Fine Print - December 2007

Burning down the house
By G.D. Gearino

Legislators returned to Raleigh talking tough. Democratic leaders fumed about Gov. Mike Easley's veto of incentives for Goodyear Tire and Rubber Co., vowing an override. Some Republicans, suddenly finding the slippery slope of incentives to their dislike, spoke of gathering enough votes to sustain the veto. But as often happens in the state capital, bluster turned into murmur. No vote to override occurred. Instead, lawmakers approved broader incentives legislation that satisfied Easley, Goodyear and Goodyear's top competitor, Bridgestone America Holdings Inc.

So will everybody now go back to their respective benches and allow the game to continue as if nothing happened? Maybe not. The reason for this tussle, after all, was that the original legislation represented a departure from North Carolina's standing incentives policy. The bill would have allowed cash - up to $4 million a year for 10 years - to go to a business already here, with no promise to create jobs. In fact, the tire maker could even lay off workers. The incentives were provided because Goodyear agreed to invest $200 million for new equipment at its Fayetteville plant.

Easley's veto brought needed public attention to incentives policy and created real debate about where and how you draw the line on who gets what. Critics condemned both the original bill and the compromise, calling each an invitation for business to blackmail the state. Critics have made similar complaints in the past. It hasn't stopped the headlong rush into ever more lucrative - and to taxpayers, more costly - offers of tax credits and cash to prompt companies to move or expand plants here.

"There's a tax-fairness issue out there. All of a sudden, people are starting to wake up and see this."

The complaints didn't stop incentives this time either. The broader, follow-up bill actually upped the ante, allowing large, existing manufacturers to battle for up to $60 million in cash. Easley did get some worker wage-and-benefit criteria put into it, though qualifying companies could still lay off a portion of their work force. But the bill did trigger a dramatic shift in the political landscape. Nearly in lock step, GOP legislators voted against the follow-up bill. Just three Republicans in the House voted for it. None in the Senate did.

A few true believers on the Republican side, seeing incentives as something akin to socialism, had voted against such packages before. They were typically joined by legislators at the other extreme - liberal Democrats who look at incentives as having a reverse Robin Hood effect, robbing from the poor to give to the rich. But, starting with the job- and equipment-investment tax credits of the Bill Lee Act in the mid-'90s, this had never been a partisan issue. The overwhelming majority on both sides of the aisle pushed the green button when it came time to vote. Some claimed they were holding their noses while doing so, but it didn't change the outcome.

Perhaps this latest vote will be an aberration. After all, it's easy to vote against incentives when the threat of job losses doesn't involve your community. Both the Goodyear plant and the Bridgestone-Firestone plant, in Wilson, lie in Democratic districts. There's reason to believe, though, that the shift may not be tempo-rary. Easley and the Democrats just opened the lid of Pandora's box a little wider. It's safe to assume more companies will come begging, or threatening. The ultimate effect may be to bring more public scrutiny, and disapproval, of incentives.

Meanwhile, the largely party-line vote coincides with one of the leading critics of incentives, former state Supreme Court Justice Bob Orr, making a bid for governor. Not to be outdone, his chief competitors for the Republican nomination - state Sen. Fred Smith of Johnston County and Salisbury lawyer Bill Graham - issued public statements critical of the Goodyear bill.

Orr says his campaign is helping focus attention on the issue. "There's a tax-fairness issue out there. All the sudden, people are starting to wake up and see this." His views may hurt him when it comes to raising campaign money from business interests. But Brad Crone, a Raleigh-based Democratic political consultant, says incentives policy could have the legs to become a wedge issue, helping a Republican peel Democratic votes from a Democratic nominee.

It remains to be seen whether that will happen, whether there is any vein of public outrage to tap. Should there be, and it's exploited successfully, political support will begin to erode. Republican success will cause moderate Democrats to be more cautious about leading the incentives cheer. As odd as it might seem, electoral politics might begin putting the brakes on incentives in a way that supposed rational policy debate has not.