Apple’s Deal with North Carolina Is a Worm in the State’s Finances for Decades to Come

Photo Credit: Moab Republic/Shutterstock.com

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Three years ago, Apple snubbed North Carolina when it chose a new campus location instead, like so many tech corporations these days, deciding on Austin, Texas. But playing hard to get ultimately turned out to be very lucrative for the iPhone and iPad designer: last week, North Carolina announced that Apple will open a new campus in the state, its first on the East Coast, in exchange for nearly $850 million in state taxpayer funds, as well as a big local property tax giveaway.

The combo makes this a massive deal, nearing Amazon HQ2 level in scope. And it’s a bad one for North Carolina. I’m going to key in on three of the worst aspects below, as they are regular features of problematic corporate incentive arrangements that North Carolina seriously amplified.

1) North Carolina is paying to “create” research jobs in a research hub. Apple’s new campus will be located in an area that’s literally called the Research Triangle, because of its proximity to several top universities, two of them public, and a huge number of other large corporations doing R&D work such as Xerox, Cisco, and Epic Games. There’s every reason Apple would want to put a campus composed mainly of advanced research jobs—which is apparently the plan—in this location, where it’s easy to find qualified employees, tax breaks or no tax breaks.

Back in the 1950s and 1960s, North Carolina officials and local leaders put a lot of effort into setting up the Research Triangle, finding the land, raising philanthropic funds, and getting corporate buy-in. Though, like many states, North Carolina has cut higher education spending deeply in the last decade, it still has some of the highest per-student outlays and lowest public college tuition rates in the country.

It’s those educational investments and human capital, not tax incentives, that are likely the draw for Apple. The Research Triangle should, more than 60 years after it was created, be self-sustaining, and attractive enough to employers that there don’t need to be added incentives piled on top of it. And it almost certainly would be, if North Carolina stood firm. After all, Google also recently announced a new campus in the Research Triangle. But there’s a major difference in how they went about it. The company explicitly said it was not asking for tax incentives.

“The Triangle region… is home to highly skilled software engineers, including those with a focus on infrastructure,” said Google’s VP of engineering. “This makes the region an ideal area to recruit and grow our engineering teams.” And Apple would benefit from exactly the same factors.

On the other hand, giving away the store to Apple today means less money for tomorrow’s smart investments by the state. If I were CEO of one of the other Research Triangle-based corporations, I’d be asking North Carolina where my $850 million is.

2) The deal is long and expensive. In return for creating 3,000 jobs, Apple will receive $845.8 million in payouts over 39 years from the state, plus a 50 percent reduction in its property tax bill over 30 years from Wake County.

The county incentives are going to be worth about $20 million, according to the state Commerce Department. The state spending, meanwhile, comes from a program called Jobs Development Investment Grants. It involves a controversial practice dubbed “paying taxes to the boss,” under which North Carolina taxes paid by Apple employees will not actually go into the state’s coffers, but will be sent back to Apple. In a decade, Apple will be receiving about 90 percent of its employees’ taxes back as payments. Instead of the state taxes employees pay going toward public benefits for all North Carolinians, they will be paid out back to Apple as it hits certain benchmarks.

As a result of all this, each job created will cost the state and county about $280,000 apiece. That puts the deal near the top of the pile of most expensive subsidy arrangements, right around the cost of Foxconn’s original, very poorly conceived deal with Wisconsin. This doesn’t make sense, until you realize one thing: the JDIG program was expanded in 2018 to give increased incentives to large tech corporations as part of North Carolina’s unsuccessful effort to win not just the Apple campus that went to Austin, but Amazon’s HQ2.

In one sense, though, the state is protected, since the subsidies are connected to particular jobs. No job creation equals no payouts. But it’s still an unnecessary giveaway. First, this wasn’t even Apple’s first successful grab. In the past the tech giant took more than $320 million in public funds from North Carolina, mostly for a data center in Catawba County. If, as I said above, Apple was going to expand its operations in North Carolina no matter what, then this is all money out the door that could have been spent on providing services to more North Carolinians. And even if Apple passed this time, no doubt other large tech corporations would come to the area—like Google, Epic Games and Cisco. There’s nothing so special about Apple that requires massive state spending in order to have it around.

3) Apple will pay a pittance toward North Carolina education. Finally, we need to discuss the state’s public schools. One of the details North Carolina officials included in their announcement was that Apple will spend $100 million on a “fund to support schools and community initiatives across the state.” This is a fairly typical aspect of these arrangements, letting the corporation buy some public relations benefits and positive stories in the local press.

But the math is obviously lopsided: Giving the corporation $850 million in taxpayer funds, which it then turns around and spends a mere fraction of that sum on education initiatives, is, at best, laundering taxpayer money through Apple. It also still leaves Apple more than $700 million ahead.

Here’s a better idea: tax corporations and use the money to pay for schools. Yes, Apple makes fancy gadgets that a lot of people like, but that doesn’t make it a good neighbor.  

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Pat Garofalo is the author of The Billionaire Boondoggle: How Our Politicians Let Corporations and Bigwigs Steal Our Money and Jobs, the Boondoggle newsletter, and the director of state and local policy at the American Economic Liberties Project.