JLF’s ‘Three Truths of Tax Reform’ report explains reform will leave N.C. government with enough revenue to fund core services

A key left-of-center criticism of tax reform plans under discussion in the North Carolina General Assembly involves the notion that reform would “rob” state government of revenue necessary to pay the state’s bills.

John Hood refutes that notion in his latest JLF report, which outlines “Three Truths of Tax Reform.” Here are some of the most salient points.

RALEIGH — The most likely outcome of tax reform negotiations in the North Carolina General Assembly is a plan that would lead to average annual state revenue growth of 3.2 percent to 3.9 percent. That’s a key finding in a new John Locke Foundation Spotlight report.

“Assuming that state General Fund revenue growth follows its 20-year historical average, state revenues would grow by 17 percent over the next five years under the state Senate’s tax reform plan, or by 21 percent under the House plan,” said report author and JLF President John Hood. “That means average annual growth of 3.2 percent under the Senate plan and 3.9 percent under the House plan.”

Those numbers fit with one “three truths of tax reform” spelled out in the report: Neither the House tax plan nor its Senate counterpart would prevent state government from funding core public services.

“In contrast to liberal criticism that the House and Senate plans would rob state government of necessary revenue, the reality is that the fiscal impacts of the two tax plans are relatively modest,” Hood said. “If enacted, they would leave most expected revenue growth over the next five years in the state treasury.”

The other two truths of tax reform: Tax bills under discussion now would constitute fundamental tax reform, not just broad-based tax relief for most households, and there is strong empirical support for the idea that reforming and reducing state taxes will increase job creation and economic growth.

“Whatever compromise tax bill the House, Senate, and McCrory administration are about to hammer out, expect liberal critics to hammer them on it,” Hood said. “But to most North Carolinians, the results will be clear: a simpler and more efficient tax code, lower tax burdens, and greater economic growth and prosperity in North Carolina. That’s real tax reform.”