Depending on the way it is measured, at least half of all workers are employed by small business and these firms account for two-thirds of all net new jobs. Thus, incentivizing the growth and proliferation of small businesses should be a key component of any state’s economic growth policy. Unfortunately, according to a new study by Thumbtack and the Kauffman Foundation North Carolina ranks the worst in the Southeast (Florida has the same ranking but beats North Carolina with many tax advantages).
The North Carolina legislature has made some improvements on easing some taxes and licensing, but many regulations and tax hurdles remain. When each state that touches your border has a friendlier environment for small business development, there is cause for concern and those in Raleigh should take notice.
As the North Carolina legislative session came to a close yesterday, Forbes recently wrote a summary of the progressive agenda within the Moral Monday crowd for the Tarheel state. It seems that those protesting in Raleigh, not only want the state legislature to provide a laundry list of government programs for North Carolinians, but also have little regard for bankrupting the state. The list of demands includes expanding Medicaid, state subsidized child care for all, and state-provided health insurance for all, which would require an almost ten-fold increase in the state corporate income tax.
The difficulties with this policy agenda are numerous, but the most troublesome reality of the Moral Monday protestors’ demands is the faith in government solutions to complicated economic and social issues. I use “issues” purposely because once we start to call all these resources needs “problems” we open the door to a grand plan for top-down government solutions (and faith that this top-down approach will solve all “problems”).
A fundamental shift is needed, among both the protestors and the policy-makers they seek to influence, in their perspective on the nature what government can and cannot accomplish. Additionally, economic growth in the state is the only means whereby workers can receive they resources needed to provide for their families and where firms can continue to invest in opportunities for future growth. Commanding more tax revenue from North Carolina businesses with higher state income tax (on top of one of the highest federal income tax rates in the world), will drive firms to other states further hampering both the state economy and the state budget.
If the recent economic downturn has taught us anything, it should be clear that economic stability (growing firms and subsequent job growth and positive investment opportunities) are not guaranteed by government policy but are the result of profitable incentives and market-driven change. Let’s set a policy agenda that results in stimulating economic opportunity instead of simply finding ways to extract resources from firms forcing them to look for opportunities elsewhere.