Between cutting that unemployment debt on the backs of the jobless and now putting up a budget surplus projection of $400 million, Senate president pro tem Phil Berger is positively glowing with self-praise. And with the surplus, Republicans in the General Assembly are even letting Gov. Pat McCrory take some credit after basically ignoring him for two years.
It’s good news that revenue exceeded expectations and that the state may be spared more budget cuts to offset a deficit. But this surplus may reflect one-time adjustments in the new tax code more than a revenue surge from a healthier economy. Some of the extra revenue comes from the loss of the medical expenses deduction for seniors, which may be restored. And some comes from small-business owners who paid more income tax this year but now will narrow their tax exposure.
It’s also notable that the legislature has taken automatic public school enrollment growth out of how it calculates baseline expenses. When that cost is put back in, revenue could still come up short.
In any event, the surplus should be treated as a one-year bonus and put into reserves or into one-time expenses. Using it to fund recurring expenses or as a reason to cut taxes more could lead to a serious budget crunch in the future. As House Democratic leader Rep. Larry Hall pointed out, the state also has seen a drop of $550 million in corporate tax revenue, thanks to Republican cuts.
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Republicans, of course, don’t want to hear these caveats. They cut taxes, and the economy came back, and that’s it. They’ll not listen to those whom Berger called “Chicken Littles,” people he said exaggerated the state’s economic problems.
The truth is, Republicans have already signaled that they’ll cut taxes even more, and if revenues reach a certain level, another Republican-pushed corporate tax cut will kick in.
Congratulations are due, all right: to the North Carolinians in the middle class whose taxes are going up and who’ll be paying more on any number of day-to-day items and services so that Republicans can make up the losses resulting from their tax cuts for the wealthy and large corporations.