RALEIGH – Did big business in North Carolina win or lose in the state budget battle of 2009? Some would say it was a big winner because there was no large, permanent increase in income taxes. That sentiment is mistaken.

I’ve been around Raleigh long enough to have watched closely several state budget crises, beginning with the 1990-91 recession. Generally speaking, when state lawmakers start talking about responding to budget deficits with tax hikes, big business does not oppose them. Instead, the various business lobbies emphasize the dangers of raising taxes on their respective industries, so as to deflect legislative attention to other industries and tax options.

In the end, the “sinful” industries with less popular support or political heft – tobacco, alcohol, now Amazon.com – tend to get stuck with higher tax costs. There will sometimes be increases in income-tax rates, usually temporary. But most of the tax bill gets tacked onto the sale of retail goods, the burden of which is then borne by consumers, retailers, and the manufacturers of taxed goods.

It happened in 1991. It happened in 2001-03. And it just happened again. The vast majority of the $1 billion+ state tax increase that Gov. Beverly Perdue and the General Assembly just enacted consists of a penny increase in the sales-tax rate plus “sin” taxes. Only a silly person believes that billion-dollar-tax hikes don’t have an effect on a state’s economy and business climate. But if you’re the head of a large firm in the finance, legal, health care, or service sectors, a budget debate that ends with higher retail sales taxes might well be seen as a success.

However, I think big business exemplifies the risks of being penny-wise and pound-foolish. By refusing to bring their considerable heft directly into the debate in favor of a smaller, more affordable state budget without tax increases, business lobbies lose tremendous opportunities to improve the state’s business climate in the long run – and this year they even got stuck with higher tax bills, anyway.

At least temporarily, there will be a 3 percent surcharge on the income taxes that business owners and corporate executives pay into the state treasury. But that’s not the end of it. A legislated increase in marginal tax rates on individual or corporate income is not the only way the business community can get stuck with a higher tax burden. There is also the matter of tax-code compliance.

Included in the finance package for the 2009-11 budget is $300 million a year in higher revenues anticipated from higher tax compliance. At least half of that is expected to come from more aggressive pursuit of corporate taxes. While few would defend corporations getting special exemptions from taxes that other firms have to collect and remit to Raleigh, much of the additional revenue involves the anticipated resolution of disputes in complex cases about defining corporate income and allocating it across multiple states.

So if a company finds itself in court trying to defend what it considers to be a good faith attempt to comply with a screwy tax code, because the state has again raised its expenditures on aggressive litigation of tax cases, it can thank its lobbyists in Raleigh who focused only on blocking a statutory increase in tax rates rather than fighting a broader battle against government bloat.

Should North Carolina reform its antiquated and costly tax system? Of course. But most of those who advocate “tax reform” think that the aggregate tax burden of North Carolina households and businesses is too low. As long as business lobbyists think it expedient to cut deals with such “tax reformers” rather than working with fiscal conservatives on real reform of state government, the longer they will fool themselves into thinking that they are winning – even as North Carolina becomes less and less attractive a place to shop, travel, invest, or create jobs.

Look, I know why big business scowls at politicians who raise income taxes and winks at politicians who raise sales taxes. The latter is, politically speaking, the path of least resistance. But that doesn’t make the policy a wise one in the long run. North Carolina already has one of the most economically ruinous tax codes in the United States. It didn’t get any better in 2009, despite the fact that North Carolina also has one of the worst economies in the country.

I consider that a loss. Don’t you?

Hood is president of the John Locke Foundation