Less Taxes, More Revenue

Can North Carolina increase tax revenues by decrease taxing percentages? I think the answer to this is yes.

    If North Carolina reduced its personal income tax to 0% (from 7.75%) and it's corporate income tax to 5% (from 6.90%), then there is a strong possibility that our tax revenues would increase.

• First, it has been proven that American's move from places with high taxes (California, New York) to places with much lower taxes (Texas, Colorado). Lowering taxes would increase our population, increasing our tax revenues by increasing our tax base.
• Second, we must keep in mind that all money that people receive must be either consumed or saved. The marginal propensity to consume in America is very high, meaning that in North Carolina we would recoup a large portion of "lost" revenues through our almost 7% sales tax. Removing the personal income tax would increase consumer spending and the government would still recover most of their revenues, just in a different method.

Allowing most of the tax revenue to be generated through sales tax would allow a better appropriation of these revenues to different local governments. Since counties share in sales tax revenues, this would allow them to provide services more tailored to the individual needs of that local community. Allowing local governments to provide their own solutions to their specific problems is significantly better than having the General Assembly attempt to provide a "fix-all" solution.

North Carolina would not be the first state to implement a tax structure like this, it works wonders in Texas. Even California, in the 70s, noticed that when they decrease taxes, they can increase their revenues. A link with data from the ALEC is here.