The state treasurer on Friday announced her opposition to a bill advancing in the Senate that would impose spending and income tax caps through a trio of constitutional amendments, if voters approved.
Janet Cowell released a statement saying she had written all legislators advising them not to pass Senate Bill 607, which she says would risk the state’s triple-A bond rating.
“North Carolina has a long history of responsible fiscal management as evidenced by our status as one of only ten states in the nation with a ‘AAA’ rating from all three rating agencies,” Cowell wrote. “The passage of the Constitutional Amendment Tax Legislation poses real danger to our finances and reputation.”
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On Thursday, the Senate Finance Committee approved “Taxpayer Bill of Rights” legislation that would put before voters in next year’s general election three amendments to the constitutional.
One would cap the personal income tax rate at 5 percent. Another would tie spending increases in the state budget to the rate of population growth and inflation. A third would create an emergency savings fund that could only be spent with a two-thirds vote in the legislature.
In order to put the amendments on the ballot, the bill has to pass the Senate and House with a three-fifths majority in each.
Cowell says credit rating agencies historically consider financial limitations such as these as negative credit. North Carolina is one of only 10 states that earn an AAA bond rating by all three rating agencies: Standard & Poor’s, Moody’s Investors Services and Fitch Ratings.
UPDATE: Senate leaders responded to Cowell’s statement by saying the proposal has safeguards and creates an urgently needed reserve fund that can be drawn upon during financial crises or natural disasters.
Senate Appropriations Committee co-chairmen Sen. Brent Jackson, a Republican from Sampson County, and Sen. Bob Rucho, a Republican from Mecklenburg County, issued a joint statement:
“The real danger to our state’s finances and reputation are irresponsible politicians who tax and spend beyond our means and who rack up too much debt. Allowing North Carolinians to vote to keep politicians from going on wild spending sprees will clearly protect our state’s financial health.”
There is a mixed record on TABOR laws in other states.