NC Budget and Tax Center

Days before teacher march, architects of slashing taxes defended cuts while providing no evidence of economic benefits

Senate President Pro Tem Phil Berger

Sen. Thom Tillis

A mere two days before thousands of teachers and parents arrive in Raleigh to voice their displeasure at the lack of investment in education, several architects of tax cuts enacted since 2013 (including former House Speaker and current U.S. Senator Thom Tillis and Senate President Pro Tem Phil Berger) defended their policies, often without acknowledging that their tax cuts are the central reason that we have under-invested in schools and communities for years. The event, hosted by the UNC Tax Center, brought together a group of elected leaders, scholars, and business people to discuss the impacts of tax cuts passed in North Carolina starting in 2013.

Elected leaders who slashed taxes largely did not address the harm of subsequent spending cuts. There was virtually no acknowledgement from the elected leaders who spearheaded the effort, that cutting taxes for wealthy taxpayers and profitable companies was the central reason that we have systematically under-invested in schools, roads, healthcare, digital infrastructure, and a host of other vital public needs since 2013. The question was raised by some business leaders, scholars, and audience members, but the elected leaders who bear the most responsibility for passing tax cuts largely avoided the harm that their policies have created.

No evidence presented that tax cuts boosted North Carolina’s economy. Absolutely no compelling evidence was presented that tax cuts have boosted North Carolina’s economy in a meaningful way. Scholars warned that state tax cuts often have very modest effects, even in the best cases, and that it is virtually impossible at present to isolate a unique effect in the North Carolina case.

Cutting corporate taxes more won’t help. Corporate executives and academic scholars largely agreed that cutting taxes on corporations doesn’t make sense right now. We’ve already reduced the corporate rate from 6.9 to 3 percent, and the rate is set to drop again to 2.5 percent in 2019. Both business people and scholars doubted that the additional cut would yield any economic benefits.

Tax cuts made inequality worse. The effect of recent tax cuts on inequality did not receive all that much attention in the discussion, but where it did come up, it was largely acknowledged that the tax cuts in North Carolina since 2013 have made inequality worse. Because the largest share of the benefits have gone to high income taxpayers, personal and corporate income tax cuts have shifted even more capital to the very wealthy. There was no counterpoint to the evidence presented that affluent taxpayers were the big winners.

Patrick McHugh is the Economic Analyst for the Budget & Tax Center, a project of the North Carolina Justice Center.

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