John Hood eviscerates the schizophrenic arguments used by North Carolina liberals as they desperately seek ways to criticize the governor and legislative reformers. Hood’s example is liberal/Democrat support for our state’s misguided film incentive. At $61 million, North Carolina’s film credit is nothing more than special carve-out for a chosen industry.
Yet most of these same Democratic politicians and left-wing activists have previously argued that state taxes are not a significant factor in business decisions — that the taxes are too small to matter in the whole scheme of things and that states with lower taxes don’t grow faster, all other things being equal, than states with higher taxes.
Are movie moguls and TV producers the only business leaders who care about their tax burdens? Are media-production jobs the only ones that state policymakers should strive to attract and retain?
Here’s another consistency problem with the Left’s tax claims. Last year, when Gov. Pat McCrory and the legislature enacted historic, pro-growth tax reform — including the passage of a modified Flat Tax — liberals complained that the measure eliminated the state’s Earned Income Tax Credit. Citing its absence, they then claimed that North Carolinians of low to moderate incomes would actually experience a net tax increase from tax reform, with only wealthy taxpayers coming out ahead.
But when my colleagues and others pointed out that the state’s sales tax burden had dropped by nearly $1 billion in 2011, which lowered the burden on low- and middle-income taxpayers far more than the disappearance of the Earned Income Tax Credit raised it, liberals denied the significance of the event. The Republican-led legislature didn’t actually cut the state sales tax in 2011, they insisted. They simply failed to extend a temporary sales-tax increase that had been enacted two years earlier.
That’s technically correct, although whether to extend that sales-tax increase was a highly contentious and partisan issue during the 2011 legislative session. Here’s the problem, however: by that logic, the Republicans didn’t eliminate the Earned Income Tax Credit, either. It was also originally enacted as a time-limited measure, back in 2007, and was set to expire in 2013. The Republicans simply chose not to reauthorize it, arguing that the larger per-child tax credits and standard deductions for single parents with kids in the 2013 tax-reform measure accomplished a similar objective.
