Targeted investments better to create jobs and spur economic growth, available evidence shows
RALEIGH (May 2) -- Evidence suggests that investing in public structures and state programs would generate more economic benefits to North Carolina citizens than cutting the state’s corporate income tax rate, a new report says.
In fact, cutting the state corporate income tax is more likely to hinder economic growth, according to a new report by the North Carolina Budget & Tax Center. The tax cut would cost the state $307 million in the next fiscal year, with the annual cost rising to $410 million after five years, with no promise or evidence that the corporations benefiting from the tax cut will create jobs.
Economic analysts in other states have estimated the cost per new job of state corporate income tax cuts would be between $83,000 (California) and $97,000 (Oregon), the report says. Research shows that North Carolina citizens would be better off if state lawmakers opted for proven investments in the state’s people to boost the local economy,.
North Carolina has the lowest state and local business taxes as share of the economy in the country, and fewer than one in six of North Carolina’s 175,000 private employers paid any state corporate income tax according to the most recent data, the report says. In addition, a mere 217 corporations—representing fewer than one in 800 North Carolina private employers—would reap more than half the benefits of any corporate tax cut.
“Like the rest of the state’s residents, small business owners would see little benefit from cutting the state’s corporate income tax while bearing the cost of higher personal taxes and reduced public services,” the report reads. “All types of businesses and all residents do, however, benefit from having a skilled, educated workforce, sound infrastructure, and public investments to improve quality of life.”
Policymakers have better, more cost-effective alternatives for promoting economic growth and job creation in North Carolina by investing in the people of the state, including customized job training, temporary wage subsidies to create new jobs for those facing long-term unemployment, and expanded access to high-quality early childhood education programs.
“The people of North Carolina expect their elected representatives to be effective stewards of public resources,” says Edwin McLenaghan, a public policy analyst with the BTC and author of the report. “Instead of joining the race to the bottom by cutting corporate taxes and the public investments those taxes make possible, state policymakers must demonstrate leadership and invest public resources in the programs most likely to pave the way to a brighter economic future for all North Carolinians.”