The Republican leaders decreased the business income tax rates with the claim that the tax cut will lead to job creation.  Also, the Republican leaders repealed the gross receipts tax that utilities have been paying. In 2015 and thereafter, that change will bring an extra $158 million a year to Charlotte-based Duke Energy and more than $107 million a year extra for Raleigh-based Progress Energy in their North Carolina operations.  The decrease in business tax rates and the repeal of the gross receipts tax for utilities will reduce revenue for the state of North Carolina and will give businesses more cash that can be used to expand their operations, create more jobs, and hire more workers.  But when firms have more cash, what do they actually do with the additional funds?  Do they really create more jobs?

For a variety of reasons, reduced taxes may not necessarily result in substantial job creation in this economic environment.  The key reasons are:

When a firm decides, for business reasons, to reduce employment or to close a plant, the decision cannot be overridden by a drop in taxes. In June of this year Dow Chemical Co. announced that it would close its manufacturing plant in Greensboro, which employs about 130 people, and move production to other sites in North America. This decision was not reversed by a reduction in its taxes.

Finally, the bottom line is this: a firm will expand and hire more workers only if it perceives that there is an increase in demand for its products or services. An increase in a firm’s cash resulting from a decrease in its taxes will not increase the demand for its products or services.

Thus, it is clear that granting firms more cash through tax reductions will not necessarily lead to substantial job creation and a decrease in our unemployment rate. Corporations’ loyalty is to their stockholders, not to employment in North Carolina. Actions to increase profits and stock prices are not always consistent with creating jobs. Corporations and governments today are in a cost cutting mode; we often hear corporate executives and Republican leaders talk about the need to cut spending or to cut costs. We must recognize that cutting costs often mean cutting jobs, not creating jobs.

To state that reducing business taxes will create jobs is misleading, self-serving, and dishonest. The Republican leaders have written legislation to benefit big corporations and wealthy corporate contributors; the decrease in tax rates does not create many new jobs and it reduces revenue to the state that is needed to support schools, universities, and other programs. The reduction in corporate tax rates is a give away to large corporations, and a transfer of North Carolina tax dollars to out of state corporate stockholders. The new tax laws should be reversed and a system should be adopted that is fairer to the working families of the middle class. VOTE DEMOCRATIC!!

It is ironic that while the new tax laws decrease taxes for large companies, they increase taxes on small businesses.  In 2013, the North Carolina tax law allowed a deduction of up to $50,000 of net business income for individuals.   In the case of a married couple filing a joint return where both spouses report a net business income, the maximum dollar amount applies separately to each spouse’s net business income.  Thus, a total deduction of $100,000 (maximum $50,000 each) was available.  This tax break allowed small businesses to put more money back into their businesses and provide for future job expansion (it is widely recognized that the major job growth in this country occurs in small businesses).  The Republican leaders eliminated this deduction for 2014, a move that has a negligible impact on large businesses but a significant impact on small businesses, mom-and-pop shops, start-ups and other entrepreneurs who create jobs.

Also, the Republican leaders have eliminated all state funding for the Support Center, a community development financing entity that supports small business lending.

Thus, the Republican leaders show a remarkable lack of interest in the welfare of small businesses, while increasing the after tax income of large businesses.

The reduction in corporate taxes has not been effective in getting companies to come to North Carolina.  Boeing and Toyota considered relocating to North Carolina, but went elsewhere.

We need a responsible approach to creating jobs in North Carolina:  VOTE DEMOCRATIC!!

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