The first two recommendations in the Civitas Institute 2010 Agenda: “20 Changes for 2010: A Primer for State Reform” focus on policies that will promote job creation.
The Problem: High Unemployment and Slow Job Growth
In Dec. 2009, unemployment in North Carolina hit a 30-year high of 11.2 percent, which ranked 7th highest in the nation. The high placement in unemployment rankings reflects a decade-long trend. Annual unemployment rates here have been above the national average every year since 2000. Conversely, North Carolina’s unemployment rate exceeded the national average only once within the 25 years prior to 2000.
Similarly, North Carolina’s job growth has lagged behind regional job growth rates this decade. From January 2000 to December 2009, North Carolina expanded jobs at a rate of 2 percent, well below neighboring Virginia’s 10.5 percent, Florida’s 7.8 percent and Georgia’s 5.6 percent. Moreover, North Carolina job growth was less than half that of the South Atlantic region1 rate of 4.8 percent.
North Carolina’s ability to create jobs has been hampered by several failed policies. Tax rates that are highest in the region and among the highest in the nation create a disincentive for entrepreneurs to relocate or expand in North Carolina. In a misguided attempt to offset high state tax rates, lawmakers have opted for a steady stream of targeted tax breaks and corporate welfare handouts to a select group of politically-connected companies. Such a practice creates an uneven playing field and establishes unfair competitive advantages for the privileged firms.
The mix of high overall state tax rates combined with political favoritism in the marketplace is a failed recipe for job creation.
Solutions:
1). Ease tax burden on small businesses
An overwhelming 85 percent of voters said they would approve of a 10 percent tax cut to every small business, according to the April 2009 Civitas Institute poll. Moreover, 60 percent of voters said small businesses are better able to create jobs, compared to only 9 percent who replied “government” is better able to create jobs.
Recommendation:
2) Stop corporate welfare and level the playing field for all businesses
Voters were asked in a May 2009 Civitas DecisionMaker poll: “In order to create jobs, is it better to give targeted tax breaks and cash incentives to a few large companies or give across-the-board tax cuts to all small and medium-sized companies? An overwhelming 87 percent replied “across-the-board tax cuts,” compared to only 7 percent who said “targeted tax breaks.”
Recommendation:
1According to the Bureau of Labor Statistics regional definitions, South Atlantic region here refers to the states: Delaware, Florida, Georgia, Maryland, North Carolina, South Carolina, Virginia, and West Virginia
http://www.bls.gov/news.release/laus.t01.htm
2 Here the southeastern part of the U.S. includes: North Carolina, South Carolina, Virginia, Tennessee, Georgia, Mississippi, Louisiana, Kentucky, Arkansas, Alabama, West Virginia and Florida. Among these states, North Carolina's corporate tax rate is third only to Louisiana and West Virginia.