I come from a family of newspaper readers. For most of my life, my family received two newspapers during the week and one on Saturday and Sunday. These newspapers were read from cover to cover. So I am one of those relics from the past who loves getting a print copy of a newspaper every day. Although I love to check the Internet for news, in my estimation there is nothing better than a hot cup of coffee and a good morning paper. I subscribe to the local paper and the Wall Street Journal (WSJ). But at times when the hefty WSJ renewal bill arrives, I debate whether the cost is justified. However, two articles on the July 19, 2008, Opinion page put that debate to rest.
The first article by Henry Olson, who is a vice president at the American Enterprise Institute and director of its National Research Initiative, discusses Sen. Barack Obama’s trip abroad and what he hopes Obama will learn from the Europeans. The second story features the byline of John Fund, a WSJ columnist who has been a featured speaker at several Locke Foundation Headliner Luncheons. Fund’s article talks about pork-barrel spending in Congress. However, both articles could also be applied to members of North Carolina’s General Assembly.
In the first article, Olson points out some amazing facts about European countries that should be embraced not only by Obama, but all North Carolina lawmakers. First, we must note that North Carolina has the highest state corporate tax rate in the Southeast. Second, the United States has the second highest national corporate tax rate within the 30 member countries of the Organization for Economic Cooperation and Development (OECD). Only Japan has a higher rate. Combine North Carolina’s rate with the federal rate, and this state’s corporate tax burden is on a par with No. 1 Japan.
But how does this apply to North Carolina and Olson’s article? Obama needs to see how Europe has “quietly embraced market-based reforms,” states Olson. This is also a concept that N.C. lawmakers should embrace.
Olson writes that many left-of-center European countries now understand that in a “globalized economy, wealth and investment are mobile, flowing to those countries that provide hospitable investment climates.” Because of this realization, many European countries are cutting corporate tax rates. Germany has cut its top marginal corporate rate from 39 percent to 30 percent. “Spain’s Socialist and Britain’s Labor government have also followed suit, reducing their countries’ top corporate rate,” says Olson. The Tax Foundation reports that six other countries have announced plans to cut their corporate tax rates.
These countries have recognized what N.C. lawmakers need to recognize. No longer does North Carolina just have to compete with surrounding states for corporate business; the state must compete with countries around the world. North Carolina lawmakers need to be a leader in cutting the corporate tax rate. At this point, lawmakers are locked into an incentive bidding war with other states and countries. The one with the most bucks wins. But as Locke Foundation fiscal policy analyst Joe Coletti states, “These monetary awards should not be labeled incentives; they should be called subsidies.” Joe further notes, “the term ‘incentives’ carries some positive connotations, so we all respond positively, while the term ‘subsidies’ is generally seen as bad, but what we are calling incentives are simply a specific type of subsidy.” By using the term “subsidies” North Carolinians understand that their tax dollars are often used to subsidize very wealthy companies. If the corporate tax rate is lowered, North Carolina lawmakers will create a friendly business atmosphere, while saving taxpayer dollars. In addition, this reduction would allow businesses already operating in North Carolina to grow and expand.
Olson also states that these countries are ahead of the United States in two other areas; his observations also apply to North Carolina. Many European countries have instituted pension reform. Sweden now includes “a private account option not too different than the one proposed by President Bush,” states Olson. Finally, Olson notes, “These progressives believe in reforming and guiding, not restricting the private sector,” a lesson that all lawmakers need to learn.
For a serious, but fun article, John Fund’s “Congress’s Edifice Complex” is just a good read. In the article, the reader learns that in this age of high taxes and a slow economy national lawmakers are using pork-barrel spending (though lawmakers prefer the term “earmarks”) to build monuments to themselves. As Fund points out, and as we have seen in North Carolina, sometimes our lawmakers embarrass us and end up in jail. By naming these edifices after living lawmakers, we take a chance that we will have a living memorial to corruption. In Fund’s article, we learn that Arkansas state Rep. Dan Greenburg introduced the “Edifice Complex Prevention Bill” to put limits on this practice in his state, which outraged his fellow lawmakers. “His fellow legislators treated him like the proverbial skunk at the picnic,” Fund says. Fund gives the reader one outstanding example of a lawmaker who used self-restraint, former Sen. Fred Thompson, who requested that he not be honored with a highway back home called “Fred Thompson Boulevard.”
After an hour of reading, I realized how much I had learned about our economy from Olson, and he challenged me to learn more about the effects of corporate tax rates in North Carolina, the U.S., and throughout the world. Hopefully, Obama, and N.C. lawmakers will soon be inspired to look into this issue. Fund’s article outraged me that my federal tax dollars go toward the creation and naming of memorials to lawmakers who represent other states. So there you have it, money and time well spent.