Of the four possible combinations, we at the John Locke Foundation have always favored the Freedom & Growth combination of low corporate taxation with low corporate welfare. Not only is that the combo that best promotes human liberty, but also it’s an empirically sound way to realize the fastest economic growth and expansion.
My research brief today looks at Gov. Roy Cooper’s choice: Central Planning & Cronyism. It’s the cardinal opposite from Freedom & Growth. Here’s an excerpt:
Gov. Roy Cooper chooses the Central Planning & Cronyism combo. It’s an approach that combines high corporate taxes with high corporate welfare. That explains his seeming hypocrisy of doling out millions of dollars’ worth of incentives to corporations even as he vetoed the state budget for including a corporate tax cut (the outdated franchise tax, not the corporate income tax). …
In total, Cooper pledged $146 million in grants to individual corporations while vetoing a reduction to the corporate franchise tax that would have allowed businesses in North Carolina, including small Mom & Pop shops, to retain an estimated $255.2 million.
Those incentives programs have a poor track record. News analysis found that from 2009 to 2016, JDIG and OneNC awards resulted in just over half the expected jobs. About 37 percent of incentivized companies failed to create even a single job. These poor results were in keeping with established research into corporate incentives, as well as forthcoming new research.
The franchise tax is something that only 15 other states even have, and unlike the corporate income tax, it doesn’t tax companies’ earnings, it taxes their net worth. It’s basically a double tax on corporate assets because it levies a tax on business capital and equipment, things that are exempted from the income tax.
The governor’s Central Planning & Cronyism program of trying to direct resources to certain corporations while taxing all the rest doesn’t help North Carolina. A policy of Freedom & Growth is the better path.