RALEIGH (July 14, 2015) — North Carolina currently faces an important choice between two different paths for creating jobs and strengthening the economy, according to a new report from the Budget & Tax Center, a project of the NC Justice Center. One would make the state a research and commercial hub rivaling Silicon Valley and the Boston’s Route 128 corridor and the other would emphasize low taxes and lax regulation.

Governor McCrory often emphasizes the innovation-driven strategy, calling for North Carolina to become the third “vertex of innovation” through proposals that would build on decades of public investment in education as well as partnerships between research institutions and the private sector. However, the state also continues to reduce taxes, particularly for the wealthiest North Carolinians, and ask less of large, profitable multinational corporations when it comes to paying for public services. North Carolina now faces the decision about whether to compete on price or on quality.

“The low-tax strategy is about competing on price – making the state a cheap place to do business in the short run by reducing companies’ taxes,” said Patrick McHugh, policy analyst with the Budget & Tax Center and author of the report. “The innovation-driven strategy is about enabling North Carolina workers and companies to produce quality goods that cannot be found everywhere. Cutting taxes has already scaled back precisely the kinds of investment that are needed to compete with the Bostons and Silicon Valleys of the world.”

These innovation centers have both outdone North Carolina and our neighbors to the south in the aftermath of the recession. Massachusetts had 4.1 percent more jobs in February of 2015 than it did at the end of 2007, and even California, which was slammed particularly hard by the collapse of the housing market, has managed to get employment back to 3.4 percent above the pre-recession level.

Both states became centers of innovation through fostering world-class research institutions, public support for research and development, venture capital, welcoming new immigrants, creating a highly educated workforce, and enabling high employee mobility. They also created economic opportunities that extend beyond the companies and workers directly in the tech world, the report said, with technological innovation adding capital flow into local economies.

Unfortunately, cutting taxes here in North Carolina has already scaled back of precisely the kinds of investment that are needed to compete with the Bostons and Silicon Valleys of the world. Support for the University of North Carolina system has been repeatedly cut over the past several years, and worker retraining programs have not kept up with growing demand. Competing on quality requires significant public-sector support, calling into question whether the state can both enact more tax cuts and hope to succeed in the innovation economy.

“The low-cost model is not the wise course for our state,” McHugh said. “Competing on quality allowed California and Massachusetts to rebound from the Great Recession faster and will likely set them up for success going forward. As more and more of the U.S. economy transitions into an innovation-driven foundation, competing on price alone just isn’t enough.”

The Governor’s goal of seeing North Carolina join California and Massachusetts at the cutting edge is a very good sign, but another round of cuts, as proposed in the legislature this year, would push the state in the opposite direction. These other innovation centers offer vital policy lessons for North Carolina, including focusing on primary and secondary education, recommitting to excellence in public university research and training, strengthening public-private partnerships, and welcoming immigrants to our state.

Read the full report at this link.

FOR MORE INFORMATION, CONTACT: Patrick McHugh, patrick@ncjustice.org, 919.856.2183; Julia Hawes, julia@ncjustice.org, 919.863.2406.