North Carolina lawmakers are barking up the wrong tree when they claim that corporate tax cuts, such as those proposed in the state Senate, will spur job creation and economic growth. In reality, those tax cuts will do more harm than good, in both the short- and long-term.
Every dollar that Senate Bill 677 would give away in a tax cut has to be made up for with a tax increase on another business or individual or with cuts to schools, health care and other vital services that provide a strong foundation for our economy.
This tax plan would cost the state $344 million once the tax cuts were fully phased in, according to the Legislature’s Fiscal Research Division. During a Senate Finance Committee meeting this week on the legislation, its sponsors noted that the tax cuts would be part of a larger tax overhaul that will be “revenue neutral” – meaning the lost revenue will be made up from somewhere. But they’re not saying where exactly.
Lawmakers are most likely to raise the sales tax and apply it to a broader range of goods and services to pay for the corporate tax cut. That means low- and moderate-income families would be digging deeper in their pockets for a handout to profitable corporations and wealthy individuals. Meanwhile, lawmakers decided to let North Carolina’s Earned Income Tax Credit—our best tool for easing the impact of the sales tax on low-income working families—expire at the end of this year.
This is the wrong direction for North Carolina, as lawmakers weighing similar tax shifts in other states – notably Louisiana and Ohio – have started to realize. Instead of counterproductive tax cuts, we need to invest in the kinds of things businesses, and North Carolina’s economy, really need to thrive: good schools; top-flight, affordable colleges; good roads; safe communities; and a healthy, highly skilled workforce.