The misleading business climate ranking

| October 31, 2014

Chris Fitzsimonby Chris Fitzsimon, NC Policy Watch and NC SPIN panelist, October 30, 2014.

The people currently in charge of the General Assembly and their supporters are busy these days giddily touting the news that the right-leaning Tax Foundation has moved North Carolina up 28 spots in its 2015 rankings of state overall business tax climates.

North Carolina now ranks 16th after being 44th a year ago. That’s the biggest jump in the history of the misleading index and the think tankers on the Right see it as a compelling confirmation that Governor Pat McCrory and legislative leaders made the right decision in 2013 by slashing taxes, with most of the benefits going to corporations and wealthy individuals.

Sadly, much of the media is repeating the propaganda, claiming North Carolina is now a much better place for business too, without putting the Tax Foundation rankings in context which sheds a much different light on the “achievement.”

First, the ranking is solely based on taxes with no regard to how the state economy is going, how businesses are faring overall, or any measure of the quality of life for business leaders and their employees.

The more a state slashes taxes, the better it does in the ranking regardless of what damage the tax cuts inflict on the state’s schools and infrastructure, both of which are key factors on where businesses decide to locate or expand.
Theoretically a state determined to rise in the rankings could slash taxes to the point that public schools suffer greatly, with larger classes, fewer teacher assistants, a lack of textbooks, and shortage of classroom supplies. That ought to sound familiar.

Secondly, the entire philosophy of the Tax Foundation and its followers is that lowering taxes always translates into economic growth, but not only is there no consensus among economists about that, there are real life examples that prove otherwise.

Kansas may be the most glaring case study that casts serious doubt on the Tax Foundation dogma.  At the insistence of Governor Sam Brownback the legislature there passed one of the largest state tax cuts in history in 2012 to the delight of the folks on the Right, who guaranteed that an economic boom would result.

But now two years later, Kansas is struggling with massive revenue problems, slashing school funding and cutting essential services and the state’s economy is growing slower than the national economy as a whole. Not coincidentally the once popular Brownback faces a tough reelection battle in the still conservative state.

And finally, as the Center on Budget and Policy Priorities points out, the business climate index doesn’t even provide a clear picture of the taxes businesses actually pay in every state. Instead it cherry picks parts of the tax codes and ignores others. The Center quotes one economist saying the ranking shouldn’t be called a business climate index at all but ought to come with the title “Stuff the Tax Foundation Doesn’t Like.”

Remember all that the next time you see a headline touting North Carolina jump in the Tax Foundation business climate rankings. It’s not an analysis of how our state is doing at all.

It has little to do with the economy and isn’t even an accurate picture of the taxes businesses and individuals actually pay. And it ignores a long list of factors that business leaders rely on when making their decision about where to locate, from transportation to workforce readiness to quality of life for employees.

The Tax Foundation ranking isn’t any way to evaluate the decisions our leaders have made. It’s a flawed mechanism designed to reinforce an ideological agenda. And it ought to be reported with a little more context.

Category: NC SPIN Perspectives - Opinions from NC Leaders & Organizations

Comments (4)

Trackback URL | Comments RSS Feed

  1. Curt Budd says:

    And no one will bother to read your comments, as soon as you start resulting to name-calling to make your points.

    Giving all income tax brackets the same rate is fair, as long as you close the tax loopholes that some wealthy were, and many still, to avoid paying their fair share. But slashing income at the rate our legislature did, was just dumb. Now we face a revenue shortfall which will make the next budget even more painful.

    How is Kansas doing with these same financial theories?

  2. Norm Kelly says:

    How can you tell very quickly that this post was written by Chirs/a lib? Simple, when a source is referenced, it is preceded by an adjective that doesn’t sound nice. It’s not just ‘the Tax Foundation’. It’s the ‘right leaning Tax Foundation’. If Chris or ANY lib references a left-leaning, liberal, or socialist group, there is no adjective attached. Whenever a lib or Chris makes reference to a socialist group, they also reference it because it is a truthful & reliable source. When referring to a non-lib, non-socialist group, an adjective is placed first so you automatically start thinking the source is untrustworthy or misleading on purpose.
    ‘with most of the benefits going to corporations and wealthy individuals’. You mean, Chris, the majority of the people who ‘benefitted’ by a tax cut are the people who ACTUALLY pay taxes? That’s not right! What actually happened was that the state government decided NOT to STEAL so much money from those who earned it. Which every lib, socialist, and Chris considers illegal. Whenever a lib decides a ‘tax cut’ is necessary, it’s usually to buy more votes from low-information types, or they want to direct it to people who don’t pay taxes to start with. Which, as it turns out, are often the same group, as well as typically being demon voters!
    ‘much of the media is repeating the propaganda’. So, the challenge here Chris is that the media has departed from the demon party talking points memo? The media has decided that toeing the line YOU choose to follow just doesn’t cut it, so now they are your enemy? There’s finally some balance in ‘the media’ to reflect some positive news about the Republicans in Raleigh, and suddenly ‘the media’ is the enemy of the left instead of the allies of the left? Doesn’t take much for libs to turn on their allies, does it?
    ‘The more a state slashes taxes, the better it does in the ranking regardless of what damage the tax cuts inflict on the state’s schools and infrastructure’. So when the facts show that tax increases, always a demon scheme, do damage to the economy of a state, the government monopoly schools, and the infrastructure, do libs whine & complain about it? When tax increases hurt middle class families, like the demons raising the gas tax or the demons raising the sales tax, how many libs crawl out of the woodwork to whine & complain Chris? When it can be demonstrated that tax increases hurt the overall economy of the state, has Chris ever come out to decry those tax increases implemented by his allies in the Socialist Party of the US? This election cycle, what are the campaign ads b1tch1ng about? Not enough abortions are being allowed and/or paid for by tax dollars. Not enough taxes are being raised. Not enough money is being spent on government monopoly schools. Even though it was the demon party who last actually CUT government monopoly school spending. Since the Republicans have taken control of Raleigh, government monopoly school spending has INCREASED. No, it has not reached the same level that it was before the DEMON PARTY cut spending, but they cut so much that it’s hard to make up the difference in so short a timeframe. So, even when the demons/Chris’s allies controlled Raleigh, they were busy raising taxes and fees across the board, but they were also ACTUALLY CUTTING THE BUDGET OF GOVERNMENT MONOPOLY SCHOOLS! Emphasis added on purpose!
    The rest of Chris’s post isn’t worth reading. If the propaganda printed so far in his post is any indication of what’s in the rest of it, which it is because Chris always spews the socialist line, then the rest of it ain’t any more worth reading than this much of it has been. Ignore truth, ignore facts, spew out liberal talking points, liberal agenda, socialist schemes. Plans? No plans. Just the same old, tired, tried, failed, socialist policies of the demon party. Nothing new. Nothing to show there will be any change in result either. When you get a headache from banging your head on the wall, the typical response is to stop banding your head. Not so with socialists. No matter how profound the failure of their socialist schemes, the response from socialists is ALWAYS the same whine and always the same scheme. ‘The right didn’t allow us to go far enough in our schemes to be successful. If you just take the shackles off of us, we’ll be able to show positive results.’ Which does not happen, cuz it can’t. And then they whine again that they were held back. There is no end to whining from the left. There is no end to their repeating the same line without showing any results! Yet for some reason we are supposed to believe that their plans have ANY chance of success. Like concrete: all mixed up and permanently set!

  3. Richard Bunce says:

    Yet Chris fawns over teacher funding as if it is the end all and be all of K-12 education while ignoring the failure evident in the traditional government school assessment results. Hypocrisy in Chris’s world as money, in this case keeping it from the government and in the hands of the business that earned it, does not matter to business environment in while money, the government collecting it and spending it on traditional government schools, is the only metric that matters.