Rob Christensen

Will NC become Utah of the South?

The “conservative revolution” in Raleigh was given a version of the Good Housekeeping Seal of Approval last week by the American Legislative Exchange Council, better known as ALEC.

North Carolina was newly ranked fourth in the country for its economic competitiveness, according to an ALEC study, jumping it from 22nd two years ago.

It has caused Republicans to break out the Cheerwine.

“We are proud of our recent tax reform efforts that impact all North Carolinians and lower the tax burden hundreds of millions of dollars,” said state Rep. Jason Saine, in ALEC’s news release.

Added Gov. Pat McCrory: “Fostering a pro-growth tax and fiscal policy environment depends on proposals like those championed in ‘Rich States, Poor States.’”

McCrory was referring to the name of the report by ALEC that was authored by Arthur Laffer, the father of supply-side economics, and the Heritage Foundation’s Stephen Moore, who has been a cheerleader for the record tax cuts in North Carolina in his columns in The Wall Street Journal.

The report judges states’ business competitiveness by 15 criteria, which are mainly related to low taxes, but also include such things as low unionization and the number of state employees.

The new report places North Carolina behind Utah, North Dakota and Indiana. The worst three states, according to ALEC, are New York, Vermont and Minnesota.

ALEC, a national group based in Arlington, Va., that drafts and shares model legislation, is held in high regard by the Republican leadership in Raleigh. But the problem with the group’s rating system is that it has a narrow-gauge, ideological focus. It assumes that tax policy overrides every other issue including education, infrastructure, the environment, climate and quality-of-life issues.

So does ALEC’s heavy reliance on supply-side tax cuts lead to better economies in the states?

You can’t tell it by comparing the 10 states that ALEC says are the models with the 10 states ALEC says are doing everything wrong.

1. The average unemployment rate in ALEC’s 10 most business-competitive states in February was 4.87 percent, while in ALEC’s 10 least competitive states’ unemployment was slightly lower at 4.74 percent.

2. There were 48 Fortune 500 companies headquartered in ALEC’s 10 most economically competitive states, compared with the 185 Fortune 500 companies located in its 10 least economically competitive states.

3. Only two of ALEC’s economically competitive states (North Dakota and Wyoming) were in the top half of states in per capita income. Eight of the 10 least economically competitive states were in the top half.

Prosperity puzzle

There are a lot of factors that go into whether a state is a rich state or a poor state, of course, including history, demographics and so forth. Taxes are certainly a consideration, but they are only part of the puzzle.

Even before the record tax cuts, North Carolina as viewed as economically competitive. North Carolina routinely was in the top 10 states in economic competitiveness in ratings released by Site Selection magazine, Chief Executive magazine, Forbes and CNBC.

The ALEC report was meant to praise North Carolina’s tax-cutting ways – and perhaps encourage it to go forward with proposals for even deeper cuts in corporate income taxes.

No doubt some conservatives want North Carolina to become the Utah or the North Dakota of the South.

But when you get beyond the rhetoric, there are real questions about whether the supply-side economics pushed by ALEC actually will deliver a better life for North Carolina’s citizens.

Christensen: 919-829-4532;

Twitter: @oldpolhack

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