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The great N.C. jobs scam

Millions of dollars in state and county tax incentives often support only low-wage jobs and wealthy counties, says an author who's coming to Raleigh. A better policy, he says, is investments in skills and infrastructure.

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When North Carolina handed Dell Inc. --the second biggest computer maker in the world--over $280 million in tax breaks and other "recruitment" incentives last year to set up shop in the state, the backlash was fast and furious. Community leaders and advocates howled at the idea of shoveling taxpayer money to a company that in 2004 made over $3 billion in profits. Lawmakers decried Dell's strong-arm tactics (which included questioning the state's "patriotism" if they didn't hand over the money). Journalists were incensed at the Dell deal's secrecy. A conservative former N.C. Supreme Court judge, Robert Orr, went to work on a lawsuit challenging the constitutionality of the give-away, which he filed in June.

"It's just an insult to other business owners in North Carolina," said Perri Morgan, an advocate for small and independent businesses. "I think with every deal, a few more people wake up."

Morgan likely had a shipment of alarm clocks sent to state leaders last week, when after months of growing skepticism over the Dell handouts, lawmakers decided to do it all over again.

Last Friday, Gov. Mike Easley signed into law a two-year extension of the state's two biggest corporate subsidy programs, the William S. Lee Act and the Job Development Investment Grant Program, calling them "smart, targeted tools to bring and grow jobs in North Carolina."

But author and advocate Greg LeRoy has another label for such deals, which is the title of his recent book, The Great American Jobs Scam. He'll be discussing the book at Quail Ridge Books in Raleigh on Aug. 10.

North Carolina is "a kind of petri dish," says LeRoy, for a silent scandal unfolding across the country. Every year, cash-strapped state and local governments shell out over $50 billion in tax breaks, free or cheap land, subsidized city services, cash grants and other give-aways--mostly to big, profitable corporations--to entice them to re-locate or expand in their area.

The deals are often shrouded in secrecy, LeRoy says, and offer few guarantees of delivering prosperity. And they commonly involve a laundry-list of "scams" that short-change taxpayers and communities, including:

  • Create a bogus competitor: State documents reveal that Dell scared North Carolina leaders into thinking they were about to lose the plant to Virginia--although Virginia leaders now say they only offered $8 million for the facility.

  • Pay poverty wages, stick taxpayers with the tab: Subsidies often don't require that the jobs created offer a decent wage. Wal-Mart has collected over $1 billion in breaks nationwide--including at least two counties in North Carolina--despite offering wages and benefits so low that, for example, 25 percent of the people on TennCare, Tennessee's health program for poor residents, are Wal-Mart employees.

  • Take the money and run: Many companies have collected millions in taxpayer-funded subsidies, only to pack up as soon as they expire. Or worse, they don't do anything at all, like the company in Haywood County that shuttered after a year without having created a single job (the county got the money back after years of legal wrangling; not all places are so fortunate).

    "Up until 1996, North Carolina had an approach that worked well," says LeRoy. "It was dedicated to investing in public schools and an excellent university system. That paid off."

    But state leaders hastily passed the Lee Act in 1996 after nearby states had landed "trophy deals." LeRoy points to "a raft of evidence" that the Lee Act hasn't worked, draining millions in state tax revenue while largely benefiting wealthy areas.

    Among the evidence is a 2004 study by the N.C. Justice and Community Development Center, which found that just 5 percent of the Lee Act credits had gone to the state's poorest counties. Despite some improvements, Amna Cameron of the Justice Center calls last Friday's extension "more of the status quo."

    How to beat the jobs scam? Demand that the details of taxpayer giveaways be made public. Insist on standards, such as guarantees that jobs will pay a living wage, and "clawbacks" to reclaim subsidies if the company doesn't follow through.

    But his top recommendation is to get back to investing in what works.

    "This is my agenda for creating good jobs: reinvestment in skills and infrastructure, not more corporate disinvestment by tax dodging," LeRoy concludes his book. Corporate subsidy deals "were always dumb ideas. Now it is glaringly obvious: they are wasteful handouts we can no longer afford."

    Greg LeRoy, author of The Great American Jobs Scam: Corporate Tax Dodging and the Myth of Job Creation, will discuss his book Aug. 10 at 7 p.m. at Quail Ridge Books and Music, 3522 Wade Ave., Raleigh. Chris Kromm is executive director of the Institute for Southern Studies ( www.southernstudies.org ) and publisher of Southern Exposure magazine, based in Durham.

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