The code name for North Carolina’s courtship of MetLife was “Project Magellan.” That’s fitting; the Portuguese explorer captained the first circumnavigation of the world, and the $94 million the state granted MetLife feeds a debate over tax incentives that keeps going around and around in circles.
The state offered one of its biggest incentive packages ever to entice MetLife and the 2,622 jobs it will bring to Charlotte and Cary. When help from those cities and Mecklenburg and Wake counties are included, the package totals just over $100 million.
Is that a good deal for N.C. taxpayers?
Incentives are bad public policy. They favor the squeaky wheels – out-of-state businesses and firms threatening to leave – over in-state companies that quietly chug along creating and preserving jobs. And the money would be better spent on things that make North Carolina a desirable place to do business – like well-educated students and efficient transportation.
Yet financial incentives are a fact of modern-day economic development. North Carolina would pay a tangible price by unilaterally disarming.
Instead, the state is best-served by structuring packages in a way that protects the taxpayer. That means getting more than you’re giving, and ensuring the incentives are paid out slowly and only if a company fulfills its promises.
The state appears to have done that with MetLife. The biggest part of the state’s offering – an $87.2 million Job Development Investment Grant – is paid out over 12 years and only if the company hits certain job-creation targets. MetLife must have 1,474 jobs in North Carolina by the end of next year and at least 2,098 by the end of 2015 and for every year through 2025. The $87 million will take the form of the state paying to MetLife 75 percent of the state income tax withholding of the new employees.
The $94 million over 12 years comes to about $7.8 million per year. That’s between $3,000 and $4,000 per job per year, or about what the state would pay in unemployment benefits to one of those workers over just eight weeks.
What does the state get for that? About $125 million in investment by MetLife, and more than 2,600 jobs that probably would not have been here otherwise. Current North Carolinians are expected to fill about two-thirds of those. They’ll have incomes averaging almost $82,000 and will be paying into state tax coffers even with the grant to MetLife. The one-third who move in from out of state will buy homes, pay taxes and become N.C. consumers. And N.C. State economist Michael Walden expects an additional 800 jobs to be created by other companies in association with MetLife’s move.
We can’t argue with former Supreme Court Justice Bob Orr, who points out that every MetLife job celebrated in North Carolina is one taken from another state, so there’s no net gain to America. But this deal is a net gain for North Carolina, and that’s all North Carolina can control.
The 50 states need to agree to a cease-fire on incentives. Until they do, North Carolina needs to use them in a way that creates jobs while carefully protecting the taxpayer.