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The shaky Tax Foundation

Chris Fitzsimon

One of the stories often used to illustrate a common frustration with the way much of the media covers political campaigns started during the 2004 presidential race. One version of the exaggerated example pretends that President Bush says in a public appearance that the Earth is flat.

Startled reporters scramble and call the Kerry campaign, whose spokesperson responds by saying that the claim is absurd and that we have known for centuries that the Earth is round.

The crawl at the bottom of the cable news shows and the headlines over the story in most papers the next day are the same: “Candidates disagree on shape of Earth.”

The coverage of campaigns in North Carolina hasn’t been that ridiculous, but an increasing number of statements from politicians are presented without context, just balanced by a comment from the opponent’s campaign and sometimes not countered at all. The claim eventually becomes conventional wisdom that defines the debate.

A Western North Carolina paper recently quoted N.C. Senate Minority Leader Phil Berger at a Republican dinner saying that North Carolina has the highest taxes in the Southeast and it is hurting the state’s economic development efforts.
State Republican Chair Linda Daves says often that “Democrats have given us the highest taxes in the Southeast” and it is generally unchallenged. A Republican legislative candidate said that having the highest taxes in the Southeast has crushed job creation in the state.

A television story about a race for county commissioner included a candidate lamenting the highest taxes in the Southeast with no source and no context. The phrase has worked its way into the popular culture.

A national blog about cycling included the claim in a discussion about good places to live and one poster to a Charlotte blog who recently relocated to the city said “it took very little research to discover that NC has some of the highest taxes in the southeast.”

But North Carolina’s taxes are not the highest in the Southeast. Push the politicians who make the claim and they will refer to you to one of Raleigh’s market fundamentalist think tanks that always cite the Tax Foundation, a national conservative advocacy group, as the source of their information.

The foundation’s 2008 state tax ranking report released last week shows North Carolina has lower taxes than Arkansas, Georgia and Virginia, which at last glance were all Southeastern states.

The report also includes rankings for previous years. North Carolina had lower taxes in 2006 than Arkansas, for example, but higher rates than Georgia and Virginia.

If Sen. Berger and Linda Daves insist on using the Tax Foundation data, they should issue a press release praising the General Assembly and Gov. Easley for moving head of Georgia and Virginia in the last two years.

Elaine Mejia with the N.C. Budget and Tax Center points out that the Tax Foundation data also shows that as a percentage of total state income, North Carolina taxes are lower in 2008 than they were in 1977.

But the rankings and analysis from the foundation are highly unreliable because the methodology apparently keeps changing, as an analysis from the Center on Budget and Policy Priorities points out.

The Tax Foundation’s 2007 report came with the headline that taxes were the highest they had been in 25 years, but the current report says 2007 taxes were lower than 10 to 15 years ago.

Past state rankings have changed in each year’s report too, including North Carolina’s. The 2007 report included a chart of state tax rankings for selected calendar years that showed North Carolina had the 17th-highest tax rate in the country in 2006.

But past year’s rankings included with the 2008 report show North Carolina was 20th in the country, not 17th. The 2008 report says North Carolina ranked 36th in 2000. The 2008 report says the state ranked 20th that year.

As the center points out, the 2007 foundation report said that Vermont had the highest taxes in the country in 2006 and 2007. The 2008 report ranks Vermont 4th and 6th in those same years.

That’s more than a little confusing and makes a lot of press releases about the rankings in previous years simply wrong, not to mention the politicians using the rankings to make their partisan points.

So enough already with claims about North Carolina having the highest tax rates in the Southeast, and let’s hope the media understands the shaky Foundation behind them and gives us all some context the next time the numbers come up.

And remember, the Earth is definitely round.

Chris Fitzsimon is director of NC Policy Watch.

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