By John A. Allison
John A. Allison
North Carolina is currently in the midst of what economists and social scientists would call a natural experiment. Last year, the state embarked on a sweeping program of economic, regulatory, and budget reforms aimed at shrinking the size and scope of government. Taxes were cut across the board, regulations simplified, and the growth of state spending has slowed significantly in the last two years.
These reforms are hardly unique. States like Texas have long had similar pro-growth, limited government policies that have met with great success. Still, North Carolina is notable for how rapidly and comprehensively it has changed its approach.
“When success is encouraged and celebrated rather than derided and taxed and when government lives within its means everyone ends up better off”
After the 2013 election, Gov. Pat McCrory and the Republican legislature he joined had quite a mandate for reform. The state’s economy had been growing at an anemic 0.3 percent (well below the national rate of 1.6 percent).
As the Cato Institute noted in our 2014 Fiscal Policy Report Card on America’s Governors, within two years, McCrory and the state legislature, led by House Speaker Thom Tillis, delivered one of the most impressive tax reforms of any state in recent memory. Three individual income tax rates were replaced with just a single, lower rate. The personal exemption was eliminated and the standard deduction was expanded, benefiting nearly all taxpayers. (For these efforts, North Carolina tied for the highest score on Cato’s report card.)
These reforms represent a departure for the state that has not been without criticism. Campaign ads have derided tax and regulatory reforms as giveaways to big corporations and the wealthy. Slowing the growth of the state’s budget, critics argue, will starve the state’s economy of vital government “investments” that would cost jobs. In a fit of hyperbole, New York Times columnist Paul Krugman called the state’s decision to exit the federal extended unemployment assistance program, rather than hike payroll taxes to fund it, a “war on the unemployed.”
Now is a good time to step back and evaluate whether these reactions to the act of reining in government are justified.
In public policy, what matters — or what should matter — is what works. What approach creates the most jobs and ensures the prosperity and well being of the most people? North Carolina’s program of reforms is testing the premise that a smaller government that …read more
Source: OP-EDS
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