One of the most eye-popping parts of the Senate tax reform plan is the proposed elimination of the state’s Corporate Income Tax, for a cost of $1 billion in foregone revenue each year. Although Senate leaders have expressed high hopes for the economic benefits of this tax cut, they are likely to be disappointed—corporate tax cuts have repeatedly been proved to be a poor strategy for boosting the economy.
Perhaps the biggest reason for this failure is that only a small fraction of the additional income given to these corporations through tax cuts is spent within the state giving the tax cut. And if North Carolina acts like the rest of the economy, then corporations will put just 10% of this tax cut back into North Carolina. The remaining 90% will be distributed to shareholder across the globe, or invested in other states and nations.
So why will North Carolina receive just 10% of the benefits of scrapping the corporate income tax? Follow us below the fold to find out.