Platform Practicality

Joya Wilmot, left, looks at campaign fliers outside Independence Regional Library, 6000 Conference Drive, before going inside to vote during early voting Wednesday. Election Day is Tuesday. Photo by Jim McGuire

With Mecklenburg County’s unemployment rate at 10.5 percent and the economy still sluggish, it’s no wonder that nearly all candidates in the upcoming Mecklenburg County Board of Commissioners races have vowed to make the economy their No. 1 priority if they take office.

But experts suggest that such promises may be easier said than done.

“It’s generally futile,” said Robert Kravchuk, chairman of the political science department at the University of North Carolina at Charlotte. “Government can’t create jobs. They can’t create demand.”

Contrary to some candidates’ statements, businesses haven’t stopped hiring or expanding because of high tax rates or a lack of incentives for them to do so, experts say. It’s because the economy has slowed, and, with it, demand for products and services has decreased. Businesses are not going to expand until that demand returns, experts say.

The sick irony, said David Swindell, director of UNCC’s public policy program, is that some candidates’ proposals — incentives such as tax cuts for certain businesses or a lower tax rate across the board — might do more harm than good.

“It’s not nearly as simple as the political rhetoric makes it sound,” Swindell said. “Cut taxes — sounds great. Cut services — that’s responsible. But those services don’t come out of nowhere. They were put there because of certain needs.”

The high unemployment rate is a double-edged sword for local government: People who are unemployed are buying less, which means sales tax revenue is down, which means local government gets less funding from the state and the budget becomes tight. Meanwhile, residents who are unemployed or underemployed are living on tight budgets themselves, which means that any tax increase is going to be an added burden and likely unpopular.

Property taxes criticized

Many candidates, mostly Republicans, have pledged to lower the property tax rate to lessen the financial burden on Mecklenburg County businesses and residents. The candidates often cite the high property tax rate as a reason why businesses are not relocating to, or expanding in, the county.

But experts say that when a business is deciding to move, the tax burden is only one of many factors they consider.

Harry Bowen, the W.R. Holland Chair of International Business and Finance at Queens University, said an educated work force is one of the top things a business considers before moving, a sentiment echoed by Ronnie Bryant, president and CEO of the Charlotte Regional Partnership. The ability to move goods easily is another, Bryant said, adding that Charlotte has an advantage because of its highways, airport and rail lines.

Good infrastructure, schools and quality of life are other factors experts list as important in helping businesses choose places in which to relocate.

By the time a business contacts the Charlotte Regional Partnership, it doesn’t have many questions about the tax rate or tax structure because it usually has already gotten that information off the Internet, Bryant said. Still, the tax rate is often a huge consideration for a business looking to relocate or expand, he said.

A business will have to weigh the benefit of being close to an urban area, which is often where the market is and where the business’s work force may live, against the lower taxes in the surrounding counties, Bowen.

“Certainly, a lower tax environment is one incentive, but it’s not clear how much of one,” he said. “Mecklenburg is going to have to compete with Iredell or other counties, and there are always disadvantages and advantages. It depends on what they want to do and where to be located.”

Taking a gamble

When counties decide to lower taxes across the board to lure businesses, they’re taking a significant risk, Swindell said: The tax rate is cut, and there’s a lag as the county waits for businesses to make the decision to move, and then an even longer lag while the business goes through the moving process. Meanwhile, tax revenue is down, which means more cuts, potentially to services that could have a long-term effect on the economy, such as infrastructure improvements or education.

“If you cut the services that provide the major criteria that attract businesses, then you really shoot yourself in the foot,” Swindell said. “Cutting taxes is dangerous.”

Swindell offers one scenario: In deciding which cuts to make to accommodate a tax cut, the Board of Commissioners might slash funding to social services, such as projects aimed at helping the homeless, deciding that the job should be left up to local nonprofits.

But when a business comes to the city to scout it out, it’ll see a lot of homeless people in the streets, which is not the best way to sell the city, Swindell said.

Here’s the gamble, Swindell said: When a businesses relocates to the county, it could generate new taxpayers to make up for the revenues lost by lowering the tax rate, but there’s no guarantee that a business that opens in Charlotte will recruit all of its work force from Mecklenburg County.

Kravchuk said cutting taxes is not a smart idea during uncertain economic times.

An alternative is to target tax breaks to businesses as a means to spur economic growth. But Swindell said that’s a tricky game to play: Counties and municipalities often end up in a “race to the bottom” until tax breaks cost the area as much as, or more than, the revenues those businesses bring.

“What you’re gambling on is that no one else is going to be offering those packages,” Swindell said. “But everyone is.”

Bowen agrees, saying that offering tax incentives creates a “slippery slope.”

The better option, experts say, is to make sure the programs with long-term returns, such as education and infrastructure, are operating efficiently, which may or may not mean more funding.

“That means making sure our roads are in good condition, sidewalks are well-maintained — those infrastructure things that make it enjoyable to live here,” Bowen said. “Let’s beautify our backyard, and people will want to come to our backyard.”

Caitlin Coakley can be reached at [email protected].