SCOTT MOONEYHAM: Arguments Continue on Taxes
The arguments are cyclical, even if the tax hikes are known as countercyclical.
A recession hits. Tax collections decline. Legislators wring their hands. After some posturing, they approve a tax hike to balance a budget in a state whose constitution forbids running a deficit into the next year.
As the tax vote looms, the arguing heats up. The party not in charge, usually the Republicans in North Carolina, describe the tax hike as a job killer. Democrats wave around economic development magazines that rank North Carolina's business climate among the best in the country.
The scene repeated itself this year as the North Carolina General Assembly raised taxes by $1 billion to help make up for state tax collections that declined by better than $2 billion.
Legislators went home more than a month ago. The arguing continues.
The liberal Budget and Tax Center recently issued a report suggesting that tax hikes wouldn't cause overall job losses. The report pointed out that the amount raised by the tax hike represents about one-third of 1 percent of the gross state product. It also noted that the tax hike will save public sector jobs.
Conservative critics responded that the report ignores basic economics, that any tax hike will reduce new private sector investment and inhibit job growth.
Some of those critics enjoy trying to tie the state's tax rates and tax hikes to its high unemployment rate. In their view, the golden goose had its feathers plucked a while ago. Anyone who doesn't see that the state's economy is no longer a high-flyer, but instead an ugly, honking critter that can't even get off the ground, is delusional, they say.
The truth is a bit more complicated.
North Carolina's unemployment rate, at 11 percent, is among the 10 highest in the nation. But are tax hikes and poor financial management to blame?
If so, North Carolina's influence must be spilling across state borders and out across the Southeast. South Carolina's unemployment stood at 11.8 percent in July. Georgia, Alabama, Florida, Tennessee and Kentucky all had unemployment rates between 10 and 11 percent, according to the U.S. Bureau of Labor Statistics.
Florida and Tennessee, by the way, have no personal income tax. Apparently that's no insulation to joblessness.
In fact, these Southeastern states still haven't recovered from the textile job losses of the 1980s and 1990s. That, more than anything else, accounts for the unemployment picture here.
Still, most economists would agree that pulling more money out of the private sector economy isn't a good thing when it comes to creating jobs.
One of those economists is Christine Romer, a top adviser to Barack Obama. She has argued that most tax hikes cause the economy to contract. It's why a key component of the federal stimulus plan is a tax cut.
Of course, it's easier to have those opinions in Washington than in Raleigh. In Raleigh, you have to actually balance the budget.
Scott Mooneyham writes for Capitol Press Association in Raleigh. Contact him at firstname.lastname@example.org.
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