Path to prosperity?

Published July 21, 2013

Editorial, Greensboro News and Record, July 21, 2013.

North Carolina Republicans have delivered on their promise to cut taxes. Is it really that easy to attract new jobs?

North Carolina Republicans promised voters they’d cut taxes, and they finally got around to it last week.

They did not achieve the “historic tax reform” they said the state needed. That would have required broadening the tax base and drawing significantly more revenue from the service sector of the economy while cutting individual and corporate income tax rates. They also would have eliminated more of the exemptions, deductions and breaks that special-interest groups have fought to include in the tax code over the years.

There was little of that in the final package, prompting the most vocal proponent of tax reform, Republican Sen. Bob Rucho of Charlotte, to say only “the first itsy, bitsy step” was taken. Instead, the legislature produced a traditional Republican cure-all for an ailing economy: a big tax cut that delivers the most relief for corporations and wealthy individuals.

The poor and middle class aren’t left out. Most should pay less in income taxes, without being socked somewhere else. Their gains will be smaller, of course, and critics say some could pay more because of the elimination of child-care tax credits and other breaks. Also, a $100 tax cut won’t mean much if it costs $500 more to send the kid to a state university. Overall, the state stands to lose $2.4 billion in revenue over the next five years.

Gov. Pat McCrory, who helped forge the final bill as a compromise between House and Senate versions, abandoned one of his prerequisites: that tax reform must be “revenue-neutral” to ensure enough funding to pay for essential state services.

Republicans say, however, that lower tax rates will make North Carolina more attractive to job-producers. They point out, correctly, that our tax rates have been higher than those in neighboring states. So, by cutting the rates, our economy will soar out of the doldrums.

We can hope so — and voters did hope so last November when they elected these Republicans.

But tax cuts usually aren’t enough. High taxes didn’t drive textile and furniture companies overseas, and tax cuts won’t bring them back. McCrory knows from his years as mayor of Charlotte that businesses also rely on government services.

They want good transportation networks, an educated, healthy workforce, effective public safety, clean water and well-maintained parks. They don’t like festering social problems. So cutting taxes but neglecting education, roads, health care and other services won’t yield a net gain for the state.

And, if poor and middle-class North Carolinians take more notice of a decline in state services than of their tax cuts, Republicans will face a political net loss.

For now, they’ve met their biggest promise. They’ve enacted a tax cut. Democrats opposed the tax and spending cuts, so Republicans will deserve all the credit if the economy rebounds and confident employers start hiring workers by the droves. New jobs will cure a host of ills, including lack of health care and cuts in unemployment benefits. They’ll also generate more tax revenue.

Did Republicans, simply by cutting taxes, find the magic formula for reviving the state’s economy? North Carolina’s future depends on it.