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OPINION: The ‘Rucho Strategy’ Failed North Carolina

Robert A. Rucho, architect of the 2013 NC tax reform plan. (Photo courtesy of NC General Assembly)

Blair Reeves is the executive director of Carolina Forward, an independent, non-partisan, nonprofit policy organization that advocates for ideas, policies and values to build a stronger North Carolina that works for all its people.

Ten years ago, on the heels of a fresh legislative supermajority engineered by aggressive partisan gerrymandering, North Carolina’s new Republican leaders set about answering the call of their voters. Naturally, their first priority was slashing taxes for corporations and the rich.

While the political theater surrounding North Carolina’s giant 2013 tax reform package is ancient history now, it is worth revisiting today. Have its proponents’ predictions borne fruit? And what lessons does it hold for us today?

There was no more visible booster for the 2013 tax package than Senator Bob Rucho, a Republican from Mecklenburg County (before such a thing became a novelty). The central argument of the “Rucho strategy” for tax reform in 2013 was simple: Slashing taxes would lead to a bonanza of economic growth, jobs, and general prosperity. Critics were doubtful.

Today, with the advantage of a decade’s worth of hindsight, we can now confidently make a call: The critics were right. And Bob Rucho was wrong.

To be sure, North Carolina’s economy grew in the last decade — as did America’s, generally. If the 2013 tax cuts had any effect, we would expect to detect it in economic data, yet we don’t. A recent economic analysis from Carolina Forward shows North Carolina actually underperformed in many ways.

For example, take our state’s gross domestic product, or GDP. North Carolina’s state GDP was $443.3 billion in 2011, and $559.5 billion in 2022 — a whopping 26% growth. That’s pretty impressive, until you consider how much the United States GDP overall has grown during that time: from $15.9 trillion in 2011 to $20.1 trillion in 2022. Also, 26% growth. North Carolina’s showing was average.

During the same period, both Georgia and South Carolina — which each have higher personal income and corporate taxes than North Carolina — expanded their state GDPs by 33.9% and 28.6%, respectively. North Carolina underperformed.

A Carolina Forward graph providing visuals of statistics listed in the article's body.
(Graph courtesy of Carolina Forward)

But what about jobs? North Carolina’s unemployment rate stands at a historic low of 3.3% as of August 2023. That compares slightly favorably to the nationwide unemployment rate of 3.8%, but not by much. Meanwhile, national real median household income grew 17.1% between 2011 and 2022, but North Carolinians’ only expanded by 15.2%.

In 2021, the median household income in America was $69,021, according to the U.S. Census, while in North Carolina, it was only $60,516 — a gap of 14%. That gap was 14.9% in 2011. (We’ll concede the tenths place.)

So what has changed since 2013? Mostly, a roiling crisis outside of North Carolina’s urban areas. Half of all population growth in the state in the last decade accrued to just four counties: Wake, Mecklenburg, Durham and Guilford, in that order. Most of our counties (51) lost population, as North Carolinians, especially young ones, voted with their feet.

Economically, fully half of all of North Carolina’s GDP growth occurred in only Wake and Mecklenburg counties during that same period. Nearly all rural counties experienced economic stagnation, or even contraction. That means smaller tax bases, leading to even fewer resources for investments in the future such as schools, health care and infrastructure in an era when our state legislature is very unwilling to make up that loss.

A Carolina Forward graph providing visuals of statistics listed in the article's body.
(Graph courtesy of Carolina Forward)

The recently passed state budget amounts to an admission that the “Rucho strategy” has failed. Slashing away relentlessly at taxes has not led to economic boom times — certainly not in (deeply Republican) rural counties. The new budget still doles out nearly half a billion dollars to coax big, out-of-state employers to relocate to rural “megasites.” Strange, isn’t it, that zero corporate income taxes alone doesn’t do the trick?

Relentless tax-slashing is an ideologue’s project commonly disguised as economic wisdom. “Trickle-down” economics has never worked; but it has also never suffered for a lack of men, like Rucho, willing to pretend it does. Kansas famously learned this lesson, and North Carolina is quickly headed down the same path.

Our state, once known for a pragmatic approach to public policy, has mostly now abandoned it. It’ll be up to voters — gerrymandered as they are — to demand a return.

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