Reducing Taxes Hurts Everyone

Written By Guest User

In 1981, the Reagan administration abandoned the economic model that guided American administrations—Democratic and Republican—for five decades: “demand-side economics.” 

Rather than investing in infrastructure, education, and healthcare, “Reaganomics” focused on tax cuts for high-income earners and corporations. The big idea behind this “supply-side” strategy was that the benefits would eventually “trickle down” to the border population through job creation and capital investments. 

Cutting taxes for the wealthy and corporations while shrinking public investment has since become Republican dogma.

As the Biden administration has emphasized, the inherent flaw in trickle-down economics is that the wealth concentrated at the top doesn’t trickle down very far. Corporations and wealthy Americans have incentives to accumulate wealth rather than invest it in ways that benefit the majority of Americans. 

The result is a wealth gap in this country that has no precedent. Supply-side economics, with its mythical trickle-down effect, has perpetuated a cycle of privilege and disadvantage that over the past four decades has hollowed out America’s middle class and ravaged the towns and communities they once called home.

Our government needs tax revenue to provide the service we demand. In North Carolina, sixty percent of the state government budget is used for education: our public schools, technical schools, and state universities that rank among the nation’s finest. Twenty-three percent is for justice and public safety: courts, state troopers, sheriffs’ offices and police departments. Twelve percent goes for health and human services like Medicaid and mental health facilities.

We see the ill-effects of four decades of trickle-down economics all around us. Schools are struggling to hire and retain teachers and bus drivers. Finding quality daycare for your children or aging parents is nearly impossible for those with limited resources-a category that includes a growing number of us. Overcrowded courts fail to deliver on Constitutional right to a speedy trial.

Yet despite ample evidence, Republican leaders in our state continue to insist that the only way North Carolina’s economy thrives is with low or no taxes. For the last ten years, the state legislature has cut our income taxes in the neighborhood of $12 billion each year. This may sound good, but the impact is fatal. 

According to research from the nonpartisan North Carolina Budget and Tax Center, tax cuts have done nothing to stem the erosion of economic opportunities outside of North Carolina’s biggest cities. Almost two-thirds of North Carolina’s counties have fewer jobs today than existed before the Great Recession, and almost a third have lost jobs since North Carolina lawmakers first started implementing tax cuts in 2013.

Tax cuts mean:

  1. our teachers leave for other places or professions,

  2. our roads go without repair,

  3. our hospitals reduce services (11 hospitals have closed since 2005),

  4. our neighbors can’t afford medical care,

  5. our children go hungry. Over 27% of families of Transylvania County children live in “food-insecure households,” homes that lack consistent access to enough food for everyone under that roof. 

Our public primary and secondary schools were once the pride of the South. Today, North Carolina schools fall into the bottom third of schools nationally. Misguided Republican tax cuts are starving our schools and the children they serve. 

To add insult to injury, tax cuts overwhelmingly benefit the rich in North Carolina. The top 1% have 6 times greater savings than those at the bottom. 

Republican leaders have also passed laws to reduce corporate tax rates.

  1. Over the next few years, corporations will pay no income tax. This approach is based on the idea that when corporations pay no taxes, more businesses flock to North Carolina.

  2. This-according to trickle-down logic-causes economic growth because more people are hired. These new workers earn money who then pay more income taxes.

  3. Any loss from the corporate income tax is covered by the increased income taxes from the workers. 

Again, the data tells us that this well-worn myth just does not work. Lowering corporate taxes does not create more jobs.

  • Either the individual taxpayer picks up the lost revenue or we just “go without” services once deemed essential. 

Our lawmakers boast about their efforts to reduce taxes. They fail to mention the real cost of their tax cuts: a whole generation deprived of the opportunity for a better life.

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