THE VIRGINIAN-PILOT
Copyright (c) 1995, Landmark Communications, Inc.
DATE: Thursday, November 9, 1995 TAG: 9511090331
SECTION: BUSINESS PAGE: D1 EDITION: FINAL
SOURCE: ASSOCIATED PRESS
LENGTH: Medium: 70 lines
North Carolina business recruiters are proposing expanded tax breaks to attract new companies moving to the state at the same time officials are fighting a lawsuit challenging cash incentives as ``corporate welfare.''
The North Carolina Economic Development Board will begin considering expanded tax breaks at its meeting today in Lenoir, The Wall Street Journal reported Wednesday.
North Carolina has lost nearly 40 high-profile projects to Virginia and South Carolina in recent years, Commerce Secretary Dave Phillips said last week.
``This clearly ups the ante so we can be more competitive,'' said Rick Carlisle, economic-policy adviser to Gov. James B. Hunt Jr.
Most companies would see lower start-up costs from the tax breaks linked to new jobs and investment in equipment.
One goal of the proposals is to increase the wages paid in the state, Carlisle said. To qualify for any of the credits, companies would have to pay at least 10 percent above the county average. A task force that has drawn up the proposals also suggests offering bigger tax credits to companies that create higher-wage jobs.
Tax credits would more than double for many companies locating in poor counties, while firms choosing booming metro areas would get tax breaks for the first time.
The package would mark a shift from North Carolina's historical reluctance to use incentives and preference for more conservative inducements such as technical-college training for workers. It also comes at a time when the state has lost major projects to neighboring states that offer more aggressive tax breaks.
The proposals include:
Extending an existing corporate income-tax credit to all counties and increasing the credit in the 25 poorest counties from $2,800 to $4,000 for each job created.
Allowing nonmanufacturing companies to qualify for credits if they make at least 75 percent of their sales outside North Carolina.
Expanding exemptions from a 3 percent sales tax on energy costs and a 1 percent sales tax on machinery and equipment.
Creating new credits for research and development and for training new workers.
The proposals are being raised a week after the state Supreme Court agreed to hear a lawsuit challenging the cash incentives and other concessions offered to companies.
State and local business recruiters claim that some lucrative prospects have written North Carolina off since August because of the uncertainty created by a Forsyth County judge's ruling. Superior Court Judge Julius Rousseau agreed with attorney William Maready that the financial incentives violate the state's constitution.
Using tax dollars to recruit private corporations is a form of ``corporate welfare,'' Maready said.
Although the Maready case creates uncertainty over North Carolina's industry-recruiting efforts, the state could not wait for a Supreme Court ruling, said the task force's head.
``We need to deal with incentives now,'' said Ron Leatherwood, ``and we've worked hard to come up with something we think is fair.''
The task force has been considering ways to sweeten the deals increasingly demanded by relocating companies since June. The development board's final report to Hunt is not expected until early next year. The General Assembly must approve the changes next spring. by CNB