Big Money Campaigns Won’t Mask Reality of Tax Shift Proposals in Raleigh

The expensive marketing campaign that an extreme, anti-government national  group launched in North Carolina this week to promote a great tax shift that will hurt the state’s economy flies in the face of the facts.

Arlington, Virginia-based Americans for Prosperity is throwing financial weight behind a plan that would  drastically cut North Carolina’s corporate income and personal income taxes. The billions of dollars in tax revenue lost due to the tax cuts would be replaced largely through a higher, expanded sales tax – or, just as bad, they won’t be replaced and North Carolina will lack the resources to  invest in the building blocks of economic growth.

Here are the facts that no amount of money spent on marketing can cover up:

  • At least 60 percent of North Carolina taxpayers would see their taxes increase — but the wealthiest 1 percent would get a tax cutUnder the concept being supported that would eliminate the personal and corporate income tax, a family earning $24,000 a year would see its taxes go up $500, while a family making $1 million a year would get a $41,000 tax cut. This is primarily because the sales tax would need to expand and increase to bring in the same revenue.  That sales tax rate could be as high as 12.5 percent to make up for the revenue loss from personal income tax elimination alone.
  •  North Carolina will not reap any short-term benefits from simply cutting taxes. Every dollar given away in a tax cut has to be made up for with a tax increase on another business or individual or with a cut to state services. At best, any benefit from a tax cut will be offset dollar for dollar, and result in no net economic  growth in the short-term.
  •  Cutting state and local income taxes does not boost the economy.  Among many similar studies a rigorous analysis by the Congressional Research Services clearly shows no relationship between top tax rates and rates of savings, investment and productivity growth.
  •  Businesses hire when customer demand for what they sell increases. Taxes have nothing to do with that. As we wrote about in a report on the harm of corporate income tax cuts released yesterday, without increased demand tax cuts will just raise profits to companies and dividends to shareholders with no economic benefit. On the other hand when demand increases businesses hire regardless of their taxes. Even if tax cuts did spur the economy the mount the average company would save wouldn’t pay many salaries.
  •  Cutting taxes puts at risk public investments that do help create jobs and build a strong economy. Abandoning investments in education, transportation or public safety, all of which are building blocks of a strong economy over the long haul, to pay for a tax cut that won’t create jobs puts North Carolina’s economic future in jeopardy. Businesses need a well-educated, highly productive workforce, access to markets and suppliers, a sound transportation system, and high quality of life for employees. That’s what North Carolina has offered over the years, which is why numerous surveys, studies and rankings show this to be a “business friendly” state.

Those who claim cutting taxes will spur job creation and economic growth ignore the reality that the opposite is likely to happen, in the short run and far into the future. No marketing campaign can mask the facts.  What’s underway in North Carolina is a great tax shift – not tax reform. That’s a direction North Carolina can’t afford to go.

4 Comments

  1. Doug

    April 19, 2013 at 10:30 am

    You need to get some facts from a non-partisan source if you really want to be credible. I know the leftists here eat it up, but the regular people of NC support tax reform. And if it decreases the NC government, all the better.

  2. Fred

    April 19, 2013 at 12:55 pm

    Yes, Doug! As a business owner, I too am in favor of the new tax reform! We DO need to increase our paperwork and red tape for small businesses through “tax reform” so that we can give even more tax breaks to Google and Duke Energy.

    Who isn’t in favor of making small businesses add 8% to the cost of their services, have them file tax paperwork 13 times a year instead of once a year, and have to pay a CPA $1000 a year to calculate their business net worth to pay the new tax on business assets. That is awesome! I love more paperwork and less sales due to higher taxes.

    Also, I agree that just like in Communist Russia, we need to make sure that people have to pay a $500 fee each year to run a business to the government before we even make a dime, get permission from the state to operate, and report all of your income to Raleigh each month so that they can investigate you for tax evasion if you fluctuate too much in income. Bring on Big Brother!

    Doug, I can certainly see how all this extra red tape, government intervention, more taxes on services and goods, and higher costs for everything will certainly help the economy! I am certainly glad I voted to help put the GOP in charge of the legislature so that they can help me decide to shut down my business and retire early (in another state). Thanks again!

  3. wncgirl

    April 19, 2013 at 1:59 pm

    and by non-partisan I am sure Doug means Civitas or John Locke… yeah Doug we know how you roll…

  4. Doug

    April 22, 2013 at 2:42 pm

    At least present both….I know how this site rolls and it will choose the most communist/socialist based view.

    But I would say look to some other economist or multiple economic sources. You are being short changed if you just look here for the spin. That’s why I look at Civitas and the Crotch.

    As far as paperwork….as if you are not filling out any right now. I will gladly take a sales tax on things rather than income taxes. I will at least have a choice to pay taxes and will actually probably pay more on average than the income tax. Income taxes are essentially obsolete in this day and time so we need to get on with some other way of funding the government.