The Locker Room

Why not try capitalism?

Posted by Dr. Roy Cordato at 09:34 AM

When the Governor and the General Assemble get together next week to discuss the issue of jobs creation, they will be asking themselves an inherently contradictory question: how can we use socialism to create employment in an otherwise capitalist market system? That is what this special session is all about. Armed with the coercive tools of corporate socialism, the central planners in Raleigh will be trying to find ways to use their taxing and spending powers to manipulate the allocation of private sector resources.

The problem is that there is no personal political benefit that politicians can accrue by asking the right questions and applying the right answers. To do this they would have to admit that they are sitting in a room with a 600-pound guerilla of their own making—i.e. three years of massive tax increases and strangling new regulations.

One of the most basic principles of economic policy is that if the government raises the cost of doing something, less of it will be done. Over the last three years the Republicrats in Raleigh have dramatically raised the cost of entrepreneurship and business investment. North Carolina now has a five rate, steeply progressive income tax that punishes small businesses, entrepreneurial activities, and top management, i.e., the people who decide whether to move existing companies into the state. N.C.’s 8.25 percent top rate is one of the highest in the country and the highest in the southeast. Furthermore, North Carolina has the highest corporate rate in the region. Adding insult to this injury, in 2002 the Republicrats in an extremely bipartisan fashion passed the massive and costly regulatory burden known as the Clean Smokestacks bill. This was passed with no cost benefit analysis and no serious investigation of the claims that were made by left wing environmental pressure groups. In doing this both our Republican and Democratic legislators were able to pass themselves off as concerned environmentalists while buying off the support of utility companies with provisions that allowed them to pass all costs on to their customers.

If the general assembly were serious about economic growth and job creation they would first repeal all of this legislation and abolish the corporate income tax. Then they would work on a serious tax reform package, adopting a low flat rate tax system that completely exempts all saved income and capital investment from the tax base. In other words, if our representatives were actually concerned about economic growth instead of ribbon cutting ceremonies, they would seek to expand capitalism rather than diluting it with their self-serving brand of corporate socialism.

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