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avery

Government Incentives

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I'm curious on others opinions regarding government incentive packages to businesses. This morning's N&O had an article on China owned Lenovo looking to relocate out of Durham unless incentives of $14 Million is met. They have other offers and they currently employ 1900 people here.

To me it is a tough predicament. I am against economic incentive packages based on principle, but losing 1900 jobs is significant to the economics of the Triangle. It seems as though Pandora's Box has been opened regarding incentive packages and you have no choice but to be a player in order to attract businesses. It feels like sport's free agency...heck, even blackmail. It's unfortunate to me to see low paid teachers and various other problems with the tax money squeeze in our state to see valuable tax dollars going to lure corporations. I hate that cities must play the role of Sugar Daddy.

Raising corporate income tax rates is not the answers because it cancels out the incentives and is unfair to small businesses. Do they tax the people more?

Very interested to hear everyone's thoughts on this. Could this issue get out of hand?

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In the back of my mind, I know that Lenovo will move most of their operations out of Durham whether they get incentives or not. I predict They're going to leave a small support and sales staff of no more than 200 people, and the rest will be moved to China as soon as all the IP and expertise can be transferred. The incentives will only delay the inevitable for a couple of years.

The question is, is it worth the $14 million to keep the jobs for another few years?

I also predict that ThinkPads will suddenly get a bit cheaper and the quality will degrade significantly. But regardless of quality and customer loyalty, I can't possibly fathom why a Chinese company with executives in China would keep running an office in the US when it's so much cheaper to do it in China. Such is the way of business.

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Yeah, I predicted that when IBM decided to sell that operation to a Chinese company, that most of those jobs would be in China in a year or so.

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This issue is a real dilemma for me as well.

I am generally opposed to corporate welfare, but how does one remain competitive in an environment in which everyone else is offering up these packages? I reluctantly view them as a necessary evil, and wonder if federal legislation prohibiting them would level the playing field.

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To me, a big fat "no" seems like a no-brainer on this one.

Incentives are normally used to BRING a company in. There is a loss of future tax revenue, but you may reap that back in jobs and increased local economic activity caused by that employment. The hope there is for a multiplier effect. So, you don't give up anything you already have, but you may get more in the long run.

With Lenovo, they are already in the community, generating tax revenue, so they are asking to reduce their existing contribution for them magnanimously agreeing to stay.

That's a net loss, no question about it.

Finally, here's the kicker for me. The alternative locations mentioned were New York and Singapore. If the alternative location was in NC or SC, then I'd think they could be swayed to stay in the long run. NC/SC locations would suggest they want to keep local intellectual capital. The number of RTPers who will move to NY (particularly NYC) or Singapore is virtually nil.

Make no mistake- Lenovo is leaving, and they're trying to fleece us on the way out the door.

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