State tax cap a misguided strategy

Published July 1, 2016

Editorial by Wilmington Star-News, June 28, 2016.

If you thought HB-2 was a doozy, get ready for HB-3.

The state Senate took a modest bill from the House, aimed at limiting local powers of eminent domain -- when property is condemned, in this case, for private development projects.

To that the senators added an idea, propounded by Sen. Bill Rabon of Brunswick County and others, to amend the state constitution, setting a permanent, all-time cap of 5.5 percent on North Carolina income taxes.

This is a bad idea, and we pray the House will have the sense to torpedo it. If not, let's hope the voters have the sense to reject it, if it makes it to the ballot in November.

Nobody likes taxes. We certainly don't. On the other hand, we enjoy the services the state provides. Some of these, like the Highway Patrol and prisons, need to be paid for all the time. Roads need fixing, and some of our bridges are pretty worn.

In rare instances, we may need to raise taxes for a time to meet special needs. North Carolina already has a 10 percent income tax cap. Maybe we'd better not tie future legislators' hands.

Lots of folks will likely be all for cutting the income tax. They might not be so enthusiastic, though, if they looked at HB-3's fine print. In addition to the 5.5 percent cap, the amendment would apparently abolish almost all of North Carolina's income tax deductions and exemptions.

Goodbye to the deductions for interest on mortgage payments, making it harder for Bud and Sissy to afford their first house. Real estate business would probably take a big hit.

Goodbye to deductions for charitable giving. Aunt Emma, who's on a fixed income, wouldn't be able to write off her church offerings any more. And goodbye to deductions for medical and dental expenses.

This whole idea reflects a philosophy among a big chunk of Republican legislators, who think income taxes are a spawn of Satan, and only sales taxes are pleasing in God's sight.

If the HB-3 amendment passes, then, expect sales taxes to take a big hike, once the state needs money for something.

This will hit low-income, mid-income and fixed income citizens hard, since they wind up spending almost all their money on necessities.

There would be other costs, too. Low tax caps have caused big problems in other states, such as California and Colorado. As a result, N.C. Treasurer Janet Cowell -- who's hardly a wild-eyed Bernie Sanders supporter -- has warned that if HB-3 passes, rating agencies will likely cut North Carolina's AAA bond rating.

That means, when the state does borrow money in bond issues, it will have to pay a higher interest rate.

Critics also worry that, if the cap goes into effect and state money starts to dry up, the legislators will shift more of the burden for schools onto local governments. More school bills will have to be paid by local property taxes -- translation: local homeowners.

Republicans often say they want smaller government. HB-3 will almost certainly accomplish that: A state government less able to pay for school needs, fixing worn-out roads or doing much of anything other than play catch-up all the time on needed services and infrastructure.

We don't need this.

http://www.starnewsonline.com/opinion/20160627/editorial-june-28-state-tax-cap-misguided-strategy

July 1, 2016 at 5:24 pm
Ron Taylor says:

I drove on highway 264 East from Wilson to Greenville this morning. I was struck by how bumpy the road surface is. Tar has been used to fill-in gaps caused by ice and other causes. This road is a candidate that would get my vote for resurfacing. But the General Assembly - and this is not the first time - has tried to cut costs at DOT. Democrats did this sometimes too. Sometimes the dollars flowed to the districts served by those in high leadership positions.

The debate question is simple: do we set tax rates first? Or do we determine what the needs are first? The GOP has done the former.

They keep talking up the supply-side economics that became the Conservative Mantra when Reagan was President. Sure, it went mostly to the wealthy. But they are the only ones with money to invest in businesses that will hire workers. The problem is that only part of the money is being put there. There are many innovative instruments and venues that will not produce employment.

I think the GOP understands that their veto proof majority may not last. So some of them are trying to strangle the government of future North Carolina citizens to the standards of who currently has the power. So future Legislative leaders would not have the authority to represent the wishes of the citizens they represent.

And in a repeat of what we've seen time and time again, they are trying to shove it through without any real discussion or debate. Hubris is like candy. It may taste good, but it doesn't sustain.