North Carolina voters could get a chance to limit how much their state income taxes will rise — a change that education groups warn could have devastating consequences on the state's public schools.
State legislators are considering this week putting on the November ballot an amendment to change the state's constitution to cap the income tax rate at 5.5 percent, which is about the current rate. Supporters say the cap will protect taxpayers, while opponents say it will limit the state's ability to adequately fund public education and other important public services.
"A typical voter is going to just read it and say, 'I want my taxes low,' and not understand the long-term impact of tying the hands of future legislatures," said Keith Poston, president and executive director of the Public School Forum of North Carolina. "It could be devastating. Our schools are underfunded, and this will lock it in permanently by making it part of the state constitution.
"Any future legislature would have to amend the Constitution to make any fundamental change."
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But conservative groups that back the income tax cap say fears that the change will harm education spending are overstated.
“AFP-NC strongly supports the Income Tax Cap amendment because it empowers voters to protect themselves from future tax hikes," said Chris McCoy, state director of Americans For Prosperity-North Carolina. "If a 5.5 percent tax rate were bad for education, you would think we’d see some evidence of those ill effects right now, since our tax rate is currently at that level.
"But over the last five years, North Carolina has made consistent investments in education while lowering the economic burden on taxpayers. We support the income tax cap amendment, and we believe voters will too.”
Education supporters say that despite the increases, state funding is less than what was provided before the recession of the late 2000s once the amount is adjusted for inflation. The National Education Association estimates that North Carolina is 39th in the nation in per-pupil spending.
The state Constitution caps the personal income tax rate at 10 percent, but taxpayers pay about 5.49 percent after Republican tax cuts. Next year, another tax cut is set to kick in in that will drop the rate to 5.25 percent. The proposed amendment would lower the state cap to 5.5 percent.
The cap is among several constitutional amendments that the Republican-led state legislature is trying to put on the fall ballot. But lawmakers are not considering a request to put a statewide $1.9 billion school construction bond referendum on the fall ballot.
The cap has drawn the concern of education groups because income taxes are the largest source of state revenue and public education makes up such a large part of state spending.
"How do you like the sound of North Carolina’s public schools cemented into a permanent recession?" Progress NC Action, a liberal group, said in an email Tuesday urging people to contact legislators to oppose the tax cap amendment.
Conservative groups dispute the idea that public education is underfunded and argue that one way to provide more money for schools is to take it from other parts of the state budget.
"If they think education isn’t properly funded in the state, that’s more of a priority problem in the state than a funding problem," said Donald Bryson, president and CEO of the conservative Civitas Institute. "There are ways to shift money around in the budget."
In addition to questioning how the cap would affect current education funding, groups warn about what the cap could mean if revenues run short during a future economic downturn.
Richard Bostic, assistant director of governmental relations for the N.C. School Boards Association, said limiting how much the income tax rate could rise if there's a recession or depression will increase the likelihood that major education cuts will be made. He said it will also force the state to consider raising sales taxes and fees and put pressure on counties to come up with the money.
"We'd like to keep all the options on the table," Bostic said.
But the Civitas Institute says there are enough alternative revenue options and the state's $1.8 billion rainy day fund to help deal with a recession. Plus, the group says cutting spending isn't a bad idea either.
"During a recession, of course, the best thing to do is to cut spending," writes Brian Balfour, executive vice president of Civitas.
The Senate has approved putting the cap on the ballot but the House pulled the vote from Tuesday's calendar. It's scheduled to be considered by the House on Wednesday.
:Poston of the Public School Forum said he still hopes that there's enough opposition to keep it from passage.
"I think there are plenty of legislators on both sides of the aisle who understand the risk, both Republican and Democrats," he said.