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The market capitalism lovers at Forbes announced today for the fifth time in eight years that the Raleigh metro area is the nation’s best for business and careers. Here are the factors highlighted first in the story

Fueling Raleigh’s consistent results are business costs that are 18% below the national average, and an adult population where 42% have a college degree, the 12th best rate in the U.S. (30% is the national average). Raleigh is home to North Carolina State University and nearby schools include Duke University and the University of North Carolina at Chapel Hill. The area’s appeal has led to a strong inflow of new residents to the city, which boasts the sixth fastest net migration rate over the past five years. (Emphasis supplied.)

Perhaps the Forbes people could share this information with their fellow travelers over at the Raleigh-based Pope Center for Higher Education, which has been banging the drum for years that — we are not making this up — North Carolina has too many college students and graduates and the value of higher education has been “oversold.”

NC Budget and Tax Center

Supporters of the Senate’s billion-dollar-a-year tax cut proposal gave North Carolinians an earful last week about the need to improve our state’s “business climate.” Unfortunately, their comments in the debate on the tax plan reflected a measure  of business climate based on  a misleading and incomplete index manufactured by an organization dedicated to cutting all taxes, all the time and justifying it no matter what the facts might be.

Like many indices that claim to assess and compare states’ ability to compete for business investment, the Tax Foundation’s approach focuses entirely on taxes even though  a range of other policies are crucial for meeting the needs of business, creating jobs, and building a strong economy. So it’s no surprise that the results bear little resemblance to reality. 

So here are three reasons that the Tax Foundation rankings are the wrong foundation for making tax policy in North Carolina:

1.       They focus exclusively on cherry-picked tax policies the Tax Foundation just doesn’t like, rather than on the whole range of factors that genuinely drive business investment decisions.

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NC Budget and Tax Center

A new report from the Budget and Tax Center explodes two persistent myths about North Carolina’s economy that are often used to justify cutting taxes. First, the report dispenses with the false claim that North Carolina’s overall economy is uncompetitive compared to our neighboring states. Turns out that our state is leading or in the middle of the pack in every major indicator of economic health—except for the unemployment rate.

Leaving aside Virginia—an anomaly in the South due to the rapid, federally-fueled growth of its DC suburbs—North Carolina has the lowest poverty rate in the region, median household income second only to Georgia’s, and annual per capita economic growth second only to Tennessee’s over the past decade. That last measure probably would have topped Tennessee’s if not for North Carolina’s rapid population growth—the Tarheel State saw an 18 percent jump  in population between 2000 and 2011 (the sixth highest in the nation), while Tennessee had  11.6 percent growth over the same period. Even North Carolina’s loss in household income over the past ten years—while undoubtedly troubling—is not out of line with the losses in other states. 

This means we face an unemployment challenge, as opposed to a more deep-seeded problem with the state’s overall competitiveness.

Second, the report delves into the reasons for this challenge and finds that it is due to long-term over-reliance on a set of declining, less competitive manufacturing industries in comparison to surrounding states, and not to uncompetitive tax policies.  Specifically, the report finds, the driver of our state’s higher unemployment is decline in those specific industries that proved the most vulnerable to offshoring, outsourcing, and global competitive pressures—examples include textiles, apparel, and furniture—and happened to employ a larger share of North Carolina’s workers prior to the 2011 and 2007 recessions than were employed in other states.

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