As newly elected governors confront their states’ grim fiscal reality, one promise that some of them made during the campaign should go in the trash along with the yard signs and the balloons from last night’s victory celebrations: cutting or eliminating their state’s corporate income tax.
At least six of the new governors elected yesterday promised corporate tax cuts as a way to boost the state economy. Governors-elect Tom Corbett of Pennsylvania, Nathan Deal of Georgia, and Terry Branstad of Iowa proposed sharp, across-the-board cuts in corporate income tax rates of between 30 percent and 50 percent. Governors-elect Rick Scott of Florida, Nikki Haley of South Carolina, and Scott Walker of Wisconsin promised to eliminate their states’ corporate taxes — over a three-year period in Florida, immediately in South Carolina, and at an unspecified time in Wisconsin.
As a recent Center report explained, cutting state corporate income taxes is not an effective way to stimulate economic growth and in fact is likely to be counterproductive. Briefly, here’s why:
In short, the evidence overwhelmingly shows that across-the-board corporate tax cuts aren’t an effective means of creating jobs. Ideally, new governors who have called for these tax cuts will recognize this reality and let these proposals slide down — and then finally off — their priority lists and focus instead on providing needed public services as cost-effectively as possible. But if they don’t, their legislatures would be well advised not to go along.