Governor hopefuls offer two tax plans

Pat McCrory and Walter Dalton are sizing up Tar Heel taxes, but any cutting must be careful.

September 30, 2012 

In a way, the Republican and the Democrat in a race for the governorship of North Carolina have stances on the state’s tax burden, and the possible need for reform, that reflect their very backgrounds in politics.

Walter Dalton, the Democrat, is the product of a careful, methodical career in the General Assembly, rising to the current post of lieutenant governor by learning the ins and outs of Jones Street and moving up the ladder until he reached a position of influence in the state Senate. He won the lieutenant governorship nearly four years ago.

Pat McCrory, the Republican, worked for Duke Energy in Charlotte and served 14 years as the Queen City’s mayor, popular with the business establishment and the powerful Chamber of Commerce. He is outgoing, bold, but not much worried about the devils in the details. In Charlotte, the backing of the bankers and other business leaders got things done effectively and quickly without much fuss.

As the two face off for governor, their tax plans are as different as their political careers.

Dalton takes a more modest approach aimed at giving some relief to small business and middle class families. He would, for example, give small businesses a break by exempting from state taxes the first $25,000 in taxable income, for those businesses making less than $100,000. There would be a $2,000-per-worker tax break for businesses that hired people who had been among the long-term unemployed.

Tipping a ‘cap’

Dalton also would fix a goof by the Republican-led General Assembly that gave a personal income tax cut ranging up to $3,500 not only to small business owners but to principals in some very large and profitable firms. At the last minute, GOP legislators lifted a cap that had limited beneficiaries to those businesses with less than $825,000 in revenue.

That meant that all sorts of higher earners, from partners in law firms to those in medical practices and lobbying firms, got a break – a costly one for the state coffers – that they didn’t need.

Dalton would limit the break and thus pay for his other proposals.

For his part, McCrory aims his tax changes at giving businesses a break in what he says is a business environment that is not friendly enough.

That includes reducing the corporate tax rate and the personal tax rate, to make them more in line with what neighboring states do. In fact, McCrory is considering elimination of the taxes altogether.

He says that his tax change ideas would be “revenue neutral,” meaning that revenue and potentially spending levels would be maintained, but that would be hard to do without raising billions of dollars somewhere. And the former mayor is short on specifics.

Making a bet

McCrory says there will be revenue from streamlining state government and from new oil and gas drilling. As governor, he certainly would have it within his power to streamline at least his own office and those agencies that report to him. It’s not an unworthy objective on its face, but as the experience of past governors has shown, it’s tough to turn “streamlining” into significant savings without undermining government agencies’ worthwhile functions.

As to the drilling profits –that money would be some time in coming, if it came at all. There’s no guarantee that North Carolina is sitting on its own personal gold mine. The natural gas deposits that many are anxious to drill, despite well-aimed concerns about environmental effects, may not prove economically viable with the market glutted and prices depressed.

Dalton, whose tax plan is more cautions than McCrory’s, says the former mayor can’t do all the tax-cutting he’s talking about without finding revenue somewhere, perhaps in the sales tax. But McCrory says he won’t raise the sales tax. (GOP leaders, when they took over the General Assembly, eliminated a fairly painless extra sales tax and passed on keeping an extra $850 million a year that it could have delivered.)

An exchange of ideas is good. Looking at cutting the tax burden is fine. But grand plans have to be backed up with those annoying details, specific ways to deliver on those plans. Pat McCrory may have them in his briefcase. It’s time to open it up.

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