Senate Republicans look to "Trumpify" NC tax code

by Rob Schofield, NC Policy Watch, March 7, 2017.

Donald Trump has always been well known for his “act first, worry about the mess later” approach to the world around him. Long before he became President, the blustering billionaire fashioned a notorious career predicated upon some crude and simplistic tactics familiar to any schoolyard bully – yell the loudest and grab what you can for yourself, intimidate opponents, deny the existence of complexity and gray areas and dumb things down as much as possible, appeal to people’s baser instincts like fear and selfishness and always, always, always, elevate the present over the future.

Trump’s “me-first-and-right-now” style of operating has been on full display in Washington in recent weeks and now, tragically, it appears to be influencing conservative politicians all over the country. A classic case in point is a proposed constitutional amendment scheduled to be discussed in the Finance Committee of the North Carolina Senate this week. It ought to be called the “Damn the future and any notion that we’ll ever improve education or strengthen any other essential public services and structures amendment.” Perhaps “Trump Amendment” might be an apt shorthand reference. 

Arbitrary and artificial tax caps strike again

The premise of the new proposal to “Trumpify” the North Carolina tax code is simple and, not surprisingly, simplistic. Under the proposed amendment, the state income tax would be permanently capped at 5.5%. Much as they did with the Senate’s past proposals to enact a so-called “Taxpayer Bill of Rights” or “TABOR” amendment, the proponents argue that this would permanently and beneficially limit the growth of government – something they regard as an almost holy crusade. 

A closer look at the facts, however, shows such an objective and rationale to be horrifically flawed. As with TABOR, the actual chief impact of a permanent income tax cap is to help freeze state public structures and services in their present state and assure that, essentially, government will never do anything more for our state than it currently does. 

Want to significantly raise teacher or state employee pay at some point in the future or undertake a new and important public program to say, clean up an unforeseen environmental crisis? Well, an income tax cap amendment – like a TABOR amendment – makes that almost impossible. That’s because lawmakers simply won’t have the means to find the necessary revenue to act unless they cut other spending items to do so.

And while an income tax cap would not be as entirely inflexible as a TABOR amendment, it would still badly hamstring future leaders. That’s because the income tax is a vital part of any healthy revenue system and one of the best means of getting the wealthy and super wealthy to pay their fair share. 

When the state constitution effectively places the incomes of the rich out of reach, there are only two options: 1) freeze spending or 2) turn to more regressive revenue sources like sales and property taxes that disproportionately impact people at the bottom and the middle – hardly a desirable option during a period in which most income growth is confined to the wealthiest households.

A long list of horribles

As a fact sheet prepared by the fiscal policy experts at the North Carolina Budget and Tax Center (BTC) explains, the list of problems with the tax cap amendment is a long one. Here are some of the main objections, along with excerpts from the BTC fact sheet:

1) North Carolina would be heading down a radical and dangerous path. 

“A state constitutional amendment proposed in the North Carolina Senate would seriously limit our state’s ability to meet the needs of its people and respond to crises in the future. Senate Bill 75 would amend the constitution to prevent future lawmakers from ever increasing the state income tax rate. Of the 41 states that have an income tax, only Georgia has taken the drastic step of using its constitution to thwart any potential rate increase.”

2) The tax cap amendment would serve as yet another costly giveaway to the rich at a time when recent income tax cuts have already done great damage.

“Income tax cuts passed since 2013 have given the wealthiest the biggest benefits, and have greatly reduced the revenue available to invest in thriving communities. When fully phased in, those income tax cuts will reduce annual revenue by more than $2 billion. That’s equal to our investments in community colleges, early childhood, and children’s health combined. Such a loss will take away support for schools, transportation, parks and other vital services. This constitutional tax cap proposal is one more step down the path of eroding North Carolina’s quality of life….

Instead of investing in prosperity, North Carolina has been changing its tax code to benefit the wealthy and powerful. Constitutionally limiting the income tax rate would put more money into the pockets of the wealthiest households and largest, most profitable corporations – while investment in the common good declines. This radical step would ignore the overwhelming evidence that tax cuts don’t create jobs and boost the economy, and would drain the state of the resources to invest in broad prosperity.” 

3) The proposed amendment will make an unfair and inadequate tax system more unfair and more inadequate. 

“Arbitrarily limiting the income tax will bring greater reliance on sales and other taxes, which hurts middle-class North Carolinians and those who struggle to get by. North Carolina’s current tax system has low-income households paying a greater share of their paycheck than the wealthy in state and local taxes.

An income tax limit would make this imbalance even worse, as the state and local governments would be forced to raise sales and property taxes, court fees, and other revenue sources that cost the wealthiest a smaller share of their income than everyone else would have to pay.” 

4) Amending the constitution in such a way amounts to another assault on basic democratic processes.

“We elect our legislators to use their judgment to make North Carolina a stronger, more prosperous state – not to hamstring the ability of our communities and future lawmakers to use their judgment to meet needs as they arise. This radical tax cap would permanently limit the state income tax rate to 5.5 percent no matter the circumstances. Like other extreme constitutional limits that North Carolina’s legislature has considered, this cap wouldn’t give lawmakers any power that they don’t already have. Policymakers have already cut income taxes for the wealthy and profitable corporations, and limited the current budget proposals to an arbitrary formula. This measure would only make lawmakers less accountable to the people who elected them to do what’s right to build a thriving state.”

Trump-like havoc

If there is a chief fear amongst caring and thinking Americans right now with respect to the current inhabitant of the White House, it’s not so much that he reflects an irreversible change in the country. Rather, the concerns are that: a) he is the embodiment of a destructive, last-ditch effort by the forces of reaction to retard progress and, b) he will do so much harm while in office that it will take years and years to repair the damage.

And so it is with the latest effort to enact a shortsighted, Trump Amendment on taxes in North Carolina. The fear isn’t that such a move would reflect a true shift in the soul of our state; the fear is that this deceptive and destructive proposal will wreak so much havoc that conservative ideologues will effectively set themselves up to remain in power for years to come – even after voters rise up and throw them out. 

No wonder they keep coming up with these ideas.

http://www.ncpolicywatch.com/2017/03/07/senate-republicans-look-trumpify-ncs-tax-code/