In a tough economy – when a state can’t yet pay its bills – you’d think the fiscal plan for the future would be conservative. Not so, North Carolina. Despite massive budget woes, the state legislature has agreed to special tax breaks designed to bring Apple to the Tarheel State.
Apple, the company that makes Mac computers (including the very MacBook I’m typing this blog entry on), the ubiquitous iPods and the iPhones that I would buy if they hadn’t struck a silly deal with AT&T, has confirmed that it will build a data warehouse “somewhere” in North Carolina. The deal requires Apple to build the warehouse outside of the twenty most wealthy counties in the state. This means no to counties like Wake and Mecklenberg; most of the Research Triangle Park and the Piedmont will be excluded.
The deal wasn’t unexpected, as North Carolina worked hard to position itself to get the business – even passing a massive tax break specifically targeted to Apple.
So what does this get the state? Free computers for its cash-strapped schools? New iPods to support the struggling arts programs? Nope, it gets – wait for it – the guarantee of 50 jobs over nine years.
Whew. Just let that sink it. Fifty whole jobs.
Of course, Governor Perdue of North Carolina (no chicken jokes, please) believes that an additional 250 jobs could be attributed to the data center. Those jobs would be related to providing services for the whopping 50 new employees.
In defense of their position, Commerce Secretary Crisco was ready with his obligatory crystal-ball reading. “Technology-driven projects like this may bring fewer overall jobs than traditional industry, but they have a tremendous economic impact through locally purchased goods and services.”
In other words, they’re hoping that it brings in more cash.
How much is it costing the state? Initially, about $46 million in foregone tax revenue over the next ten years. If Apple sticks it out in NC for at least 30 years, the company could save more than $300 million on corporate taxes. That’s more than the tax package the state offered Google just a couple of years ago to open its data center in western NC: Google will only save $260 million over 30 years.
But hey, look what Google has brought to NC… *sounds of crickets chirping*
(At least Apple will make NC look cool.)
As you can imagine, not everyone is excited about the new tax breaks. A lawsuit has already been filed against the state with respect to Google – expect more of the same in response to the Apple package. While those companies get tax breaks, NC taxpayers are being asked to cough up a little more out of their own pockets in order to meet the $4.6 billion budget gap looming on the horizon.
I generally think encouraging investment is a good thing. And as a former North Carolina girl, I understand that the state could use additional revenue. Unemployment rates are increasing as companies move their manufacturing jobs out of the state (my dad was a victim of DuPont’s flight south to Mexico) and agriculture increasingly becomes outsourced (yes, it’s true that we actually import a significant amount of food in the US). Giving companies incentives to move to North Carolina may be good for the state. May.
But, in this case, the timing and scale seem a little off. This is the same state that threatened to delay tax refunds as well as raise taxes and fees to meet the budget in 2008 – in a year that saw the poverty rate in the state increase. People in the state are hurting. And yes, I get that people need industry and investment to survive. But the statistics since 2000 have not demonstrated a correlation between increased spending for investment and increased prosperity for the people of the state.
The investment in Google in the western part of the state hasn’t provided a significant bump in the economy. Although the company indicated that it might hire as many as 200 employees, a year after the deal was finalized, Business Week reported that Google had hired one full-time employee. Just one.
How ’bout them apples?
currently a Carolina girl, I hope the deal goes through and Apple makes a home here in NC. That being said…I also hope they stick to the plan of not allowing them to build in the “rich” cities. We desperately need industry in Eastern NC where there are constantly closing businesses and major layoffs in the news….however, I have noticed in the five years I have lived here, this great state lures business in with promises of tax breaks and ease of start up and then the local town/city governments make it impossible to set up shop effectively driving those businesses back out. Even 50 new jobs is better than no new jobs and I agree that those 50 jobs can create a need for other businesses to open shop to provide basic services for the new employees. Its a ripple effect and it has potential to ripple out to smaller towns, boosting local economies. Alas it is probably just another “pipe dream”.
Did anybody in NC do the math? $300 million / 30 years is $10 million/year. Divided by 50 jobs, that is $200,000 per job, per year. Heck NC could hire hire 50 folks themselves for less money.
I wish this kind of stuff was against public policy. I always feel I am paying millionares be come billionares
Great deal for Apple! Wow, it must be the aura of the shiny iPhone or the Interoffice mail commercial for the MacBook Air that has everyone mesmerized with their brand. Horrible deal for North Carolina though.