A better incentive? Kill NC’s corporate income tax
The recent buzz around North Carolina “losing out” on big projects from Amazon and Apple underscores politicians’ strong desire to pick winners and losers in the economy. Legislators from several states competed over who could lavish these corporate giants with the biggest handouts and tax breaks.
Doling out millions of taxpayer dollars and other political privileges creates unfair advantages for the few politically favored corporations while harming the many North Carolina businesses that have been paying taxes and creating jobs for decades.
Such crony relationships put big business and big government in bed together and not only create an unfair playing field, but an environment highly conducive to political corruption.
There is a solution, however. What if North Carolina could be a national leader in rejecting corporate cronyism, while at the same time creating more than 43,000 jobs and creating the fifth-best business tax climate in the nation?
How? Just eliminate the state’s corporate income tax. What better corporate incentive could there be than zero tax liability on all corporations operating in North Carolina?
In a study just released by the Civitas Institute, economists concluded that eliminating the state corporate income tax would create 43,000 jobs over the next decade alone and grow average worker salaries by more than $1,500.
According to the Tax Foundation, eliminating the corporate income tax would improve North Carolina’s business tax climate to fifth best in the nation.
And thanks to the economic growth, in just a short period, eliminating the corporate income tax would end up increasing total tax revenue to the state.
Granting tax breaks to favored companies shows that politicians recognize the importance of low taxes for job creation and economic growth. How about a tax break for all corporations, not just the politically privileged few?
Many economists note that the state corporate income tax is the most harmful to economic growth of all state taxes. While corporations are a favorite whipping boy of the political Left, the fact is corporations don’t pay taxes, people do. The people bearing the cost are shareholders, customers and employees of those corporations.
Guess who primarily benefits from the additional business investment spurred by the tax cut? Workers who are hired to fill the newly created jobs, and existing workers whose wages increase because investments in capital goods make them more productive.
In the end, benefits of tax cuts to “large corporations” accumulate mostly to workers.
Moreover, the corporate tax generates less than three percent of state tax revenue while being the most volatile source of tax revenue.
Corporate tax elimination would be a significant next step to accelerate the positive economic momentum North Carolina has enjoyed courtesy of the General Assembly’s tax reform efforts over the last several years. Such reforms have improved our state’s ranking in the Tax Foundation’s Business Tax Climate Index from 44th to 12th this year.
Let’s put more North Carolinians to work and put more money in their paychecks. And let’s put an end to unfair cronyism. Eliminate the state corporate income tax.
Donald Bryson is President and CEO of the Civitas Institute, and Brian Balfour is Executive Vice President. The Civitas Institute is a conservative think tank in Raleigh.
Incentives helped persuade LendingTree to create more jobs in Charlotte. Mayor Vi Lyles spoke at the announcement last month.