For those who may have already read The News & Observer‘s story Monday on taxes and job growth in North Carolina, the study referenced in the piece ? and featured prominently in a related graphic ? is just as silly when you read it closely as it appears to be in the newspaper?s credulous coverage of it. Performed by the accounting firm Ernst & Young for a consortium of multistate employers, the study purports to demonstrate that North Carolina’s ?business taxes? are between 47th and 49th in the nation, depending on how you measure it. We actually received the study at JLF a few days ago, and I?ve been scrutinizing it. Suffice to say that its flawed design revealed its flawed conclusions, since the data seem to be correct.
Look for a more detailed analysis out of JLF later this week, but here?s a foretaste: 1) the study does not account for individual income taxes or consumer sales taxes, on the assumption that they don?t affect business sales, investment, or profits (insert giggle); 2) the study is based on FY 2003 data, when states more reliant than most on income-derived taxes were likely to report low revenue collections due to low or nonexistent recessionary profits (insert laugh); and 3) the study’s formula ends up putting the overwhelming weight on property tax collections, which is why high-tax hellholes such as New Hampshire, Wyoming, and South Dakota are at the top of the list in tax burden and such business-friendly climes as Maryland, Connecticut, North Carolina, and (on some measures) Massachusetts are near the bottom of the list (insert guffaw).
Common sense would suggest to most that a study ranking Tennessee, Alabama, Florida, and Texas has having significantly higher taxes than North Carolina is probably silly. And that common sense turns out to be an astute guide. Basically, this study provides convincing evidence that North Carolina has yet to attract as much (land-intensive) cattle-ranching, mining, and oil drilling as Alaska and Montana have. Thanks for the news flash.
