Tax cut will have consequences – The Daily Reflector



Wednesday, July 24, 2013

When businesses weigh the option of locating in a particular state, the relative tax burden of the competing locales is but one factor that helps tip the balance one way or the other. Corporate leaders cite the strength of education — such as a public university system — the infrastructure network and potential quality of life for employees as other items to be considered, just as a family seeking a new place to live would do.

Republican leaders who drafted and approved the tax cut put great emphasis on reducing the tax burden for business in an attempt to reverse North Carolina’s high unemployment rate. Yet, their determination to ignore all other factors, as is reflected in the proposed $20.6 billion state budget poised to pass the Legislature, could well be a case of taking one step forward and two steps back.

Most North Carolina voters who elevated the Republican Party to a legislative majority and elected Pat McCrory governor sought changes to the state’s tax code. They may be disappointed, however, to see an attempt at real reform of an antiquated tax system was jettisoned in favor of a massive tax break that benefits the wealthiest individuals and North Carolina’s corporate citizens above all others.

GOP leaders are quick to tout the widespread benefit that such a tax cut creates, and that it will free would-be job creators to hire more workers. That remains to be seen, of course, but cannot be dismissed out of hand. Surely a company looking to relocate will consider a state with a lower corporate rate than its neighbors, and this change makes North Carolina more competitive by that measure.

Yet, decisions about relocation are not made in a vacuum, and one cannot view changes to the tax code without recognizing that the plan is not the “revenue-neutral” approach the governor sought. Raleigh will lose millions in annual revenue, forcing deep spending cuts to public schools, the university system, roads, mental health and social services.

It is a perfectly valid opinion to desire a smaller state government. Likewise, it is within reason to want a tax system that leaves more income for individuals and puts North Carolina on level footing with its neighbors.

However, these decisions have consequences, and they will be seen in Pitt County classrooms, on the campuses of East Carolina University and Pitt Community College and in the homes of families across this county scraping to get by. And they will be seen by those nebulous “job-creators” who may like the state’s lower tax rates but are still left wanting.