Tweak the tax code to avoid revenue gaps
Published May 6, 2014
Editorial by Fayetteville Observer, May 5, 2014.
With the April tax-filing season past, state budget analysts finally have a solid grasp on how last year's tax code overhaul affected revenues. For the fiscal year ending June 30, North Carolina's government will run $445 million short.
That's at least a concern and could be alarming. But Gov. Pat McCrory's office has issued statements explaining the shortfall, saying $600 million in reserve funds will take care of the immediate problem. "It is disappointing that state revenue is coming in under budget," McCrory said, "but the state prudently prepared for such a possibility."
What happens next? The General Assembly's top economist issued a memo saying everything will take care of itself. That's because tax reform included measures reducing overall tax rates but also broadening the base of who pays taxes. Reduced rates have kicked in, but the base-broadening won't have much effect until next year, the memo says.
That explanation and the governor's words would be more reassuring if they were more convincing. But they're asking for a lot of faith in future outcomes.
The political parties haven't wasted any opportunity spinning these developments. Senate Minority Whip Josh Stein, a Wake Democrat, says this shortfall is exactly what Democrats warned would happen when Republicans slashed taxes, especially for the very wealthy. But Wake Republican Rep. Nelson Dollar, senior co-chairman of the House Appropriations Committee, describes things differently: "What you're seeing out there is more money in the pockets of working people and working families in North Carolina."
Cutting through the spin, the shortfall is $191 million worse than budget forecasters predicted. This instills little confidence in their assertions that when the other shoe drops, it will pick up the slack.
These revenue numbers could also threaten planned raises for state employees, including teachers, who have remained stuck at 2008 pay levels. Not that many private-sector employees didn't fare worse, but the state needs to keep faith with its public servants, especially as the overall job market shows signs of recovery.
Though these seem like unimaginably huge numbers to those of us just trying to scrape by, the total shortage represents just 2 percent of this year's state budget. Whatever one thinks of the politics behind last year's tax overhaul, it was huge. Adjustments will be needed.
No one navigates a ship into port with the first turn of the wheel. Lawmakers shouldn't expect their overhaul to self-correct either. Tweak the new tax code as needed, bringing up revenues enough to avoid wrecking the ship of state.
http://www.fayobserver.com/opinion/article_951d04bd-d0dc-543d-8379-48190470374a.html
May 6, 2014 at 8:38 pm
Norm Kellly says:
So, the demon party controlled Raleigh for about 100 years. Was there ever a year where they ran a deficit? Was there a year when revenues didn't meet expectations (and need)?
Nope. Never.
The Demon controlled legislature was in the habit of raising taxes. But there were several years recently where even though they RAISED taxes, the budget was still short. Remember? How could that possibly be? Republicans are now blamed for a shortfall and it's all because they gave their millionaire buddies a tax cut! But is this true? No, but it doesn't have to be if you are a lib or writing a statement to be sucked down by low information lib voters.
Remember when Gov Mike stole money from county sales tax revenues? It was because even though the demons in the Legislature had raised taxes, there was still a budget shortfall.
Remember when Gov Mike stole money from the E911 fund? He did. What was the reason? Because even though the demon controlled legislature raised taxes, there was still a budget shortfall.
Remember when one-time money was used by the demon controlled legislature to pay for on-going budget items? Well, even if you don't remember, this IS what happened even though demons had raised taxes AND converted a temporary sales tax increase into a permanent tax increase.
So, if raising taxes causes a budget shortfall and lowering taxes causes a budget shortfall, which is a better position to be in? Definitely better to leave more money in the pockets of the people who earn it! Cuz IT'S THEIR MONEY!
The solution is actually quite simple, even if it's not easy. Set taxes & fees at an appropriate level. Charge for services at the price that the service costs. Set expenses based on how much money you have coming into the government from taxes & fees. Don't spend more than you anticipate taking in. This takes prioritizing. Something like not BORROWING money from the feds to pay for extended unemployment benefits. Along with NO PLAN to pay back the loan. Something like NOT expanding medicare/medicaid (whatever) because socialized medicine was passed by the irresponsible socialists in Washington. Something like NOT building a tea cup museum when the state has NO MONEY! You know, live within your means! A concept foreign to MOST lib politicians.
'but the state needs to keep faith with its public servants'. To a certain extent this is true. However, one must also take into account the words that precede this statement. The private sector hasn't fared any better. In many cases the private sector has fared much worse. When private sector employment takes a hit, tax revenues naturally take a hit. Unemployment benefits DO NOT bolster the economy, no matter how many times an uneducated lib politician tells you it does. But taking more money from tax payers who are suffering because of a bad economy doesn't make it any better for everyone, it actually makes it worse for everyone. And when government employees are rewarded simply for longevity, when private sector employees are being devastated, is outrageously difficult to explain and support. It shouldn't happen regardless of how long it's been since government employees got a raise. The flip side to that is that so few government employees lost their jobs when the economy soured. It's also uncommon for government employees who screw up to get fired. The White House occupier has demonstrated over and over and over ... that screwing up big enough is cause for promotion and bonuses. What does that tell private sector employees who are struggling? How about the IRS employees who screwed up, or haven't paid their taxes, getting bonuses? Does this encourage people to continue to pay ever higher taxes to governments?
'the total shortage represents just 2 percent' of the budget total. What was the amount of money borrowed by the demon party to pay for extended unemployment benefits (with no repayment plan!)? Was it only 2 percent of the budget total? I believe it was much higher than this. And a 2 percent shortfall CAN be adjusted for. There MAY be a plan for this already. But there WAS NOT a plan in place to repay the feds when extending unemployment benefits by the demons! What's the difference between the 2 situations? The current budget leaves more money in the hands of the people who earn the money. That's always a good thing! Better in my pocket than yours and DEFINITELY better in mine than any government agency's! I can spend it better than ANY socialist cuz it's mine and I'm more careful with it. Cuz it's mine.
