Amendments will protect state taxpayers

Published October 25, 2018

By John Hood

by John Hood, Syndicated columnist and NC SPIN panelist, October 24, 2018.

If your taxable income is greater than $60,000, then you are at least a bit better off than the average North Carolinian. But does that make you wealthy?

There’s an amendment on the ballot this year to lower the state constitution’s cap on income-tax rates to 7 percent, down from the current 10 percent cap that has been in North Carolina’s constitution since the Great Depression.

According to left-wing critics of the 2018 tax-cap amendment, passing that 7 percent tax cap would help rich people at the expense of everyone else. But if you make more than $60,000, such a cap would have saved you a good amount of money during the 1990s and 2000s, when North Carolina’s had a tax rate of 7.75 percent that applied to taxable incomes over $60,000 for singles and $100,000 for married couples filing jointly.

Of course, millionaires did pay that 7.75 percent rate on most of their incomes (actually, for a time their effective state income-tax rate soared above 8 percent because of a surtax). But lots of other North Carolinians got hit by that 7.75 percent rate, too. Call them wealthy if you want. They are unlikely to agree, or to appreciate the implication that they don’t deserve to keep their own hard-earned money and spend it as they wish.

At a recent debate held at the Gastonia Conference Center by the North Carolina Institute of Political Leadership and the statewide cable channel Spectrum News, two state lawmakers and two policy analysts engaged in a spirited but respectful debate about the tax-cap amendment’s pros and cons.

State Rep. Kelly Alexander, D-Mecklenburg, argued that the higher 10 percent cap should remain in place. “I’m from the ‘if it ain’t broke, you don’t have to fix it’ school,” he said. “Ten percent has worked for us. It gives us enough room should we need to go higher.”

State Sen. Dan Bishop, R-Mecklenburg, disagreed, pointing out that the existing income-tax cap has done nothing to limit the tax burden since the General Assembly has never even considered raising the top rate that high. This year, voters have the opportunity to speak directly on the issue.

“Low-tax policies and careful spending policies, at the end of the day, benefit every single North Carolinian,” Bishop said. “And that, I think, is what the notion of a tax cap recognizes. Taxes are not the answer.”

Frankly, I would have preferred to amend the constitution to cap the annual rate of growth in state spending to a combination of inflation and population growth. The Republicans currently leading the state legislature have kept budget increases within such a cap, but it currently has no legal force. Excessive spending is the ultimate cause of excessive taxes, whatever the form those taxes may take.

But that’s not what voters will decide this year. The ballot question is whether to enact a lower cap on income taxes. Keep in mind that the currently scheduled flat rate is 5.25 percent. Even if the tax-cap amendment passes, future legislatures could raise income taxes quite a bit if they deem it necessary — although I think such a decision would be unwise and counterproductive.

During the IOPL debate, Rep. Alexander said he doubted that lowering taxes is responsible for “all of these magical, mystical things” claimed by its advocates. While some conservatives do overstate their case about tax policy and growth — claiming that all tax cuts pay for themselves, for instance — most studies confirm that taxes do influence decisions to work, live, invest, or create jobs in one place rather than another. As long as policymakers accompany tax reduction with firm spending priorities, they can balance budgets and promote economic growth at the same time. North Carolina has been doing just that.

Sen. Bishop picked up on Alexander’s choice of words. “With that I completely agree,” Bishop said. “There is no magic. There is discipline, and discipline practiced over a period of time begins to look like magic.”

John Hood (@JohnHoodNC) is chairman of the John Locke Foundation and appears on “NC SPIN,” broadcast statewide Fridays at 7:30 p.m. and Sundays at 12:30 p.m. on UNC-TV.

https://www.carolinajournal.com/opinion-article/amendment-will-protect-state-taxpayers/

October 27, 2018 at 1:49 pm
Norm Kelly says:

'most studies confirm that taxes do influence decisions to work, live, invest, or create jobs in one place rather than another'.

Interestingly, even when forced into it, Democrats know & believe this is true. Ask any democrat politician how they respond when a company wants to move/expand here but wants tax incentives and you will find that virtually every one of them agrees we should do it and understands why the company asks for it. So, democrats believe/know that tax policy influences decisions. Until it's time to raise taxes, then they have ABSOLUTELY ZERO impact on anyone's decision. When it comes to raising taxes, the standard democrat response is that the state can't afford to do without it. Raising taxes DOES have a negative impact on the economy. While not every tax cut pays for itself, virtually every tax increase has a corresponding negative impact on the economy. Unless, of course, all states around us are also raising taxes. Or if politicians decide that SOME group or business deserves a tax break while the rest of us are forced to fund not just OUR tax increase, but that favored groups TAX CUT!

In today's political environment, it seems logical to ask what ANY democrat pol brings to the table. If they are honest, they will say a substantial tax increase is first on their agenda. Second on the agenda is socialized medicine. A failing system every where it's tried, but democrats believe if they are in control it can finally (and uniquely) survive. Along with tax increases, democrats also bring to the table a desire to increase regulation, even when it serves no purpose or would cripple a state business. Plus they will raise teacher pay to 'the national average'. Of course, 2 things about national average are important. As pay is increased, the national average also increases; it's a moving target. If all states are taken as part of the average, states like California, Illinois, New York skew the average considerably. If we compare teacher pay with cost of living, there IS NO comparison between those states and ours. Drop those 3 states from the average and then how do our salaries compare? It might also be worth investigating if Mass. should be taken out of the average, but I'm not so up on tax policy in Mass.

Other than taking us back 50 years, not trying ANYTHING NEW, and wanting to force socialism on us, what exactly do democrats bring to the table? Unlike the average lib/socialist/left-wing zealot, my mind is open and I'll gladly read what you believe is good about todays democrats. Also keep in mind that today's democrat pols ABSOLUTELY DO NOT believe in the rule of law. 'Innocent until proven guilty' comes to mind. 'Sanctuary city/state' comes to mind. 'Equal justice under the law', as promoted by the left-wing judicial candidate, doesn't apply to men, white men, blacks, 'the poor', gays, antifa, liberals who dislike certain public monuments. White men are guilty by default. You come up with why the others are listed, cuz I'm politically incorrect enough without defining those!