The North Carolina General Assembly is returning to Raleigh for a special session on economic development. Rather than rush to push targeted tax credits and incentives for a few, lawmakers should pursue a broader examination of the factors under their control that really influence state economic growth. The wrong direction is to enact any set of policies that increase the state bureaucracy or the ranks of lobbyists seeking to arrange special “deals” for their industrial clients.
Defining and protecting intellectual property, generally referred to as patents and copyrights, and trademarks have been legal and political endeavors for at least the last several hundred years. In the United States, protections of intellectual property are enshrined in the Constitution. This paper discusses the concept of intellectual property from an economic perspective.
The North Carolina Justice and Community Development Center released a report in May that purported to demonstrate that 60 percent of North Carolina families with children were not receiving enough income to meet a “living-income” standard. This startling statistic was the result of gross exaggerations of cost and undercounts of income, including no accounting for child support payments. Moreover, the Center’s proposed solutions would increase poverty.
Gov. Easley's new incentives proposal would put political appointees into the position of doling out special tax breaks that amount to grants of taxpayer money to private businesses. Because of the unpredictable nature of a free-market economy, such a policy cannot claim to boost overall economic growth. A better policy would be to reduce North Carolina sky-high marginal tax rates on personal income, investment, and capital gains - which are among the highest in the country.
Gov. Mike Easley's proposed budget for FY 2002-03 includes $250 million in revenue from a state-run lottery that has yet to be enacted. Among many legitimate objections to the administration's idea are that expected net revenue is inflated by between 37 percent and 62 percent - creating a hole in the budget of as much as $96 million — and that the administrative costs of the lottery tax exceed both the cost of alternative taxes and any revenue "loss" to out-of-state lotteries.
North Carolina's approach to economic development policy has failed, with the state’s high tax burden, lack of industrial diversity, and hostility to entrepreneurial effort contributing to a painful decline in employment and competitiveness. Public policymakers should rethink their reliance on central-planning models and schemes to subsidize specific businesses or regions. Instead, the state should lower taxes and avoid costly regulatory mistakes like the "Clean Smokestacks" bill.
The ghastly terrorist attacks in New York City and Washington will have overwhelmingly negative consequences for the nation’s economy, despite the foolish suggestions of some that it will result in a net stimulus. North Carolina’s economy promises to be particularly hard-hit by troop deployments and faltering investor and consumer confidence. Now is the time for state leaders to dedicate themselves to strengthening the economy, not weakening it through massive tax hikes.
Policymakers should think carefully about the administrative costs of raising revenue through a state lottery. In effect, the state would be legalizing gambling, establishing a state monopoly on it, and then taxing gross sales at a 33 percent rate. The cost per dollar collected of this lottery tax would be 20 to 50 times greater than the cost of raising rates for other state taxes that already exist. The best course for the state is not to raise taxes at all but to reduce the size of government.
Economic Growth & Development by Author
Copyright 2020 John Locke Foundation. All Rights Reserved