Voters Send Signal About Opposition To Targeted Tax Breaks

By Mitch Kokai

Almost everyone agrees that economic growth is good. Much of our ongoing political debate involves the best way to achieve growth.

Some believe government should take the lead. Spend the right amount of money on the right programs, and the economy will respond favorably.

Others see a smaller role for government. Set clear ground rules for businesses to operate. Keep tax rates and government spending as low as possible. Limit regulations only to those needed to protect public health and safety.

In other words, limit government’s ability to get in the way of economic growth.

My John Locke Foundation colleagues adopt the second view. We support a healthy mix of free markets and limited constitutional government rules. Get the balance right between free decisions and government dictates, and you will set the stage for the most robust economic growth possible.

That’s why Locke consistently opposes tax incentives targeted at boosting a particular business or industry. These incentive deals create high-profile ribbon-cutting ceremonies and positive headlines for politicians. “Company X plans to create 200 jobs thanks to a state incentive!”

Yet someone has to pay the bill. All taxpayers who don’t get the incentive pick up the tab, including any competitor Company X faces now or in the future.

The most recent Carolina Journal Poll suggests that voters in North Carolina dislike the idea of paying the incentives bill.

The poll conducted on May 4-5 asked likely general election voters: Which of the following options comes closest to your view about the best way for government to help improve North Carolina’s economy?

Voters faced two options. Nearly 64% of them selected the market-oriented choice: “lower tax rates and reduce regulations for all individuals and businesses rather than offering special incentives to particular companies or industries.”

Just 15% of likely voters selected the second choice: “Offer tax breaks or other incentives to targeted companies or industries, anticipating that those businesses will help boost the rest of the economy.” Some 10% of voters selected neither option, and another 11% said they were unsure.

Conservatives (79%) and Republicans (78%) were most likely to choose the market-focused option. But that option also appealed to 66% of independent and third-party voters. Among Democrats, the number dipped to 47%. But only 22% of Democrats supported the answer favoring targeted incentives.

Men (63%) and women (64%) offered almost equal support to the option focusing on lowering tax and regulatory burdens. Younger voters showed the least interest in the free-market option, with 56% support among those 18 to 34 years old. But those in the next age bracket, 35 to 49 years old, registered the highest support at 69%. The incentives-focused option prevailed among no more than 17% of voters in any age group.

Rural (67%) and suburban (61%) voters supported the market-based option to a greater extent than urban (55%) voters. Perhaps that’s tied to the fact that North Carolina’s high-profile government incentives deals almost always reward companies setting up shop in or near urban areas.

White (67%) voters supported the market-focused option more than their black counterparts (54%). Yet the incentives-focused option attracted only 20% support from black voters, compared to 13% of whites.

The incentives-focused option appealed most (23%) to likely voters with household incomes of less than $40,000. Yet even a majority (51%) within that group preferred the option of lowering tax and regulatory burdens for all. Among the income groups, support for the free-market option was highest (70%) among those making $40,000 to $70,000 a year. Support dipped slightly among those earning $70,000 to $100,000 (65%) and those making more than $100,000 annually (66%).

All of these numbers represent good news for fans of public policies favoring private actors as the primary drivers of economic growth. While voters might accept the ribbon cuttings and the headlines, few of them view targeted incentives as the key to boosting North Carolina’s economy.

During a May 9 public presentation of the poll numbers, one former state House Republican leader asked whether the John Locke Foundation planned to share voters’ economic preferences with current GOP legislative leaders. His implication was clear: Lawmakers need to know that public support for targeted tax deals registers as lukewarm at best.

One could say the same about Democratic Gov. Roy Cooper. He regularly mischaracterizes broad-based tax cuts as “giveaways,” while spending much of his nearly eight years in office touting targeted incentives deals. These Cooper-endorsed deals attract tepid support from even the most vocal sections of his political base.

Views from North Carolina’s voters could help steer the governor and other policymakers toward a more productive course.

Mitch Kokai is senior political analyst for the John Locke Foundation.