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Opponents of Tax Reform in NC Not Making Much Sense


Posted by Patrick Gleason on Thursday, July 11th, 2013, 1:07 PM PERMALINK


The temperature and rhetoric in Raleigh is heating up as the 2013 session of the North Carolina General Assembly hits the home stretch. As lawmakers get close to finalizing a tax relief package, opponents of tax reform appear to be getting desperate, so much so that their arguments are getting more incoherent by the day. Take the News & Observer’s Chief Political Writer Rob Christensen, a vocal critic of the tax reform plans passed by the House and Senate. Christensen penned a column last week attempting to discredit the Tax Foundation’s Business Tax Climate Index, which has been cited frequently by Republicans making the case for tax reform. Here's Christensen's critique:

“So what is the Shangri-La that North Carolina is now searching for?

Wyoming, a state with about the same number of people as Raleigh and Cary.

The Tax Foundation considers it the perfect state as far as taxes. Rounding out its top five of the lowest tax states for business are South Dakota Nevada, Alaska, and Florida.

And what are the states North Carolina is trying to avoid? The worst state, according to the Tax Foundation, is New York, followed by New Jersey, California, Vermont and Rhode Island.

Now you may have varying ideas about those states. But few people would argue that Wyoming, South Dakota and Nevada are the nation’s economic engines and that New York, New Jersey and California are the nation’s economic backwaters.”

Other than his personal preferences for certain states over others, Christensen offers no empirical or methodological critique of the Tax Foundation’s state business tax climate index, which ATR frequently cites. As it would happen, a look a Bureau of Economic Analysis data shows that the economies of the states that score the best on the Tax Foundation’s index and that Christensen derides for no apparent reason– WY, SD, NV, FL, and UT – grew by 66.9% on average in the ten years from 2002 to 2012. Meanwhile, the five states ranked as having the worst business tax climates – NY, NJ, VT, CA, and RI – saw average economic growth of only 39.7%.

Over the last decade, economic expansion in the five states with the most hospitable tax climates outpaced the five least welcoming by 68%, which is significant. Furthermore, the average unemployment rate amongst five states with the worst business tax climate is 7.5, while the five states that score the best on the Tax Foundation's index have a far lower average unemployment rate of 5.9%, well below the national average. Mr. Christensen might not personally want to live in WY, SD, NV, FL, or UT, but it’s clear that they are doing something right when it comes to tax policy and are outperforming the bottom five states on the Tax Foundation’s index. Left-leaning members of the media might thumb their noses at states they don’t consider to be hip or cosmopolitan, but a look at the facts indicates a tax code overhaul that left North Carolina with a more competitive business tax climate, as both the House and Senate plans would do, would be good for the state economy.

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