news-record.com

Dueling budget notions

The liberal-leaning N.C. Justice Center’s Budget & Tax Center put out a brief today arguing that the tax increases lawmakers enacted this summer were relatively modest and would not hurt the economy as some, mainly conservative, voices have claimed.

They argue that the tax increases are both small when compared to the overall state economy and that most other states are doing them too, so North Carolina is just keeping in step with everyone else.

“Without this additional tax revenue many of the more drastic spending reductions considered this year would have been enacted, such as increasing class sizes in early grades and freezing enrollment in the state’s children’s health insurance program. Those cuts certainly would have caused job losses in both the private and public sectors, while credible research concludes the revenue increases likely will not negatively impact the job market.”

Click here to read the whole thing. One note if you do go read it: The original draft of this report sitting on the group’s website as I write this says “23% of the 2010 budget and 31% of the 2011 budget are supported by funding from the tax increase.” That should, I’m pretty certain, say “23% of the 2010 budget GAP.” The entire general fund budget is $19.1 billion. The budget gap was $4.5 billion or so…if you believe those who wrote the budget, but that’s another story.

That analysis prompted a response from the conservative-leaning Civitas Institute, who has consistently said the tax increases would be a problem.

How do they back up this fantasy-world claim?

First, they try the “oh, $1.3 billion in new taxes really isn’t much, so nobody will change their behavior” approach

[snip]

In short, the BTC brief does nothing to bolster its claim that higher taxes have no effect on job growth. Any basic Econ 101 theory will describe how job and economic growth is based largely upon the accumulation and investment of new capital and the proper incentive structure.

Click here to read their whole response.