Some North Carolina legislators want to put $1 billion down on a risky bet that has little to no chance of paying off.
That’s the annual cost of their plan to cut taxes for the wealthy and profitable corporations. It would mean less money for schools, health care, public safety and other linchpins of a strong economy, right when we need to invest more in those things to attract employers and strengthen North Carolina’s recovery from the Great Recession.
The House and Senate leadership are moving forward with similar plans to cut the personal income tax in a way that mostly benefits wealthy households, cut corporate income taxes and expand the state sales tax to make up for some of the cost. But not all of the cost. Both plans carry a potential price tag of between $500 million and $1 billion in lost revenue. Meanwhile, the vast majority of the tax cuts will go to the wealthiest taxpayers under both plans.
Supporters of these plans claim that slashing taxes will lure new businesses, create jobs and boost the economy so much that the state will still have all the revenue it needs. Reality proves otherwise. Most of the states that have cut taxes in this way actually experienced slower economic growth than the national average.
In fact, when North Carolina raised taxes in the past to increase support for public education, the state thrived. Poverty fell, household income rose and people continued to move here in droves. The tax plans moving through the House and Senate would make it impossible to repeat that performance. Not only would North Carolina’s schools and colleges be drained of resources just as the need for well-educated, highly skilled workers is greater than ever, numerous other services that we rely on to strengthen our economy and our quality of life would be threatened. Public safety, clean water infrastructure, health care, parks, aid for the elderly – all would likely face cuts. The tax plans would ensure that North Carolina would chronically lack enough resources to meet the needs of a growing state population and a changing economy.
In short, North Carolina would surrender its reputation as a leader in the South. Rather than showing the way with robust investments in technology, job training and other high-return ventures, the House and Senate want to import tax policies that have failed elsewhere. We have long been recognized as a state that values education, supports innovative industries and builds effective partnerships between business and government . These values aren’t sustainable under the tax approaches being considered in Raleigh.
A strong middle class is the engine of economic growth, and for years North Carolina was willing to make the investments needed to sustain that growth. This is no time to abandon the strategy that made our state a powerhouse. But that would be the result if the radical departures from North Carolina's values are enacted. And we would all be the poorer for it.
The author is the Director of the Budget & Tax Center.