While other countries commit, or re-commit, to freedom and free markets, the U.S. does the opposite as we endure the impacts of failed economic and social policies that have forced us out of the top 10 of a key indicator of freedom. Terry Miller, director of the Center for International Trade and Economics at the Heritage Foundation, writes for the Wall Street Journal about the 2014 Index of Economic Freedom.
It’s not hard to see why the U.S. is losing ground. Even marginal tax rates exceeding 43% cannot finance runaway government spending, which has caused the national debt to skyrocket. The Obama administration continues to shackle entire sectors of the economy with regulation, including health care, finance and energy. The intervention impedes both personal freedom and national prosperity.
But as the U.S. economy languishes, many countries are leaping ahead, thanks to policies that enhance economic freedom—the same ones that made the U.S. economy the most powerful in the world. Governments in 114 countries have taken steps in the past year to increase the economic freedom of their citizens. Forty-three countries, from every part of the world, have now reached their highest economic freedom ranking in the index’s history.
On the state level, North Carolina’s legislative leaders, and the governor, understand the key role that low tax rates have on prosperity. And they’ve acted — not just talked — with historic tax reform that sets the state for economic growth. JLF”s Roy Cordato explains here about North Carolina’s tax reform.
Sweeping changes target two areas: personal and corporate income taxes. The reform plan lowered tax rates and broadened the tax base. Changes to the sales tax were less wide-ranging, leaving current rates in place and expanding the base to include some services. The reform also eliminated the estate tax.
Overall, North Carolinians’ taxes are cut by about $4.75 billion over five years, assuming the state meets certain revenue triggers and implements the plan fully. That works out to no more than 4 percent of expected General Fund revenue during the period, and probably less if the economy grows as a result.
North Carolina’s personal income tax has had a graduated rate starting at 6 percent and climbing to 7.75 percent, the highest top rate in the Southeast. Tax reform ushers in a single 5.75 percent rate, with large personal exemptions and most loopholes and deductions eliminated. Exceptions include deductions for charitable giving and mortgage interest and property taxes.
The 6.9 percent corporate tax, also the highest in the Southeast, will be lowered first to 6 percent and then to 5 percent in 2015. Assuming the state meets revenue targets, the rate will drop to 4 percent in 2016 and 3 percent in 2017. Unlike the current tax, which combines a high overall rate with special breaks for favored businesses, new rates will apply to businesses across the board. Giveaways embedded in the current system are eliminated.
