[Editor’s note: At the same time that thousands of teachers and their allies have taken to the streets to demand dramatic improvement to North Carolina’s investments in public education, state lawmakers are poised to hand profitable corporations yet another round of income tax cuts. While such a move raises some obvious red flags – even from a superficial perspective – a new and detailed report from analysts at the N.C. Budget and Tax Center (“Corporations over Carolinians? Why North Carolina Doesn’t Need to Give Corporations More Tax Cuts”) dissects and explains this situation in detail.
The report’s conclusion: Cutting corporate tax rates even further is bad public policy and will inevitably lead to new and damaging cuts to public services and/or raising taxes that are paid by everyday North Carolinians. The following is from the report introduction.]
Big corporations and wealthy executives have been on quite a run. Corporate profits are at historic levels, stock prices are through the roof, and plush executive pay has become the norm. At the same time, corporate taxes have been slashed both here in North Carolina starting in 2013 and last December at the federal level. Unfortunately, cutting corporate taxes did not address our most critical economic challenges, and continuing to cut taxes will only undercut our ability to invest in people and communities.
Unless leaders in Raleigh change course, corporations could be in line for yet another tax cut next year if a scheduled rate cut to the corporate income tax moves ahead as currently scheduled. Cutting corporate taxes has already failed to make North Carolina an economic leader, has done nothing to revitalize many rural communities, and has left far too many working North Carolinians struggling to get by on marginal wages.
There are many ethical corporate executives that care deeply about their workers and communities, but the past few decades have seen a growing divide between the fortunes of the fortunate and everyone else. As decisions are increasingly geared to reward shareholders above all else, the connections between many corporate suites and the communities in which they operate has frayed to the breaking point. Today the average CEO makes around 270 times the annual typical employee earns. It wasn’t always this lopsided: In 1989, the gap was 59 to 1, but productivity gains since then have accrued primarily to corporations as profits, far outpacing what employees have seen in wage growth.
Recent corporate tax cuts risk deepening the divide between corporations and the communities where they do business. By reducing our commitment to vital public goods like schools, roads, and healthcare, corporate tax cuts are putting North Carolina’s economic future at risk.
Many corporations are already flush with newfound wealth after the federal cuts, so this is hardly the time to transfer even more from public to corporate balance sheets. It is time to take a break from the corporate tax breaks and get back to investing in North Carolina’s people and communities.
This report looks at how corporate taxes have been slashed at the state and federal levels, provides evidence that wealthy shareholders are the prime beneficiaries of corporate tax cuts, and shows that corporate tax cuts have not solved North Carolina’s most pressing economic problems. All of these facts point in the same direction: It is time to stop lavishing unneeded tax cuts on wealthy corporations, and get serious about ensuring that employees share in the wealth that they are creating.
Click here to read the full report.