RALEIGH, N.C. (WNCN) — It could take just four years for the state to recoup the tax benefits given to Apple for bringing a headquarters to Wake County, according to an analysis by two North Carolina State University researchers.
“This is a really big win for the state of North Carolina,” said Nathan Goldman, an assistant professor of accounting at N.C. State’s Poole College of Management who co-authored the study with lecturer Erynn Stainback.
The tech giant last week picked the Triangle for its first East Coast headquarters, a move that will bring 3,000 new jobs with an average annual salary of $187,000.
Apple is receiving $846 million worth of tax benefits over a 39-year period via the state’s Job Development Investment Grant program.
“Are the tax benefits that they’re going to provide to the state and to the local municipalities — are those going to be greater than the benefits that we have to give to that company, the cost to the state?” Goldman said.
“It can be recouped in as little as 4-7 years if you start adding in some of these other things that are going to be occurring simultaneously with the new employees that are coming in,” he added.
Goldman and Stainback lay out a series of six factors that piggyback off each other to shorten the projected length of time before that break-even point arrives.
For example, the most basic assumption — that those thousands of new workers at that average salary will pay the state’s income tax rate of 5.25 percent — results in the state receiving about $29.5 million in additional tax revenue per year, meaning the state would break even in 29 years.
“The other things start to add up, though,” Goldman said.
Apple is investing $110 million across the state, lowering the net cost to the state to $636 million — and shortening the break-even period to 23 years.
The company is also expected to pay $16 million a year in corporate taxes. Surrounding counties and municipalities also figure to see their tax revenues rise.
And Goldman and Stainback describe their estimate of 3,000 additional jobs not at Apple — but created as a result of the tech company’s decision to come to the Triangle — as “conservative.” The various taxes paid by those workers could yield the state another $56 million per year.
Taken together, those factors could mean the state would come out ahead seven years from the date the facility opens — with that period shortened even further, to four years, if those assumptions are increased over those preliminary estimates.
The additional tax revenues to the state could exceed $200 million per year. And over the course of 29 years, that could add up to more than $6 billion for the state.
“There is a lot of additional tax incremental tax revenues that are going to result from Apple locating their facility here,” Goldman said.
The key question — what should the state do with that additional tax money?
“It’s really important to keep in mind that these additional revenues are meant to be spent, are meant to be reallocated throughout the state,” Goldman said.
Now is the time to plan that spending, he says.
“For example, when you have 3,000 new people show up, we’re going to need more schools or more parks. We’re going to need better transit,” he said. “These are things that we need to start thinking about, not just when they get here, but even before they get here and whether there needs to be opportunities for us to begin fulfilling our infrastructure needs in this area before it gets too big and gets a little bit out of control.”
