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North Carolina: One of the 10 worst states for business
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This could very well be the headline in the N&O next year when the Tax Foundation publishes its annual ranking of best and worst places for businesses. In the 2009 edition, North Carolina ranks a dismal #39, just missing the worst 10 by 2 places. If the legislature and Governor Perdue pass the new taxes they are now promoting, the state will most likely make the 10 Worst List next year.
What makes the climate in NC so bad for business? Taxes. The 3 worst states for business are New Jersey, New York, and California – North Carolina’s tax rates are already in the ballpark of those states. New Jersey’s top individual income tax rate is 8.91, and the NC House has already proposed raising the state’s top marginal rate to 8.25%. New York’s corporate tax rate is 7.1%; North Carolina’s is 6.9%. New Jersey’s combined sales taxes are 7% -- the same rate the NC House is proposing in the 2009-2010 budget.
Amazon said yesterday it would stop paying commissions to North Carolina businesses who partner with it online to sell goods on Amazon’s web site if The House’s proposal to tax internet sales is passed. Message: businesses will not just accept the new taxes – they will adjust their operations where possible to minimize the negative effect of the tax.
Does anyone really believe North Carolina (unemployment rate now 11.1%) can extract another $1 billion from its economy through new taxes– without negative economic consequences?
The call for taxes might have a little more credibility if it were based on something other than politics. But that’s what this is all about – as the N&O pointed out yesterday, the education lobby strongly supported the Perdue campaign and was miffed about the .5% pay cut by the governor. The governor and others have been saying we cannot afford to "gut" education.
Some numbers: public schools account for $8 billion out of a total budget of $20 billion, or 37% of the budget. If public school cuts were made in proportion to the $1.5 billion in taxes proposed (37% of $1.5 billion), the reduction would be 6.8% from last year's public school budget. Mrs. Perdue herself, in her original budget for this year, proposed a 4.9% reduction in public school funding from 2008.....who is proposing to "gut" education?
But is it right to satisfy a special interest at the expense of statewide economic health?
There is a solution for this: temporary layoffs. State revenue is down because the economy is poor. This is not a permanent condition, and the problem should not be treated as permanent.
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