After more than 20 years reporting on, studying and writing about North Carolina government, I’ve commented on hundreds of separate news stories, political campaigns and policy issues. But if I had to summarize my overall “take” on our state and local governments, it would be that North Carolinians don’t get a good rate of return on the (excessive) tax dollars they pay.
    In our private lives, we all constantly shop for bargains. That’s not to say that we always choose the lowest-priced good. We look for the best value for the dollar. Sometimes that may indeed mean buying the least-expensive product. But other times, we’re willing to pay more to obtain a more valuable outcome.
    {mosimage}Lots of North Carolina politicians use this line of reasoning to justify their favorite new programs and, when it comes time to pay the bill, new taxes or fees. But to assert that a new educational program will improve student performance, a new health care program will save lives, or a new transportation bill will increase public safety or mobility is not to make it so. Perhaps the program has been tried elsewhere and found wanting. Perhaps there are good theoretical reasons to doubt that it targets the right problem. And after the fact, you have data with which to compare the predictions of politicians to actual experience.
    One of my John Locke Foundation colleagues, Joe Coletti, has just completed a study subjecting my “take” to empirical analysis. It consists of two parts: 1) how North Carolina compares to other states in the cost of government, and 2) how North Carolina compares in recent economic, educational, social, and other trends. If our costs were relatively low and our outcomes were relatively high, that might well constitute evidence that North Carolina’s state and local governments were making good use of our money.
    You know where I’m going with this, don’t you? Unfortunately for taxpayers, Coletti found precisely the opposite. North Carolina imposes a relatively high tax burden but has lagged, not led, the region and nation in most outcome categories. Some key findings:
    • North Carolinians pay twice as much in state and local taxes, adjusted for inflation, as they did in 1983. As a percentage of income, North Carolina’s tax burden now exceeds the national average and is one of the highest in the South.
    • While North Carolina experienced better-than-average performance in some economic and social indicators during the 1980s and early 1990s, more recent trends aren’t as favorable. After Jim Hunt and the General Assembly created major new initiatives in the mid- to late 1990s, and Mike Easley and lawmakers raised taxes to finance them a few years later, the state’s progress actually stalled.
    • Since 2000, North Carolina students lost ground in reading and underperformed other states in math. More than half the states posted more improvement in crime rates than North Carolina did. For much of the decade, our road system deteriorated in quality and congestion compared with regional rivals such as Florida and Texas. Economically, North Carolina experienced rapid population growth, but job creation and income growth lagged the regional and national averages, sometimes badly.
    None of this is to say that North Carolina is a bad place to live and work. Governments matter, but their performance isn’t necessarily decisive. While taxes are too high and the return on tax dollars is too low, our state has many other attractive amenities. At least until recently, North Carolina’s land, energy and labor costs have been comparatively low. These are tremendously important variables that both households and businesses consider when deciding where to move or expand. In addition, and in tacit recognition of the fact that North Carolina’s overall governmental costs are out of line, state and local officials have become increasingly willing to offer targeted tax breaks and generous subsidies to big businesses, largely exempting many from the excessive tax burden that smaller businesses and households must shoulder.
What Coletti’s study shows is that progress in North Carolina has increasingly come despite rather than because of the policy choices of our politicians. Considering both governmental costs and outcomes, he came up with a letter-grade ranking of the rate of return that each state’s residents derive from the taxes they pay. Among the A states were Florida, Texas, and Tennessee. Virginia and South Carolina earned Bs.
And North Carolina? We got a D. There are states where taxpayers get an even-worse deal than North Carolinians do, but not many.
The good news is that our policymakers have plenty they can learn about government reform from the successes of other states — if they are willing.
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