RALEIGH – Entrepreneurs, investors, and the vast majority of business leaders in North Carolina have little to fear from proposed lobbying reforms, according to a new report from the John Locke Foundation that examined the ways that special-interest lobbying affects the business climate.
John Hood, president of the Raleigh-based think tank, wrote that a Senate bill to require full disclosure of lobbying expenditures, create a “cooling-off period” before lawmakers can become lobbyists, and cap the value of personal gifts to public officials would not infringe on free speech or necessarily lead to legislation harming the state’s economic competitiveness.
“The interests of most people engaged in business across North Carolina are not necessarily the same as those of a few big-dollar lobbying operations,” Hood said. “Most business leaders and citizens alike opposed a series of state tax increases since 2001, but many lobbyists purporting to speak for them in Raleigh remained neutral or even supported the higher taxes that have hurt North Carolina’s economic recovery.”
Hood examined the available empirical data on the relationship between pro-growth fiscal policies and lobbying efforts. A concept in political economy known as “rent-seeking” – in which special interests seek favors from government at the expense of the general public – helps to explain why high-priced lobbying on behalf of individual firms or industries may harm rather than help the business climate.
For example, Hood found that among the seven Southeastern states for which Common Cause has rated lobbying laws and the Tax Foundation has rated the business-tax burden, North Carolina has both the least-stringent lobbying rules and the least-attractive tax environment. South Carolina, Georgia, Tennessee, and Virginia have each enacted at least three of the provisions of North Carolina’s lobbying-reform proposal, and each also has either lower marginal tax rates or fewer special tax breaks than North Carolina does.
“Laws that raise the cost of special-interest lobbying may not cause better fiscal-policy decisions,” Hood said, “but certainly one can conclude that there appears to be little economic benefit from making such lobbying easier, as North Carolina does.”
Hood also reported the findings of two national studies examining the factors that many believe influence state economic growth over time. Measurements of lobbying activity are negatively correlated with economic growth in the United States, he found, and the effect is stronger than for most other factors studied – including energy prices, public spending, or educational attainment.
“Lobbying reforms to require disclosure, limit personal gifts to public officials, and ensure that political insiders do not enjoy undue influence in the halls of power won’t injure North Carolina’s business climate, and may well improve it,” Hood concluded.
The Spotlight paper, “Budgetary Rent Control: Why Taxpayers Should Care About Lobbying Reform,” is available online. For more information, call JLF at 919-828-3876.