After overhauling taxes last year in a way that significantly reduced state resources and shifted the tax load away from the wealthiest taxpayers and profitable corporations and onto ordinary North Carolinians, policymakers are using smoke and mirrors to try to hide the damage theyve done.
Revenue is coming in well below projections for the fiscal year that ends June 30 a trend that will continue next year, when the shortfall could reach as high as $600 million. The cost of the tax plan now appears far greater than feared, both in dollars and cents and in the harm it is causing ordinary families and communities across the state.
Rather than pause to reflect on the problems they have created, state policymakers are moving to cut vital public programs, shift responsibility to local governments and, yes, cut taxes even more.
The budget recently proposed by the Senate is Exhibit A. Senators want ordinary North Carolinians to pay the price for their reckless tax cuts. Thousands of North Carolinians who are older adults, blind or disabled would lose much-needed affordable health care services. Low-income families would find it more difficult to get child care because of stricter eligibility standards. Teacher assistants would no longer be in the classroom to give additional help and support to a child learning multiplication tables or how to read.
College would continue to be unaffordable for too many at a time when a credential or degree is a ticket to the middle class. And struggling communities would have far less support from the state to build their economies. Senate budget writers know that their plan is not only inadequate, its harmful to North Carolina families and the states economy.
Thats why they made it a point to generously offer individuals the opportunity to contribute their income tax refund to support teacher pay increases and propose we all buy a license plate to support public education. They also want to reinstate the income tax deduction for teachers who buy their own school supplies which wouldnt be needed if the states investment in classrooms actually kept up with needs. Another proposal would urge local governments to raise property taxes to support schools and school construction.
This is the game that lawmakers are playing: While theyre more than happy to tout the huge tax cuts given to the wealthy and profitable corporations, theyre far less willing to confront the damage theyve done to our schools and other services and their efforts to absolve themselves of responsibility to the states residents.
And that leads to the most ironic move yet: Even as policymakers seek to shift more functions to communities, they have limited the ability of local governments to manage their own resources. A bill passed last week will eliminate a local tax on businesses operating in communities at the request of big retailers and cost cities nearly $63 million all told. Rather than reform the tax as needed, they just got rid of it starting in 2015. Local governments will be left to raise property taxes or cut local services you know, those things that people tend to appreciate like garbage collection and firefighters.
Last years tax plan and its harmful aftermath must be front and center in the budget debate this session. Without adequate revenue, North Carolina cannot keep up, let alone get ahead. Its time for lawmakers to face up to that.
Alexandra Sirota is director of the Budget & Tax Center, part of the N.C. Justice Center in Raleigh.