John Hood writes for Carolina Journal’s Daily Journal that the federal tax reform enacted by Congress and signed by President Trump will enhance economic growth for the nation as a whole, and for North Carolina in particular.
Slashing America’s relatively high taxes on corporate income will encourage more domestic investment, business starts, business expansions, and employment. Reforming and reducing the personal income tax will also boost job creation and take-home pay.
Naturally, Democratic and progressive opponents of tax reform disagree about the net effects. They believe federal expenditures are, on balance, more helpful to the economy than private expenditures, and would rather keep taxes higher to finance the former at the expense of the latter.
So, what benefit will North Carolina see from this tax reform?
On employment, the Tax Foundation projects America will create about 1.4 million more full-time-equivalent jobs over the next decade than would have occurred under the old federal tax rates. About 37,000 of those net new jobs will be in North Carolina, according to this estimation model.
The Heritage Foundation’s model examines a different issue: how tax reform will affect take-home pay. It estimates that the average North Carolinian saved about $1,054 this year, representing a 12 percent decrease in federal tax liability, with larger average savings for married North Carolinians with two children ($1,913 per couple, a tax cut of 14 percent).
To sustain these gains in economic well-being and freedom, Congress and the Trump administration must also look to spending.
Federal deficits are soaring. And even if the current budget were balanced, the long-term cost of the federal welfare state vastly exceeds the revenues produced by either the previous tax rates or the current ones. In my view, we will need to control spending in virtually every department and agency of the federal government — eliminating some programs and applying strict income tests to others, including Social Security and Medicare, so that they become more explicit safety nets rather than notionally universal entitlements.
