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The tax plan that North Carolina’s Senate leaders unveiled yesterday should not be mistaken for tax reform. It is, in reality, a plan to gut North Carolina’s schools, public colleges and universities, infrastructure, and other key state investments that promote long-run prosperity.

The plan’s massive tax cuts, which would mainly benefit large corporations and the wealthy, would cost the state $1.3 billion each year once fully in place, roughly the entire annual budget for North Carolina’s community colleges. Blowing such a massive hole in the budget would jeopardize the quality public schools, nationally-recognized public university system, and other assets that have attracted businesses — and jobs — to the state in industries like financial services and scientific research.

Other states that considered similar proposals this year backed off in part because of the reality that huge tax cuts for the wealthy must be paid for with untenable reductions in funding for schools and other state services, tax hikes on others, or both. The North Carolina Senate’s plan ignores that reality and opts instead for wishful thinking.

Claims that the Senate plan will cause North Carolina’s economy to boom are simply empty promises. Any boost from cutting income taxes will be canceled out by the spending cuts or tax increases the state will be forced to adopt to balance its budget.

Elimination of the corporate income tax is largely a giveaway to multistate corporations that — rather than creating jobs — will likely stick the savings in an out-of-state bank or use it to pay higher dividends to stockholders, most of whom don’t live in North Carolina.

The plan’s personal income tax cuts won’t likely create jobs, either. Most small businesses would get a tax cut so small that it wouldn’t even cover one worker’s salary. Plus, small businesses rely on state education, roads, and other services that would degrade year after year under this plan.

To ensure a bright economic future, North Carolina should focus on strengthening the K-12 and higher education systems that have set the state apart in the past but faced deep cuts in recent years due to the recession. Blowing a huge hole in the state budget would make that crucial task much harder. North Carolina has nothing to gain and much to lose from the Senate’s misguided plan.

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STATEMENT FROM THE N.C. BUDGET & TAX CENTER:

Senate tax proposal shifts burden from the rich to the poor

RALEIGH (May 7, 2013) — The Senate leadership has released a proposal that will harm working families and the broader economy.

By cutting income taxes and expanding the sales tax to more goods and services, the Senate leadership has pursued a shift in tax burden from the rich to the poor, not tax reform. The result is a plan that not only requires low-and middle-income families to pay more while the highest income families pay less, but also reduces the state’s ability to invest in a foundation for economic growth by cutting state revenues by $1 billion each year. That is equivalent to the entire community college system OR the combined budgets of the DHHS Divisions of Aging, Child Development, and Child Health and the Judicial Branch and NC Biotechnology Center.

 

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Bobby JindalMaybe it’s no coincidence that Senator Phil Berger’s new plan to cut taxes at the top, reduce public services and raise taxes on the working poor appears to have a lot in common with Louisiana Governor Bobby Jindal’s failed tax plan. It turns out the new and schnazzy website Berger unveiled today was produced by a conservative Louisiana ad firm – Innovative Advertising LLC.

As you can see by clicking here, the website domain www.nctaxcut.com is registered to: Read More

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The wonks at the Budget and Tax Center are out with a new report — “Cutting corporate income taxes won’t be an economic boon for North Carolina” — that ought to be a “must read” for state government leaders.

It lists three top reasons for not cutting corporate taxes:

  1. Corporate income tax cuts don’t pay for themselves and put key investments at risk.
  2. A very small share of corporations would benefit.
  3. Corporations are unlikely to expand or relocate because of state income tax cuts

It’s a quick, too-the-point read that you should check out too. Click here to do so.

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April 15Suggested readings for Tax Day 2013:

Joseph Stiglitz in the New York Times on “A Tax System Stacked Against the 99 Percent,”

Travis Waldron at Think Progress on “Five Ways the Tax Code Subsidizes the Wealthiest Americans,”

David Cay Johnston on the fast-shrinking budget of our national tax police, and, of course,

our own recent series – “Profiles in corporate tax avoidance” featuring profiles of Duke Energy, Merck & Co. and International Paper.