Fiscal devolution: trust the evidence not the metaphor
Lagan Valley Ulster Unionist Richard Price reflects on what fiscal devolution is in reality by highlighting recent fiscal measures passed in New Mexico.
5th April 2013
That is, namely:
- a reduction in state corporate tax from 7.6 to 5.9 per cent;
- an increase in the state’s rebate for series TV production to 30% from 25% of a producer’s total qualified spend in New Mexico;
- the introduction of a single sales factor for New Mexico (a measure for reducing tax and regulatory burden for investing companies. More information here); and,
- a property tax freeze for low income seniors.
Why am I telling you this, and what does it have to do with the price of tomatoes in Northern Ireland, you may well reasonably ask.
Well we have heard often enough the camping metaphor from self-styled bastions of unionism in Northern Ireland like Jim Allister that fiscal devolution would “cut the guide ropes of the union” and “play to a Sinn Fein agenda of making us different” (Ref Pan-Unionist Youth Conference 2011).
Yet, if we are able to leave this terrifying and apocalyptic metaphor to one side for a moment, New Mexico, with a Northern-Ireland-like population of 2 million, presents something of a case study of what fiscal devolution is IN REALITY – and what it could be for Northern Ireland if we had the courage and imagination to grasp its opportunities.
Wouldn’t the ability to reduce corporation tax help us compete with the ROI? The CBI, the FSB, the IOD and NICC seem pretty convinced of that, as indeed am I. Wouldn’t following the New Mexico example and offering further tax incentives to our growing film industry help build on existing success? Wouldn’t measures to reduce investment burden and targeting tax freezes on the retired on fixed incomes also be welcome?
The REALITY of fiscal devolution is it enables beneficial policy innovation, creates inward tax competition (New Mexico is competing with simular measures taken by neighbouring Texas and Arizona, and other states in the region), leads to more dynamic and competitive regional economies, more evenly spread productivity in the national economy, greater national wealth creation and jobs production, and all the increased national cohesiveness that stems from that.
It should also be noted that “guide ropes” holding the USA together have not been observed to be dangerously fraying as a result of all this radical devolution of fiscal powers.
New Mexico’s timely example from yesterday tells us, that when it comes to the fiscal devolution question in the UK, we should aim to trust the evidence of its operation in practice, in globally successful economies like the USA – and not simply accept the lazily-offered off-the-shelf convenient metaphor.