Business Subsidies Revisited

A recent decision by state and local officials in North Carolina to offer a large subsidy package to Google has reopened a long-simmering debate about the effectiveness and wisdom of using tax breaks to recruit industry.

State and local officials recently promised Google a package of subsidies that could amount to as much as $260 million over a 30-year period. In return, Google will open a data processing center that could employ as many as 210 people in Caldwell County, an area hard hit by the decline of traditional industries. A summary of the deal is available in today's issue of The News & Observer.

The size of the subsidy package, coupled with the strong-arm negotiating tactics used by Google, has renewed debate about the appropriateness, wisdom and fairness of such deals. Are they necessary parts of an economic development strategy or gifts to favored industries financed by pre-existing businesses and individual taxpayers?

In response, the North Carolina Senate has announced a review of the state's subsidy policies and processes. That review likely will cast a spotlight on a contentious issues facing states across the South.