North Carolina Business Group Says High State Taxes Hindering Economic Growth

Mar. 31 – High taxes are keeping the North Carolina economy stagnant and preventing new businesses from locating here, according to a John Locke Foundation study presented Tuesday in Burlington.

The report, “Climate Change 2004,” surveyed North Carolina business leaders who said corporate and income taxes are hurting the economy and quoted statistics that show North Carolina lagging behind other Southern states on key economic statistics.

Chad Adams is director of the Locke Foundation’s Center for Local Innovation and author of the study. He told a lunch meeting of the local chapter of Citizens for a Sound Economy that, by a 3-1 margin, business executives interviewed for the study said that an across-the-board tax rate reduction would do more to spur North Carolina’s economy than targeted incentives.

“What we’re finding is that business leaders are saying we believe lowering taxes is an incentive to create business,” Adams said.

The report painted a bleak picture of North Carolina’s economy, quoting statistics that showed:

–North Carolina lost four percent of its jobs between 2001 and 2004. That’s more than three percent more than the average for the Southern states and more than twice the national average.

–The state lost 20 percent of its manufacturing jobs between 2001-04, more than the national average and the average for Southern states.

–North Carolina trailed national and regional averages in non-manufacturing job growth and personal income growth.

Despite those grim statistics, Gov. Mike Easley’s office says North Carolina is recovering.

The governor’s office has announced the creation of hundreds of new jobs this year in places such as Yadkin, Catawba and Davidson counties, and in Charlotte. New call centers will bring more than 1,000 jobs to Wilmington and 900 to the growing space between Greensboro and Burlington.

Easley credits North Carolina’s Job Development Investment Grant, which distributes 15 grants each year with a total annual value of up to $10 million to new and expanding businesses.

“North Carolina has a diversified economy, and we are doing a good job to retain, expand and recruit business, industry and jobs,” Easley said in a recent statement. “Key investments have been made to educate and train our workforce for the high-skilled job opportunities, and that must continue. Despite losses in manufacturing and textiles, we gained jobs in the last 12 months, while the United States as a whole lost a net 220,000.”

The Locke Foundation, a conservative Raleigh think tank and advocacy group, polled business executives in 2002 and again this year. In both years, business executives rated state and local taxes as the biggest factor that reduces North Carolina’s ability to compete for new jobs. The government regulatory burden on businesses and the availability of skilled labor also ranked high both years.

Easley’s office has touted North Carolina’s recent No. 1 ranking in the United States for business climate by Site Selection magazine, for the third year in a row. An industry-funded study by Ernst and Young found that North Carolina’s business tax burden ranks between 47th and 49th in the nation.

On a Locke Foundation question that asked business leaders to rank the rate of return on state investment as good, fair or poor, only the state’s universities and community college system received more good ratings than fair or poor. The state’s public schools got a 22 percent good rating.

“So business leaders across the state are not real impressed with the K-12 system,” Adams said.

The survey also found that executives don’t think the state’s regulatory benefits justify their costs, believe immigration costs exceed benefits and think more highways will do more to reduce traffic congestion than rail transit.

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