Editorials

NC is no model for US tax cuts

U.S. Sen. Thom Tillis (R-NC) (2nd L) speaks as Sen. James Lankford (R-OK) (L) and Sen. Orrin Hatch (R-UT) (R) listen during a news conference announce the “SUCCEED Act” September 25 at the Capitol in Washington, DC. Tillis is also advocating federal tax cuts that follow the North Carolina model that passed in 2013 when he served as the state’s House speaker.
U.S. Sen. Thom Tillis (R-NC) (2nd L) speaks as Sen. James Lankford (R-OK) (L) and Sen. Orrin Hatch (R-UT) (R) listen during a news conference announce the “SUCCEED Act” September 25 at the Capitol in Washington, DC. Tillis is also advocating federal tax cuts that follow the North Carolina model that passed in 2013 when he served as the state’s House speaker. Getty Images

As Republicans prepare a tax cut package in Washington, D.C., North Carolina’s Republican Sen. Thom Tillis is telling them North Carolina should be their model. Tillis, who was speaker of the state House when Republicans passed sweeping tax cuts in 2013, says lower taxes triggered a boom in jobs and rising prosperity.

It’s predictable but still discouraging to see the state’s junior senator combining the illusions of trickle-down economics with the mirage of the so-called “Carolina Comeback.” And it’s especially worrisome that he’s advocating applying North Carolina’s lopsided and ineffective approach on a national basis. Those who know better, especially North Carolina’s three Democratic members of Congress, would do well to disabuse their colleagues of the notion there has been a tax-cut miracle in North Carolina.

In his Sept. 21 op-ed, Tillis declares: “North Carolina is proof positive that successfully enacting tax reform reaps tremendous rewards: more growth, more jobs, more businesses and more revenue.” Tillis says that since the General Assembly replaced the progressive income tax with a flat tax and sharply cut the corporate tax “more than 350,000 jobs have been created, and the unemployment rate has been cut nearly in half.”

Those numbers are true, as far as they go. But job growth has simply kept up with population growth and the unemployment rate has fallen sharply across the nation, in high-tax states and low-tax states.

Broader numbers indicate that North Carolina’s “tax reform” has not, or at least not yet, stimulated the state economy. Indeed, the austerity spending the tax cuts require may have undercut growth that would have resulted from more robust state investment in infrastructure, educational systems and people.

John Quinterno, a principal with South by North Strategies, a Chapel Hill research firm specializing in economic and social policy, says Tillis’ claims ignore the reality on the ground. Household income, adjusted for inflation, is about the same as before the recession hit in 2007. Wages are not going up. The poverty rate (15.4) is improving slightly but remains 1.1 percent higher than in 2007.

Essentially, the Republican approach of cutting taxes in ways that disproportionately benefit the wealthy and large, profitable corporations has not significantly improved North Carolina’s economy from 10 years ago.

“We are having growth, but it’s nowhere near adequate to lead to improvement in quality of life and well being,” Quinterno says. “If people aren’t better off that they were 10 years ago, that is a hollow victory. It’s nothing to celebrate. It’s saying the status quo is acceptable.”

And the status quo in North Carolina is not a model for the nation. Economically, the state is being pulled apart as its urban centers grow rapidly and its rural counties remained mired in the last recession.

On Wednesday, the Budget & Tax Center, a project of the nonpartisan N.C. Justice Center, released an analysis of the state’s August labor market data that showed how uneven economic progress is across North Carolina. One telling fact: 48 of North Carolina’s 100 counties had fewer jobs in August than before the Great Recession. And even some urban counties are losing ground. Rocky Mount and Goldsboro lost jobs over the past year.

The truth is that there’s little evidence that state tax cuts can spur a state’s economy while there’s abundant evidence that a failure to invest can stymie it, as has been recently demonstrated in Kansas. In any event, the tax cuts in North Carolina have only been in effect for about three full years. It’s too soon to assess how much they’ve helped or hurt the economy. And it’s far too soon for Sen. Tillis to be telling Congress to follow North Carolina’s example in shaping tax reform.

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