IN FOCUS: Cutting corporate taxes won't help North Carolina's economy
Deep corporate income tax cuts being proposed by state lawmakers will put at risk key public investments that North Carolina businesses rely on for an educated and skilled workforce, quality roads , police and fire protection, court systems that protect intellectual property, and innovative research coming out of North Carolina’s universities.1 While proponents claim that the tax cuts would spur job creation and economic growth, in reality they are likely to harm the economy, in both the short- and long-term.
Under the two main proposals, the corporate income tax rate would be lowered to 6 percent from 6.9 percent. Both proposals also would change the formula used to determine a multi-state corporation’s income tax in North Carolina. The state currently uses a formula based on a corporation’s property, payroll and sales in North Carolina, with sales factored in more heavily. Under the proposals being considered by North Carolina lawmakers, the formula would change so that only the sales factor would be used.
NEW RESOURCE: Tax Reform in 2013
The Budget & Tax Center has promoted principled tax reform since our founding, and will continue to conduct credible, accessible and timely analysis during this pivotal legislative session. At this link you'll find reports, fact sheets, media links, blog posts, and other information related to proposals to eliminate the Earned Income Tax Credit, the personal and corporate income tax, and why maintaining these taxes is so vital to the future of North Carolina.
ABOUT OUR STATE REVENUE WORK
North Carolina’s revenue system funds investments in the public structures—schools, courts, hospitals, colleges, universities, and infrastructure—that are critical to building and preserving a strong middle class and a 21st century economy. It is not just important that North Carolina have adequate resources to make these investments but how that revenue is raised is important too. The Budget and Tax Center produces research on state and federal tax policies with a focus on how they support economic opportunity and shared prosperity in North Carolina’s communities.
As revenue modernization once again becomes a major topic of debate in North Carolina, it is critical that proposals and ideas are measured against the following principles:
- Equity – How much a family or business contributes in taxes should be based on its ability to pay. The wealthiest should contribute a greater share of their incomes in taxes than those who are low- or middle-income.
- Adequacy – The revenue system should be able to keep up with the needs of the state. Population growth and changes in demographics often cause increased economic activity and greater demand for public services and better infrastructure. The revenue system should grow with the economy so state government can meet those needs.
- Stability – The revenue system should not overreact to changes in the economy and policies, like strong Rainy Day Funds, should be in place to smooth the availability of revenue in difficult times.