 

Conservative legislative leaders have championed growth-based policies to contrast themselves from the political favoritism and pay-to-play games of previous regimes. 

Embracing policies that instead pick winners and losers with special giveaways undercuts that progress. 

As Sanders points out, 99.6 percent of businesses in North Carolina are small businesses. They stand to gain nothing, and perhaps wind up net losers, if policymakers consciously craft deals to benefit headline-grabbing megacompanies and shift the costs to entrepreneurs who are already here. 

So, if our state is such a boon for businesses, why did Apple go elsewhere? It turns out our incentive package was less important than other advantages Austin had and we didn’t. 

An existing relationship with the company, with more than 5,000 employees already there, certainly gave Austin a leg up. Apple was comfortable with the local culture and clearly liked it enough to make another major investment there. 

It also helped that Austin-area developers had a 130-plus-acre site, which would be perfect for a standalone, expandable corporate campus. The location is close enough to the downtown area to let employees and clients enjoy the city’s amenities, but separate, so that employees won’t have to navigate as much downtown congestion as they might have at an urban campus in the Research Triangle. 

Finally, business executives admit economic incentives aren’t really that important when they’re deciding where to relocate or reinvest. Sanders cited an article from Economic Development Quarterly, in which researchers asked executives from 150 companies that received economic incentives and 465 companies that didn’t to rank factors that mattered to them in determining a region’s business climate. 

Nineteen were named. State and local economic incentives ranked 15th and 16th. (Mass transit ranked even lower — sorry, light-rail fans.) 

Executives are much more swayed by access to skilled labor, a light regulatory and tax burden, a solid university and community college system, housing costs, major airports, and workforce training programs. 

Incentives may make a slight difference at the margins, but a state or region has to get many other policies and practices right before tax-funded handouts gain notice. 

Once our elected officials and economic development boosters figure this out, and insist on improving the factors that really attract and retain businesses and employees, North Carolina can show it doesn’t need to bribe people and entrepreneurs with tax dollars to move here.

https://www.carolinajournal.com/opinion-article/the-real-winner-in-the-apple-sweepstakes-north-carolina/