Excessive Spending Prompts Excessive Taxation Which Leads to Job Loss

Freeze Spending Now

Raleigh, N.C. – The final joint meeting of the House and Senate Finance Committees studying tax reform wrapped up with a presentation by Brent Lane, Director of the UNC Center for Competitive Economies.  He discussed the recent history of tax policy in North Carolina and its effect on the state’s business climate.  From 2000-2009, North Carolina’s labor force increased by 329,012 workers; during the same period, the state’s economy added only 13,806 jobs—a shortfall of 315,206 jobs.  Further, wages in North Carolina fall significantly below the national average. 

Since 1997, when North Carolina first adopted incentives targeted at certain companies aimed at luring them to the state, per capita income in North Carolina has declined from 93 percent of the national average to 88 percent of the national average.  Additionally, a new study from the Small Business & Entrepreneurship Council says North Carolina has the fifteenth worst tax environments for small businesses in the country and the worst in the South.  (“Study slams N.C. on tax environment,” Charlotte Business Journal, 4/28/10).

Governor Bev Perdue recently presented her Fiscal Year 2010 -2011 budget proposal.  She claims this budget “spends 5 percent less per capita than FY 2008-09.”  Unfortunately this claim is not true.  From the Office of the Governor we obtained the state population estimates used for all other purposes. From her office and from Fiscal Research we obtained the actual spending levels for 2008-09, 2009-10, and projected for 2010-11.  These figures include federal stimulus dollars because this is what she proposes to spend. 

The results:

	2008/2009	2009/2010	2010/2011
Population – July 1	9,227,016	9,380,884	9,521,567
Spending	$19.6 billion	$19,952,863,857	$20,648,144,557
Spending Per Capita	$2,127	$2,127	$2,169

Spending per capita increases 1.94% under her proposed budget.  It does not decrease at all – much less by the claimed 5%.

Senate Republican Leader Phil Berger (R-Rockingham) said, “The formula for stalling job creation and driving businesses away from our state is well known at this point. Increases in state spending have resulted in high tax rates. High tax rates have choked out job growth. Still, as North Carolina’s unemployment rate remains in double digits, Governor Perdue has proposed a budget that increases overall state spending by nearly $700 million. These policies have failed North Carolina’s families and businesses in the past and they will not put our state’s economy back on the right track now.”

“North Carolina’s 2010-2011 budget need not exceed the spending levels of the current year, approximately $20 billion.  This amount includes federal stimulus funds,” said House Republican leader Paul Stam (R-Wake).  “The current budget signed by Governor Perdue imposed $1 billion in new taxes on our citizens in a time of severe recession and 11 percent unemployment.  We must live within our means and the Governor’s spending increase will only grow government at a time our citizens are demanding just the opposite.  We should freeze spending at current levels (per capita).  We know we can do it because we are doing it now.  The Democrats claim they can find efficiencies.  Let those efficiencies be all that is spent for new programs.“

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