A Lesson in Stupid Tax Policy

North Carolina is a state with a huge budget deficit. It is one of the worst state deficits in the nation at $4.6 billion or 21% of the general fund budget for fiscal year 2010. In addition, North Carolina has the 5th worst unemployment rate in the country at 11.1%, and just missed the top 10 lists of the worst states in the country for business (39th here, and 38th here).

So how has the Tar Heel State proposed it solve its budget crisis and spur economic growth? Not by cutting spending of course. Governor Beverly Perdue has proposed $1.5 billion in tax increases, much of which will come from taxing online retail sales from companies that have no physical presence in the state.

So instead of angering the education lobby that helped her get elected, Governor Perdue is pursuing more taxes that will only cause further damage to North Carolina's suffering economy.

Amazon has already put affiliates on notice that they will be terminated once the law is enacted.

This means that not only will North Carolina once again be unable to collect the sales tax from Amazon, but also now they won't even be able to collect the income taxes from affiliates who profited from their relationship with Amazon in the past. That is a net loss in tax revenue resulting from a bill that was supposed to increase taxes by $1.5billion.

In short it is a recipe for disaster... [snip]

The one benefit the Amazon Tax has brought about is a wonderful teachable moment on stupid tax policy. Conservatives have espoused for decades that raising taxes actually reduces revenue coming into a government, and the example of the Amazon Tax illustrates that point perfectly.

States with serious economic problems right now should not be looking for more tax opportunities to artificially sustain bad spending habits. Instead they should take this time to prioritize their expenditures and make cuts as necessary...

[But first we need elect 'representatives' that understand this, or nothing will change.]

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