Fitzsimon File

The state tax debate will take center stage at a forum next week presented by the Emerging Issues Institute at N.C State.  The two-day event will feature national speakers ranging in philosophy from Steve Forbes to Paul Krugman. New Mexico Governor Bill Richardson and former U.S. Treasury Secretary Paul O’Neill will also appear.

The title of the event is “Financing the Future.” The point is to reenergize the debate about the reforming the state’s tax system, a debate that everyone involved in state policy agrees must happen soon to respond to the changing economy.

The problem comes after that. A working group that included this columnist met several times over the last few months to frame the discussion at the forum. There were a handful of issues on which the group reached a consensus, primarily that the sales tax base needs to be expanded and that tax credits designed for specific businesses or industries don’t make much sense.

The group developed a list of options, not recommendations for the Forum to consider, but even that list is problematic and reflects the constant distortions in any debate about taxes.

The first option listed is the reduction of the corporate income tax and lowering the tax rate on the wealthiest individual taxpayers in the state.  There is no option to raise either tax, only to cut them, a not so subtle endorsement of the view that current tax rates on corporations and the wealthy are too high and are hurting economic development.

There was no evidence presented during the working group sessions that the current tax rates make it harder to recruit new jobs to the state, only anecdotal stories about wealthy individuals leaving North Carolina and CEOs deciding against moving here because of the tax requirements.

Information was presented showing that as a whole, North Carolina’s tax system for individuals and corporations is not out of line with other states in the region or the country.  Property taxes are low for example, especially in counties like Wake, which is now considering a regressive sales tax increase to pay for school construction instead of raising the property tax.

Study after study shows that North Carolina continues to lead the nation in attracting businesses, making it clear that company executives understand they should evaluate the entire tax system when considering a move, not just one or two rates.

It is also clear that taxes are not the reason a company moves to a state. The quality of schools, an educated workforce, and a transportation infrastructure are all major factors, as is the quality of life for employees.

For those who argue that taxes are all important, the best evidence of how a state tax system compares to others is to look at where people move. A recent national study found North Carolina ranked third in the nation in positive migration, comparing the number of people moving into the state to the number of people moving out. 

Wealthy retirees continue to flock to North Carolina’s beaches and mountains. People want to live in North Carolina with the current tax system in place. It must not be too onerous.

The tax system should raise the amount of revenue the state needs to pay for programs and services that improve our quality of life and provide all families and businesses the opportunity to succeed. 

Our current system is regressive, inadequate and out of date. It needs to be replaced. But let’s don’t start the discussion considering tax cuts for corporations and wealthy.  We have been mislead long enough about that

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This entry was posted on Tuesday, January 31st, 2006 at 3:19 pm and is filed under Fitzsimon File. You can follow any responses to this entry through the RSS 2.0 feed.