RALEIGH – They don’t know any better. They are victims of a mass psychosis. They are being hypnotized by political hacks. They’re liars.
Take your pick. One of these explanations must explain, in Gov. Mike Easley’s world, why leaders of North Carolina businesses large and small say they are worried about the competitiveness of the state’s tax structure. It can’t be because North Carolina’s marginal tax rates are actually harmful to the state’s economic climate. It can’t be, you see, because North Carolina’s tax burden on business ranks as the 49th highest in the nation.
As I have opined on this silly factoid repeatedly, including a glancing blow yesterday, it may seem as though I’m stuck like a broken record. Perhaps I am. But so is the governor. Long after he should have stopped making the claim, long after it became obvious that the study he is citing to back up his claim had absurdly left out most state and local tax collections, Easley continues to allege, and perhaps even to believe, that our state has among the lowest tax burdens on economic activity in the United States.
Our taxes are lower than New Hampshire’s, by his reckoning. I mean, you don’t have to be a corporate-relocation expert or economic-development professional to know that claim is silly.
Other data point in a different direction. The Tax Foundation just released another of its comparisons of state taxes affecting business and economic growth. North Carolina doesn’t show up as one of the highest-taxed economies in the country – few have made this extravagant claim – but it does show that our marginal tax rates on income are quite high and that, taking all state taxes into consideration, North Carolina imposes the most anti-business state tax burden in the Southeast. Taxes in Virginia, Florida, South Carolina, Tennessee, and Georgia are lower. Broadening the category to include all Southern states, only Arkansas ranks worse in business-tax burden than North Carolina. Further broadening the measure somewhat to include all state and local taxes, the overall tax burden in North Carolina remains higher than the regional average, though slightly lower than the national average.
I’m not going to suggest that North Carolina is, as a consequence, an economic basket case. Taxes are only part of the policy mix that influences – but does not determine – the health of state economies. North Carolina fares better than neighboring states on some measures affecting growth, such as unionization (there ain’t much), and worse on others, such as road condition and congestion.
It is true that North Carolina has had a larger net job loss since January 2001, measured either in job counts or percentages, than most of our neighbors. Our relatively higher tax rates on income and retail sales likely influenced the jobs trend not primarily by inducing the initial layoffs or business failures but by inhibiting our economic recovery and slowing the job creation needed to replace the lost employment in declining industries. There’s no need to oversell the point – that’s bad enough.
What makes the governor’s continued insistence on his taxation fables so disappointing is that one cannot have a meaningful discussion about public-policy options if there is no basic agreement on the facts. If he truly believes that North Carolina’s taxes are the about the friendliest to business in the country, the most charitable explanation is that Easley lives in Never-Never Land, not the United States.
Hood is president of the John Locke Foundation and publisher of Carolina Journal.