NC State Economist Mike Walden – “Tax Rates and Tax Revenue”


Mary: This is Mary Walden with economist MW welcoming you to the economic perspective. Today’s program looks at tax rates and tax revenue. Mike, it was recently reported that North Carolina’s state tax revenues for the first three months of the current fiscal year were down over $300 million from the same time period last year.  What happened?  I thought that with the economy improving, state tax revenues would also improve.

Mike:  Summary Answer

  1. State made some big changes to tax system last year – specifically reducing income tax rates
  2. Idea was to make the state more attractive to businesses and promote economic growth and jobs
  3. Issue is that much research over the past two decades shows that – especially initially – when reduce tax rates the economic base doesn’t grow enough to prevent total tax revenues from falling
  4. I think this is the situation NC is in now – we have had economic growth – indeed for the last 4 ½ years – but not enough to outweigh the reduction in the tax rates
  5. Long run may be different – wait to see
  6. I’m MW

Mary:  And I’m Mary Walden for the North Carolina Cooperative Extension Service.'

A native of the Texas Panhandle, Rhonda was born and raised on a cotton farm where she saw cotton farming evolve from ditch irrigation to center pivot irrigation and harvest trailers to modules. After graduating from Texas Tech University, she got her start in radio with KGNC News Talk 710 in Amarillo, Texas.