Dell’s incentives: They wouldn’t cost the state $242 million — or anything

From a practical standpoint, the General Assembly acted wisely last week when it approved a $242 million incentives package for Dell Inc.

The huge Texas-based electronics company had said it would build a plant here if the incentives were alluring enough. That would mean at least 2,000 new jobs, plus — according to Gov. Mike Easley’s office — possibly another 6,000 jobs at companies that would build nearby to manufacture supplies for Dell.

That’s 8,000 jobs. On Tuesday, Dell announced that it will come.

Unfortunately, it will be in the Greensboro and Winston-Salem area, not in eastern North Carolina or in the mountains where economic development is so grievously needed. But location is Dell’s decision, not the Legislature’s. What the Legislature had to decide was whether to try to get Dell to build anywhere in the state.

While at first blush the deal that the lawmakers approved might seem that it would cost the state $242 million, it actually will cost nothing. In fact, it would be a money-maker.

Rather than giving the company something, the government would merely take less from it in taxes than current tax regulations require. That is how the incentives would work.

Furthermore, the tax credits that make up the incentive package give the state some bargaining power in workers’ compensation packages and in the size of Dell’s capital investment. They will not kick in unless Dell reaches certain hiring and investment milestones.

Dell is expected to pay roughly $740 million in taxes over the next 20 years, and that’s after the incentives are deducted — in other words, gravy.

But while the incentives offer is economically sound, is it right? Or does it interfere with competitive commerce?

North Carolina also is home to some of Dell’s competitors, IBM for example. Is it fair to that long-time North Carolina employer and corporate citizen for the government to allow Dell to operate more economically in the state?

It gets a little sticky when government favors one private company over another.

Published in Editorials on November 10, 2004 12:08 PM