U.S. tax cuts follow NC’s wrong path

Much of the nation looked on in shock last week as Senate Republicans trampled the legislative process in their rush to deliver big tax cuts to corporations and the top 1 percent of earners. But for people in North Carolina it was an all too familiar approach to passing unfair and unpopular legislation.

Republican Senate leader Mitch McConnell did a fine imitation of North Carolina Senate leader Phil Berger as he rounded up votes and pushed a tax-cut bill that overwhelming favors corporations and the very wealthy. The approach had all the hallmarks of major North Carolina legislation since Republicans took full control of the legislature in 2011. There were no public hearings. Phone calls of protest were dismissed, and polls showing a majority of the public opposed were ignored. There was no Democratic support. Expert assessments of the legislation went unread or were waved off.

“Not a single member of this chamber has read the bill,” Senate Minority Leader Chuck Schumer (D-N.Y.) said on the Senate floor before the 500-page bill passed early Saturday morning. “It would be impossible.”

McConnell, sounding much like a North Carolina Republican lawmaker, replied caustically, “You complain about process when you’re losing.”

Perhaps the strongest parallel between this week’s legislating in Washington and what is now routine in Raleigh is that lawmakers passed legislation without knowing much about its possible effects – intended and unintended.

Lack of assessment

Consider how the North Carolina Senate slammed through the notorious “bathroom bill,” House Bill 2, after the Democratic senators had walked out to protest a lack of public hearings and time to assess the bill. Or the state tax cut that exempted the first $50,000 in business income to promote small businesses. Instead it was a handout to well-heeled professionals. It was ended. Or the “tax reform” that eliminated the deduction for medical costs. That was restored after the state’s older residents reminded lawmakers of how important the deduction was. Add to the above the slew of bills passed that turned out to be unconstitutional. Taking time for a legal assessment before voting would have saved taxpayers a lot of legal expenses.

Now the U.S. Senate is backing a grab-bag of tax breaks for corporations and the wealthy that will also end the insurance mandate under the Affordable Care Act without really knowing what the changes will do. Republicans say tax cuts will be rocket fuel for the economy, but it’s an odd time to add stimulus. The U.S. economy is already near full throttle. Now is the time to address the national debt, not increase it.

What the Senate tax bill will do is add more than $1 trillion to the national debt, widen income inequality to Gilded Age levels and increase health insurance premiums across the board.

In North Carolina, the federal tax cuts could have the odd effect of rendering ineffective or forcing the reversal of much of what Republicans did with state taxes. The premise of the state tax cuts was that lower taxes on large corporations and the wealthy would encourage more businesses to relocate here and the wealthy to stay or retire here. But large cuts in the federal corporate tax will diminish the already low significance companies place on corporate taxes when they move. In effect, the corporate tax rate will be much reduced no matter what state a company chooses. It’s the same with income taxes for the wealthy.

No room to adjust

But the most significant problem for North Carolina will be a combination of austerity at the state and federal level. Lower tax revenues will cause spending cuts in federal programs and now North Carolina has no room to adjust. The state has already given up $3 billion annually to tax cuts and funding of state services never fully recovered from the spending cuts of the last recession.

“The current tax structure of the state can’t absorb any cost shift from the federal government,” said Alexandra Sirota, director of the NC Budget and Tax Center, part of the N.C. Justice Center that advocates for the advantaged.

With the scale of tax cuts coming from Congress, Sirota said the General Assembly will have to re-evaluate whether it wants to go forward with more tax cuts scheduled for 2019. If programs for the elderly and children lose substantial federal funding, it will be hard for state lawmakers not to step in with state revenues, she said.

Cutting taxes and limiting spending is the rallying cry for North Carolina’s Republican leaders. But now that they have imitators in Washington, that approach will only make North Carolina’s reckless tax cuts less effective and its heartless spending cuts harder to bear.

This story was originally published December 2, 2017 at 9:30 AM with the headline "U.S. tax cuts follow NC’s wrong path."