Statement from the Budget and Tax Center on HB 200 Passing the House

The budget that passed today out of the House will not support the state’s economy—not now as we recover from the worst economic downturn in decades and not in the future.  By divesting from public structures that sustain continued and shared economic growth and community stability, the House budget will result in job losses, greater financial burdens on local government, and increased long-term costs due to unaddressed needs and family hardships.  The House budget takes a cuts-only approach to a new extreme: not only cutting back on public investments but cutting taxes as well.

Guided by discredited economic theories, the House leadership has taken steps to cut public investments without attention to the responsibilities and functions it must fulfill. The House budget has eliminated investments in effective programs that generate proven cost savings and widely shared benefits for the state, and all while proposing to cut corporate income taxes and increase fees. North Carolina is not, and should not be, a vending machine where the many pay to access government while big business pockets the proceeds.

Research from respected, mainstream economists demonstrates that reduced public spending in an economic downturn leads to worsened economic outcomes.  History bears out the value of public investment.  We know from actual experience that government support and policies in higher education, affordable housing, and rural community development in the post-war period supported decades of unprecedented economic growth and increased access to prosperity.

These cuts are being made because policymakers have foregone responsible fiscal leadership, overlooking many key budget-balancing options, including raising revenue.  Instead, they have “set aside” $230 million in revenues for an unspecified tax cut for corporations. Voting in favor of any spending plan without demanding even the basic details of the revenue side or consideration of revenue alternatives indicates a troubling level of disregard for sound fiscal stewardship.

Yet again, the economic theories guiding these tax decisions are unfounded. House leaders will instead squander the state’s limited resources on a strategy of corporate tax cuts that offers little but false hope for new jobs in the state.  A BTC report released earlier this week found little compelling evidence to support the assertion that cutting corporate income taxes will create any jobs at all, let alone the 460,000 jobs that we need to make up what North Carolina has lost over the Great Recession.

Furthermore, raising revenue only through fees puts forth a vision of government as little more than a vending machine where individuals pay for services received—and our communities are the worse for it.  The common good that government supports isn’t achieved through such a one-to-one exchange.  Governing, and financing good government, is about making shared investments that benefit all North Carolinians.

The House leadership has proposed a budget that will make North Carolina’s economic recovery more difficult in the immediate term by making cuts that directly impact middle-class and low-income families while allowing corporations to profit from these taxpayers contributions. As one member stated in debate today, the cuts proposed could even drive those corporations from the state, since no business wishes to locate in a state that cannot provide adequate infrastructure and an educated workforce.

The House budget reflects a fundamental refusal to acknowledge the real social and economic needs of North Carolina at this moment in time. The Senate can, and must, do better.


One Comment

  1. Nonanonymous

    May 5, 2011 at 4:14 am

    First off, we’re not in a recovery, not by a long shot, and not until the fraud and corruption that caused it is rooted out and uncovered.

    Second, what discredited economic theory, that cutting taxes and cutting spending will invite private investment, which is the one thing that will revive the economy, minus the fraud and corruption that caused the collapse in the first place. Neoliberalism is what is discredited, or will be, if we survive the Fed.

    The rest of your piece hinges on the first two points, and there’s no point in further debate. “History bears out the value of public investment”? Not when it crowds out private investment. The problem is federal, the symptoms are local and state.

    The middle class is an endangered species, unless wealth disparity and corporate tax reform is addressed. Who’s kidding who, here, Alex?

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