Earlier this month Wolfspeed, a semiconductor firm in North Carolina, announced that it received nearly $700 million in federal tax refunds through investment credits tied to the CHIPS and Science Act. Wolfspeed emerged from Chapter 11 bankruptcy in September after filing in June. The company says that about a third of the credit will go toward its remaining debt.
“This substantial cash infusion further strengthens our liquidity position at a critical phase in Wolfspeed’s strategic evolution,” Wolfspeed CFO Gregor Van Issum said in their press release. “It provides us with the financial agility to support long-term growth, manage our capital structure responsibly, and continue driving innovation across the silicon carbide value chain for our customers.”
Wolfspeed received $750 million in direct funding under the CHIPS program under the Biden administration in October of 2024. It was to build a semiconductor plant in Durham. The company said it plans to hire 1,800 workers at the site, but in November it laid off 20% of its workforce ahead of the June bankruptcy filing. Now, the federal tax refund is allowing the company to retire debt and keep moving.
There are millions of struggling small businesses that would desperately want a similar bailout from taxpayers, but alas, only the big companies seem to qualify. This case highlights the dichotomy in economic development strategies: large taxpayer-funded incentive programs reward big corporations, while small businesses are left out. They set up a deal that becomes too big to fail, and the strategy leaves taxpayers picking up the tab.
Large corporate incentives create the illusion of economic development, choosing winners and losers in the marketplace, while exposing taxpayers to financial risk. Excessive reliance on corporate welfare for economic development distorts markets, create inequities among businesses, and reduces state funds available for education and infrastructure. This is not free market, not responsibly stewarding of public resources, and simply not employing good government policy.
North Carolina has long offered tax incentives to lure large companies, arguing that it is needed to compete with neighboring states’ economic development strategies.
According to research from the John Locke Foundation, publishing organization of Carolina Journal, North Carolina pledged nearly $1.1 billion in 2022 to just 49 companies using Job Development Investment Grant (JDIG) and One North Carolina (OneNC) grants. The 2021 commitment was even higher at $1.3 billion. Bear in mind that back in 2019, the state pledged $146 million in incentives and $519 million in 2020, so the price of these incentives is climbing.
According to Joe Harris of the John Locke Foundation, the JDIG and OneNC grant funds promised to create 204,000 jobs when they were created in 1993 and 2002. But they have only delivered on 95,000 as of 2024.
In 2022, policymakers provided Vietnamese electric automaker VinFast with the single largest economic development incentive package in North Carolina’s history, valued at more than $1.2 billion over 32 years. Since then, the construction site in Moncure has been mostly empty and the 2025 target of 3,600 jobs has not materialized. According to a story out this week in Triangle Business Journal, the company could have to pay back some of the incentives and the state could take possession of the dormant factory site.
If that happens, it means that the failed deal was based on outcomes, not promises, but how much was spent attempting to make it work, between government incentives and state employee work hours? Such failures reveal gaps in risk mitigation and highlight that if incentives are needed (free market economists say they aren’t), the process needs a more open discussion and greater transparency for taxpayers.
This is a cautionary tale for both state and federal policymakers. In a time where we have an escalating federal deficit and competing state budget priorities, incentives programs should, at a minimum, face increased public reporting on state and county agreements, audits on company performance, and clawback provisions for companies that fail to deliver.
