In light of Arthur Laffer’s visit to North Carolina this week, a new analysis by the Institute on Taxation and Economic Policy on the Civitas/Laffer study for our state is particularly timely.
Their main findings are that the report:
“• Fails to control for a large range of important non-tax factors that affect state economic growth.
• Confuses cause and effect by assuming that declines in personal income in 2008 were due to taxes rather than the Great Recession.
• Fails to examine the impact of increased sales taxes on the economy.
• Makes claims that have been previously discredited by mainstream economists and relies on misleading and cherry-picked data.
• Ignores the importance of taxes in financing public investments that have a far greater positive impact on economic growth than reducing tax rates.”
Check out the report in detail here. It adds to the mounting evidence that the Civitas/ Laffer/Senate proposal is a bad one for North Carolina, not least because its case is not supported by the rigorous research needed for undertaking such a radical overhaul of the state’s tax system.