North Carolina recently offered Boeing $683 million in tax incentives to open a plant in North Carolina to build Boeing’s new 777X jetliner. The NC bid failed, as did those from some other states, when Boeing decided to build the 777X in its home state of Washington where there is no state, personal, or corporate income tax.
More recently, North Carolina was prepared to offer Toyota up to $107 million worth of incentives to lure the automaker’s North American headquarters from Los Angeles to Charlotte, bringing 2,900 jobs with it. The Charlotte Observer reported that Charlotte lost out to Plano, Texas. The Texas offer was only $40 million but Texas has no corporate or personal income tax and has direct flights to Japan.
Businesses do not locate in any one place solely because of the tax laws. However, as tax burdens climb, the tax treatment of the business itself, and of its higher-paid employees and executives, becomes a more important consideration. Thus the incentive packages, made up primarily of special tax abatements for a set period of time, are developed and used in recruiting new businesses.
It is apparent that the politicians — politicians as diverse as Governor Pat McCrory of North Carolina and Governor Andrew Como of New York — who try to make use of these incentives, are totally missing the point they are illustrating. If you have to bribe a company to locate in your state or bribe one not to leave, your taxes and whatever else you are using to bribe them, are too high or otherwise onerous. If this were not so, companies and entrepreneurs would move to your state without being bribed and those already there would not be trying to leave. Low taxes and a favorable business climate, like that of Texas, bring in many companies from other places, like California, where the business climate and taxes are not favorable.
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