Grover Norquist, President of Americans for Tax Reform, sent a letter to members of the North Carolina House of Representatives today urging them to support HB 998, which would represent a significant step towards tax reform in the Tar Heel state. The letter reads as follows:
Dear Members of the North Carolina House of Representatives,
On behalf of Americans for Tax Reform (ATR) and our members across North Carolina, I write today in support of the HB 998, a bill that would begin to fix the state’s broken and anti-competitive tax code. This proposal, which you will be called to vote on as early as this week, provides significant tax relief to individuals, families, and employers across North Carolina and does so in a way that makes the tax code more efficient. North Carolina has the highest personal and corporate income tax in the Southeast. HB 998 would relieve North Carolina of this dubious distinction.
Just about every study on taxes & economic growth published in a peer reviewed academic journal in the last three decades find that high taxes harm growth. It is clear that North Carolina’s onerous tax rates are hindering the state. It is no coincidence that North Carolina has both the region’s highest unemployment rate and income tax rates. In fact, not only do North Carolina’s lower tax neighbors have healthier employment rates, but they also saw jobs come back at a greater clip since the peak of the recession. As the chart below shows, North Carolina’s terrible business tax climate, ranked 44th in the country, has left the state with the weakest jobs recovery and highest unemployment rate in the region:
|
State |
Top Marginal Income Tax Rate |
2009 unemployment rate |
2013 unemployment rate |
Percentage change from 2009 to 2013 |
|
North Carolina |
7.75% |
10.4% |
8.9% |
14% reduction |
|
South Carolina |
7% |
11.5% |
8.0% |
30.4% reduction |
|
Georgia |
6% |
9.8% |
8.2% |
16% reduction |
|
Virginia |
5.75% |
6.9% |
5.2% |
24% reduction |
|
Tennessee |
0% |
10.7% |
8.0% |
25% reduction |
(Source: Bureau of Labor Statistics)
The tax reform plan put forth by Rep. David Lewis represents a huge improvement from the current code and would make the state more attractive to job creators and investors. According to the non-partisan Tax Foundation, North Carolina’s business tax climate is ranked 44th, meaning that only six other states have a less hospitable business tax climate. Rep. Lewis’s proposal, if enacted, would cause the state to jump from 7th worst, to the 19th best business tax climate in the nation. The plan also represents a significant step toward the ultimate goal of getting rid of the state income tax, which would be a boon to the North Carolina economy. From 2000 to 2010, the nine states with no income tax greatly outperformed the nine states with the highest income tax rates. Over the last decade, economic growth was 38% higher in the no income tax states. No income tax states saw 5.4% job growth over that period compared to a 1.7% net reduction of jobs in the nine states with the highest income taxes.
Bringing down the personal income tax rate would provide much needed relief to individuals, families, and small businesses, the majority of which file under the individual income tax system. However, the corporate tax relief included in HB 998 is also important, for it is not corporations that pay taxes, but people. There is an emerging consensus among economists that at least $0.60 out of every $1.00 the corporate income tax collects is paid in the form of lower wages for workers and lower returns for shareholders. Furthermore, the corporate tax brings in such a paltry share of state revenue that it is simply not worth the economic harm it causes.
I urge you to not miss this opportunity to fix North Carolina’s broken tax code and to provide much-needed relief to taxpayers. ATR will be following this issue closely and will be educating your constituents as to how their representatives in the General Assembly vote on this important matter.
To view a PDF copy of the letter, click here.