Assessing the corporate tax rate.

• Author: Gearino, G.D.
• Position: FINEPRINT

In any reasonable era, a year such as 2011--which is to say, a moment squarely between national election cycles--ought to be politically muted, a time of respite when the partisan troops rest by their campfires and debate the next day's tactics. But we live in the age of the permanent campaign, so no issue is too inconsequential to be endlessly engaged. Additionally North Carolina's state government now finds itself in a budget crunch, meaning costs must be trimmed and / or taxes raised. Put those two phenomena together, and you get the most Orwellian squabble imaginable: the debate over the state's corporate tax rate.

When it comes to tax discussions, the corporate tax rate is without equal as a political lightning rod. It's populism, economics, political belief and class warfare bundled together in a single tidy issue. Gov. Beverly Perdue has proposed reducing the rate from 6.9% to 4.9%, and that suggestion sent policy wonks into overdrive. The liberal North Carolina Justice Center, for instance, opposed the cut by arguing, in essence, that as far as the state's greater economic health is concerned, politicians are the better stewards of corporate profits. (Its exact words: " ... a further reduction of the state's available resources will not only be damaging to the state's public structures but in turn could undermine efforts to create jobs and build a stronger economy for North Carolina's future.") Meanwhile, the conservative John Locke Foundation supported the cuts and made the case that the corporate tax rate ought to be abolished altogether. The latter claim only makes me shake my head at the audacity it takes to tilt at that windmill. The first claim, though, leaves me gap-jawed with astonishment: There are people who seriously believe that money confiscated by the political system somehow comes out the other end and pays a premium to the economy?

But these are, obviously, philosophical differences. For all the certainty accompanying the predictions of good or harm that would come with a reduced corporate tax rate, it's really just theory springing from pre-existing belief. Still, there are two things to factor into the debate.

[ILLUSTRATION OMITTED]

The first is something called Hauser's Law, named for the economist who first noticed the relationship between tax revenue and the gross domestic product (which is to say, the economy). Hauser's Law postulates that no matter how much politicians tinker with tax rates--hikes, cuts...