South By North Strategies, Ltd.

The N.C. Budget & Tax Center explains why a reduction in the state’s nominal corporate tax rate will do little to boost growth.

In the short term, corporate tax cuts are unlikely to provide the needed local boost to support the economic recovery and job creation.  That is because, as research has found, the impact of tax cuts on corporate investment would not only be small but require years to fully take effect. Additionally, businesses are likely to distribute these additional dollars to their shareholders who are often living out of state.   Evidence has generally found that a 10‐percent reduction in total state and local taxes paid by businesses is likely to boost economic output and jobs by only about 2 percent. However, again, this does not account for the negative impact of the offsetting cuts to public structures that would be required to pay for such tax cuts.
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The job creation goals of the Governor and other policymakers are important to the state’s economic recovery.  But investments to achieve that goal must be cost‐effective in the immediate and long‐term.Cuts in the corporate tax rate are not targeted to business undertaking new investments, job creation or research and development.  Thus, they do not generate the kind of new economic activity that is needed to create more jobs.