CJ Commentary: Don’t play favorites with business taxes

Syndicated columnist John Hood published a piece in Carolina Journal on targeted tax relief. Targeted tax relief works by – instead of lowering the general tax rates for all– offering certain companies or industries tax breaks and incentives. North Carolina has a history of supporting this system, as John Hood writes:

[Governor Roy Cooper has] requested and enthusiastically supported big tax incentives for companies that moved to or expanded their operations in North Carolina, including multi-million-dollar packages for Lending Tree, Honeywell, equipment manufacturer Greenheck Group, biopharmaceutical firm Cellectis, and Charlotte tech company AvidXChange, among others.

Hood also writes that, in order to defend these tax incentives, advocates have to make some major assumptions. As Hood states:

Advocates of targeted tax relief assume that they or some other state officials are capable of reliably distinguishing the worthy corporate recipients from the unworthy ones — that is, they can know with confidence which companies are economically vital and most sensitive to tax burdens…

There are surely North Carolinians who find these assumptions plausible. I don’t. I think economies are far too complex a set of systems to be measured, forecast, and planned at that level of detail. I don’t think it wise to put state officials in the position of choosing among “worthy” businesses or industries, which I suspect will inevitably lead to political favoritism and perhaps even rank corruption in the long run.

Read the rest of Hood’s column here.

Let’s look further into the issue.

Targeted tax relief is an expensive and inefficient practice which, at its core, is political favoritism. Targeted tax relief lets politicians pick and choose which companies to give tax breaks. This offering of tax breaks to a select few companies or industries leaves those businesses with a distinct advantage over others in an economy. Targeted tax relief is bad for the free market and bad for North Carolina; despite this, North Carolina continues to push for these perverse tax incentives to companies in industries like tech and film.

It is not the job of the government to pick winners and losers in an economy, yet that does not stop politicians from trying.  Learn more about targeted tax relief in North Carolina here.