Real Victims of the Corporate Income Tax? North Carolinians | Eastern North Carolina Now

    Publisher's note: This post, by Leah Byers, was originally published in Civitas's online edition.

    States and municipalities courting of large corporations such as Amazon and Apple has brought the folly of economic development tax incentives into the public awareness. Those incentives are intended to lure hand-picked corporations to the state at taxpayers' expense.

    Corporate handouts fundamentally create an uneven playing field for businesses within the state. Non-incentivized corporations must pass along the higher price of doing business to their workers (through lower wages) or customers (through higher prices). These added costs make them less competitive than businesses that receive special tax breaks. Thus, corporate incentives essentially allow government to pick winners and losers in the free market.

    Corporate incentives are not the way to strengthen our economy, so how can the state promote economic growth?

    Instead of offering tax relief to only a few companies, North Carolina should eliminate its corporate income tax altogether and end corporate welfare programs. As the country's leading state for business, North Carolina is in a position to be a leader in this area as well.

    A recent editorial by the Capital Broadcast Company called for movement in the exact opposite direction. They advocated a halt to the state's scheduled decrease of the corporate income tax in 2019, saying that the revenue collected by the higher tax rate is needed to fund government obligations. According to the article, one such obligation is providing "high quality of life to all its citizens."

    What the article fails to mention is the impact that a thriving business environment has on quality of life.

    The most recent report from the U.S. Bureau of Labor Statistics revealed that low-tax burden states had employment growth rates of 50.9 percent higher than average-tax states and 72.1 percent higher than high-tax states (Analysis here). That same report reinforced North Carolina as a consistent leader for unemployment decreases.

    Following this pattern, the elimination of corporate income tax would likely drive more economic growth. Businesses would want to locate in North Carolina, where they would have an advantage over businesses in other states with corporate income taxes. This would foster growth for all businesses, and not just those favored by politicians.

    Cultivating an environment where people can find work and be self-sufficient is the biggest impact state government can have on quality of life.

    Progressives like us to think that corporate taxes are a charge on the soulless, faceless big businesses. But the truth is that those taxes almost always get passed on to workers in the form of lower wages. Corporations are comprised of a collection of individuals; when taxes on corporations are raised, individual people ultimately bear that burden. Corporate income taxes allow government to extract more money from citizens of the state, without having to take the direct political blame for doing so.

    In summation, the corporate income tax: is felt most by average North Carolinians through lower wages; incentivizes lawmakers to meddle in the free market through selectively offering tax breaks; and hinders economic growth compared to lowering taxes across the board.

    North Carolina has lowered the corporate income tax in recent years, and the results are undeniable. But eliminating the corporate income tax entirely is the next logical step for North Carolina.