- Associated Press - Saturday, May 9, 2015

RALEIGH, N.C. (AP) - North Carolina legislators who say their decision to cut corporate and personal income taxes two years ago spurred job growth are again debating whether to preserve elective tax breaks Gov. Pat McCrory’s administration has wanted to expand for months.

State leaders are under pressure because wages, income growth and poverty is worse than the U.S. average even though 123,000 jobs were added between January 2014 and March, the last month for which public data is available.

With the state’s largest program of targeted tax breaks due to expire with the end of the year, legislators are weighing whether better results come from further tax cuts or dangling dollars to companies that will relocate or expand in North Carolina.

Corporate taxes are on course for another reduction next year if current projections on tax collections through mid-2016 hold. McCrory and others want millions more set aside for businesses looking for dessert after sizing up the buffet of benefits to locating in North Carolina.

McCrory’s administration has promised almost $400 million in tax breaks to lure companies in the governor’s first two years in office, according to a new state Commerce Department report. Funding for elective corporate tax breaks, the Job Development Investment Grant program, is now nearly empty.

The program gives companies that choose North Carolina over other places to grow or expand a percentage of the income taxes withheld from the paychecks of hired workers. Companies must meet job, wage and investment minimums or lose the cash awards.

McCrory’s administration lamented last year it was nearing a limit on new grants through this summer. No new grants have been announced this year.

A group of pro-business Democrats agrees with McCrory about the value of a range of incentives the governor has sought for months. Rep. Ken Goodman wants the Legislature’s Republican majority to approve an incentives package because the current stalemate has led some big employers like Mercedes Benz to rule out North Carolina.

Georgia offered $23.3 million in cost savings to coax 800 Mercedes jobs paying an average of $78,000 to suburban Atlanta when the luxury automaker moves its U.S. headquarters from New Jersey.

“We feel like we’re losing prospects to South Carolina, Georgia and neighboring states while the majority party is arguing over whether incentives are a proper way to go about doing business or whether lower corporate taxes are a better pull for our state,” said Rep. Ken Goodman, who heads a group of about a dozen pro-business, moderate Democrats in the General Assembly.

“I think the incentive packages are making a difference and there’s a lot of evidence over the past year or two to substantiate that,” said Goodman, D-Richmond.

Since taking office, McCrory’s team announced about 15,300 jobs as projected to arrive in the years ahead thanks to the JDIG program. Another 19,000 jobs that could have been lost were preserved thanks to the tax breaks, recruiters said.

During that same period, nearly 22,000 workers lost jobs through mass layoffs and plant closings reported to state and local officials. Thousands of other layoffs were not required to be reported.

While up to $800 million in tax breaks were promised and 48,000 jobs projected since the JDIG program started in 2003, the new state report said, the track record is that about a third of the promised tax breaks have been abandoned or unrealized for lack of hitting jobs targets. Supporters say that’s among the program’s benefits - no tax breaks for the company until after it’s created new jobs.

But some Republicans and Democrats alike blast targeted tax breaks like JDIG as corporate welfare or government picking winners instead of markets and consumers.

Legislative Republicans are debating what to do about incentives, but Sen. Bob Rucho said he’s determined to continuing lowering corporate and personal income taxes while expanding sales tax on services.

“A tax incentive is nothing more than a short-term tax break for a specific company versus what we’re offering is long-term, across-the-board tax breaks for all companies including the one that would like to come here,” said Rucho, , R-Mecklenburg. “If you have 450,000 small businesses and if 10 percent of them created one new job (as a result of lower taxes) that’s 45,000 jobs.”

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Emery P. Dalesio can be reached at https://twitter.com/emerydalesio


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