MEDIA RELEASE: Tax-financed public investments can create jobs, boost incomes

MEDIA RELEASE: Tax-financed public investments can create jobs, boost incomes
Investing in education, public safety, health care often more cost-effective than tax cuts

RALEIGH (Oct. 26, 2011) – Tax-financed state and local public investments – in areas such as education, transportation, public safety and health care – can create jobs and build stronger local economies, a new report shows.

Evidence from economic research demonstrates that using state and local tax dollars for public investments in education, transportation, public safety, and health helps to create jobs and increase household incomes in both the short and long terms, said a new report by the North Carolina Budget & Tax Center (BTC).

The majority of credible studies have found that reducing state and local taxes has, at most, a small positive impact on job creation and economic growth and only in cases when tax cuts haven’t adversely impacted public services. Because of balanced-budget requirements, the report said, state and local tax cuts almost always must be paid for with cuts to public investments that support jobs and strengthen the state’s economy.

Most studies have shown that the modest benefits of state and local tax cuts on economic growth take a long time to materialize and mostly result from large firms relocating from other states. In contrast to tax cuts, increasing public investments creates jobs and generates better economic outcomes for individual states and the nation as a whole.

“Since the economic future of North Carolina rests in part on the economic strength of the southeast region and the nation as a whole, state policymakers would be better advised to adopt an economic strategy focused on high-quality public investments rather than a ‘beggar thy neighbor’ approach of state and local tax cuts,” said Edwin McLenaghan, a public policy analyst with BTC and author of the report.

As lawmakers consider the economic future of North Carolina, they should look to the long-term investments, such as upgrading and maintaining highways, educating children, training workers, and creating safe communities, the report said. Some of these investments and services – such as roads, water, and law enforcement – boost economic growth by reducing the cost of business, while others like education improve worker productivity. The report added that even investments in public parks and the arts play a role helping businesses attract and keep high-skill workers at a lower cost.

For policymakers, making the most cost-effective use of public resources to achieve the public’s top priorities is critical, particularly at a times when such resources are scarce and both the national and global economy have been weakened, the report said.

“Sound public investments in schools, hospitals, colleges and universities, and a modern transportation network were critical to propelling North Carolina from one of the most impoverished states in the country to become a leading economy by the end of the 20th century,” McLenaghan said. “Only by building on North Carolina’s long history of investing in its people will the state emerge from the Great Recession in a position to thrive and compete in the global economy.”

FOR MORE INFORMATION CONTACT: Edwin McLenaghan, Public Policy Analyst, NC Budget & Tax Center, edwin@ncjustice.org, 919. 856.3192; Jeff Shaw, Director of Communications, NC Justice Center, jeff@ncjustice.org, 503.551.3615 (cell).

The N.C. Budget and Tax Center—a project of the N.C. Justice Center—seeks to create economic opportunity and shared prosperity for all North Carolinians through non-partisan research, education and advocacy on budget, tax and economic issues.