The Left insists government is better poised than you to spend more of your hard-earned money. Arguing against tax cuts, North Carolina Justice Center claims the tax cuts in the state’s new budget “will permanently reduce revenue that the state has available to pay for every area of the budget.”
In particular, some have argued that the government needs the money from the corporate income tax, one of the most detrimental taxes to economic growth, to “support the public schools, public health, and other public goods.” Even without a massive surplus, significant pork spending, and unprecedented federal stimulus, this argument is invalid.
Yes, the government uses our tax revenue to function and to fund many programs. But the argument that the corporate income tax revenue is needed for government functions is flawed.
Separate from the fact that the corporate income tax penalizes workers, the revenue from this tax is tiny and volatile.
See the below graphs. Even before the tumult brought by Covid, the state corporate income tax revenue is minuscule, making up less than 3.5% of total tax revenue in each of the four years prior to the Covid-lockdown riddled fiscal year of 2020-21.
Moreover, it is not a reliable source of revenue but is the most volatile source of tax revenue.
And without a corporate income tax, legislators could end the practice of doling out hundreds of millions in corporate welfare, which would help offset a portion of lost revenue.
Additionally, the corporate income tax comes with heavy administrative costs to both businesses and the collecting agency. Overall compliance costs for businesses have increased.
The General Assembly’s laudable efforts this year to phase out this tax will relieve businesses of burdensome compliance, liberate workers, and have a negligible effect on the workings of government.