The state's core investment.

• Author: Mooneyham, Scott
• Position: CAPITALGOODS

More than a decade ago, a writer for a national publication reported that businesses and governments were becoming "disillusioned with incentives." Apparently her powers of prognostication weren't preternatural when it came to North Carolina. More than ever, this state appears willing to hand out cash or refashion policy to induce major companies to build here.

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The latest effort involves a $1 billion data center that Cupertino, Calif.-based Apple Inc. plans to build in the state. As of early June, the company hadn't announced where but was thought to be considering a site near Hickory. To bring Apple here, Gov. Beverly Perdue and a majority of legislators were willing to rework the corporate tax code so that the company would enjoy a tax break worth $46 million over the next decade. That price might seem cheap when you consider that in 2004 state and local governments offered incentives worth as much as $280 million to Round Rock, Texas-based Dell Inc. to build a computer-assembly plant in Forsyth County. That plant, though, last year employed 1,400 (a figure Dell has trimmed since). When completed, the data center might never employ more than 50 workers.

The Apple project and the state incentives bring to mind a couple of parallels. In 1988, the state changed the corporate-tax formula to bring an RJR Nabisco cookie factory to Wake County. Back then, political leaders worried that adverse court decisions might undo incentive deals. To try to prevent that, they applied the change--double-weighting the sales part of the apportionment formula--to all companies paying corporate taxes. The effort didn't end well. RJR Nabisco ultimately decided not to build.

This time around, the tax break is being accomplished by again changing the formula by which corporate income taxes are figured. There's one key difference: The legislation is so tightly crafted around the size and type of investment that only Apple is likely to benefit. Even so, the inducement required rewriting the tax code rather than relying on the state's inventory of cash grants and other industrial-recruiting incentives.

The server farm that Mountain View, Calif.-based Google Inc. is building in Caldwell County is the other project with parallels to Apple. As with Apple, the operation is light on jobs and heavy on investment. Google is expected eventually to invest more than $600 million and employ around 210 people. The state agreed to sales-tax breaks on...