Amendment One Hides Behind Innocuous Name

If our legislators considered a constitutional amendment to expand state debt or to promote corporate welfare, such a proposal would probably die before it even reached the ballot box. That is why they chose to seek the same end, while simply calling it Amendment One. Completely innocuous. Nonthreatening. Bland. And deceptive.

That is why I am urging Tarheel citizens to vote against the amendment to our state constitution to create "tax increment financing", or TIFs. TIFs are bonds that would not require voter approval, forbidden under our current state constitution. They are used in several states to finance economic development, with the bonds paid from the resulting property taxes, rather than as a general obligation of the issuing government unit.

Let me explain my three main objections.

The first is to the level of deception in the promotion of Amendment One. The proposal has already failed twice, in 1982 and 1993. Proponents have pulled out a bait-and-switch promotion for their third effort. In addition to the meaningless name "amendment one", proponents also refer to "self-financing bonds". You've heard of those before, haven't you? Don't your neighbors have mortgages and car loans that pay for themselves? No? Mine neither. Imagine that you get a second job to pay off a car loan. It is true that the loan won't be a drain on your original family budget, but would you consider it paying for itself? I wouldn't, but that is the principle behind Amendment One.

Additionally, proponents have been completely silent on two requirements of the amendment (which, by the way, will NOT be found in the ballot version of the amendment). One will lock in a minimum tax valuation, set upon completion of the new development. That means that the subsidized businesses will have to pay a minimum property tax, no matter what happens to the property. Fire or flood destroy the business? That's no problem for government, because the deed holder will still be liable for the same property tax. No credible business would knowingly accept that liability.

Furthermore, the bill explicitly states that the local government "may" be required to apply additional sources of revenue, such as the taxes paid by other businesses or homeowners, to pay off the TIFs. So, when the proponents claim that the TIFs will only be paid off by the generation of new property tax revenue, they are only giving you half the story. That will be true only at first, but could change at any time afterward.

My second objection is to the expansion of corporate welfare. Not only would new businesses demand TIFs to finance their investments, but they would also hold the public budget hostage to their continuing success. Why should taxpayers underwrite corporate expansion and profits? This proposal will put a corporate gun to local officials: "Give us subsidies, or we'll stick you with useless bonds." Not only will that be a disaster for local government, but it will make inefficient businesses into parasites on productive companies.

And my final objection is to the inevitable tax increases hidden behind supposed limited debt. As some of the subsidized businesses fail, or move due to insufficient revenue, the property tax income will dry up, leaving the TIFs as a general obligation on the local budget. In addition, the tax burden on neighbors of such businesses will necessarily increase, as t he burden increases on roads, police, fire, and other public services, while the increased tax income disappears down the TIF money pit. Letting businesses bear their own risks is only what capitalism has traditionally advocated, and let them contribute to the tax base just like their neighbors.

Of course, principal objections would only be relevant if TIFs actually succeeded in their intended purpose. For example, one study of TIFs in Pittsburgh found that an outlay of $130 million resulted in only $38 million in tax value for one project, a cost-to-benefit ratio of almost four to one. Iowa State University also reported a high cost-to-benefit ratio in that state . The latter study concludes that there is zero social benefit from TIFs, and reports a significant subsidy from existing businesses and residents to the new businesses attracted by the TIFs. How is that for "self-financing"? Here in North Carolina, the John Locke Foundation has also issued two reports ( Public Debt, Public Vote: Tax-Increment Finance the Wrong Approach and Some 'Fellow Behind a Tree' Pays for Bonds) opposing the use of TIFs.

Voters in this state should be outraged at the level of deception applied to take away one of the few controls we still have over our own government. But one issue should stick in every voter's craw: if Amendment One is so good for us, why are politicians going so far to take away our vote o n these bonds? If they are truly the financial miracle we've been told, we could be convinced on a case by case basis, just like traditional bonds . I urge NC voters to say no to corporate welfare, decreased accountability of government, and increasing taxes. Vote No on Amendment One.