off the charts
BEYOND THE NUMBERS
BEYOND THE NUMBERS
The radical tax bill that North Carolina lawmakers passed today—and that Governor Pat McCrory is expected to sign — has two dangerous implications for other states.
- It redefines “tax reform” to include proposals that fail the fundamental tests of fairness and revenue adequacy.
- It threatens a new tax-cut war among the states that, in the end, would benefit no state’s economy.
- First, it’s not likely to work. Numerous academic studies haven’t found a consistent connection between tax cuts and state economic growth. Recent history also shows that deep cuts in income taxes don’t fuel growth: the states that cut taxes the most in the 1990s grew more slowly over the next economic cycle than other states. The frequent claim that rich people will flee higher-tax states for lower-tax ones turns out to be a myth.
- Second, despite this lack of empirical support for the tax-cut strategy, some policymakers in other states undoubtedly will cite North Carolina to push for tax cuts of their own. Several national organizations, including the American Legislative Exchange Council and Americans for Prosperity, have made large state-level tax cuts for the wealthy a major part of their agenda. Already, Virginia gubernatorial candidate Ken Cuccinelli has proposed deep cuts in personal and corporate income tax rates. As neighboring states seek to mimic North Carolina, any advantage the state might have hoped to gain over the others will disappear. When every state enacts the same tax break, all they’ve done is ratchet down their ability to pay for good schools, roads, police and fire protection, and all the other critical services that make them places where people and businesses want to stay for the long haul.
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