It’s one of those cases in which Republican rhetoric about “limiting government” and cutting taxes runs into harsh reality.
The notion of constitutional amendments to cap the state income tax rate at 5 percent and to cap spending in the state budget by connecting any budget hikes to population growth and inflation is just zany. So is the idea of creating an emergency fund that couldn’t be tapped without two-thirds approval by members of the General Assembly.
The theme behind these moves, which as constitutional amendments would have to pass the state House and Senate with three-fifths majorities then go to voters, is going to have a popular ring with many voters. So backers of the amendments figure they can simply ignore the potential problems and charge on.
State Treasurer Janet Cowell, whose management of the state retirement fund and other investments has been exemplary, is rightly alarmed by the idea. That’s why she sent all 170 lawmakers a strong cautionary warning against it.
Cowell notes that North Carolina is in the enviable position of being one of only 10 states with a triple-A credit rating from all rating agencies. But she says that credit rating agencies don’t like the types of self-imposed limits these amendments represent. She told legislators that “the Constitutional Amendment Tax Legislation poses real danger to our finances and reputation.”
That’s common sense. These limits would make it difficult for North Carolina to deal with a severe recession or to invest in infrastructure projects. What about responding to a natural disaster?
The notion of tying budget spending mainly to population and inflation ignores the need for the state to be nimble in its investments and spending. Let’s say urban populations are booming but the overall population is not going up as much. The state’s spending would be limited, and therefore its investment in urban areas – roads, for example – would be hindered.
Capping the income tax rate? Oh, yes, the GOP loves to roll that one out there, because everyone wants an income tax cut. But what about investing more where the needs are great, such as public education?
For the state to adopt these amendments in the name of cutting government would be akin to putting on handcuffs before going into a boxing ring. You can bob and weave for a while, but what happens when you get hit?