North Carolina, thanks to excessive tax cuts for the wealthy and businesses, has been staring at possible revenue shortfalls for months. Now, astoundingly, Republicans in the state Senate want to cut personal and corporate income rates even more.
And they don’t seem to have a clue as to the effects of such cuts on revenue or on the economic stability of the state.
A bill filed last week would amount to $1 billion in additional tax cuts. The personal income tax rate of 5.75 percent, lowered from 7.75 percent several years ago, would drop to 5.5 percent in 2017. To try to smoke this one past the public, the proponents are selling the idea that the break would help lower income people because they could choose to itemize deductions now available or use a zero percent bracket that would apply to some income. In other words, some of their income would not be taxed, but they’d pay taxes on the rest.
Sen. Jerry Tillman, Republican of Archdale, says a married couple earning $46,000 would save $350 a year. That’s $7 a week.
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The corporate rate would go to 4 percent in 2017, and that would apply even if the state fell short of revenue levels that were required in 2013 if corporate tax rates were to be lowered.
Tillman’s logic for this clumsy and risky bit of legislating? “We need to get below South Carolina” in terms of tax rates, he says, to recruit new business.
North Carolina is consistently rated as one of the country’s most business-friendly states, and enlightened corporations establish locations and move headquarters based on more than tax rates. Good schools. Strong universities. Infrastructure. Unfortunately, the Republicans in the General Assembly haven’t focused on those things.
While they’ve been cutting taxes for the wealthy and businesses, which have gotten most of the breaks, they’ve bashed the public schools, cut the university system and put the state in such a tight revenue margin that further tax cuts could be catastrophic.
Amazingly, even the Senate sponsors of the additional cuts say they haven’t bothered to figure out the details, such as how the state will make up the lost revenue.
“That’s a matter of the Senate and House working together to figure out how we find it,” said Sen. Bob Rucho of Matthews, another budget writer.
That’s rather like Alfred E. Neuman of Mad magazine’s slogan, “What, me worry?”
Good grief. Are these guys serious? They are. Cut taxes, cut revenues and figure out the details later. Once again, Republicans demonstrate their inexperience in running government, particularly with regard to budgeting.
Alexandra Sirota of the N.C. Justice Center said of the plans, “The continued pursuit of income tax cuts will not boost North Carolina’s economy and only serves to further reduce revenue. Those benefiting from these tax cuts will continue to be the state’s wealthiest taxpayers and profitable corporations.”
Indeed, one tax “reform” proposal under consideration would alter the corporate taxing system and base it entirely on sales instead of also figuring in payroll and property value. That would amount to a cut of $75 million for companies with lots of property and big payroll taxes.
It’s true most citizens look at tax cuts and say, “As long as I get one, I don’t care if the rich and corporations get one, too.” But if revenue falls short, there will be no choice given the state’s legal requirement for a balanced budget but to cut state spending further. With Republicans in charge, that’s going to mean cutting public education and other services that help average people.
Thankfully, there are cooler heads in the state House who already are saying they’re not so warm to further cuts if the deductions put revenue figures and thus the stability of the state budget at risk. Let us hope they prevail.