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Budget & Tax Roundup: Lack of Accountability

Brian Balfour  |  August 26, 2008

A continued spending binge, tax and fee increases and a lack of accountability to taxpayers all dominated the recently completed two-year budget cycle.

The following brief summary highlights what our General Assembly did and didn’t accomplish over the last two years:

What the Legislature Did

What Voters Think

• 66% of voters think taxes in North Carolina are too high.
• 77 percent of voters believe state government should not be allowed to borrow money without voter approval.

Source: Civitas DecisionMaker polls

• Increase the sales tax by more than a quarter of a billion dollars
  Instead of allowing the “temporary” sales tax to completely sunset as repeatedly promised, the FY 2007-08 budget made the remaining ¼ cent permanent. In effect, the General Assembly imposed a $258 million tax on North Carolinians. Recent polling data shows that 66 percent of voters think taxes in North Carolina are too high (Civitas Institute, DecisionMaker Poll, April 2008).
• Set the stage for future tax increases
  More than $1.2 billion in future spending obligations is included in the FY 2008-09 capital budget – the amount deemed necessary to complete the projects being planned. Future budget-makers will be hard-pressed to finance this construction binge without raising taxes.
• Increase several fees
  Over the past two budgets, fee increases totaling at least $66 million were authorized.
• Spend more than half a billion dollars on pork projects
  During the two year budget cycle, the Civitas Institute identified more than $280 million in wasteful appropriations commonly referred to as pork barrel spending. Making matters worse, close to $240 million in debt was authorized to finance new pork projects.
• Violate procedural rules when crafting the budget
  Budget-makers violated their own standards of transparency and open debate by including new items and provisions at the last minute, changing items already agreed to in both chambers and providing more money for items than was proposed in either chamber’s budget.

What the Legislature Didn’t Do

• Give taxpayers a say over new state debt
  Not one penny of the astonishing $1.53 billion in new state debt authorized over the last two sessions has been (or ever will be) approved by voters – the very same people who will be required to make payments on said debt. Seventy-seven percent of voters believe that state government should not be allowed to borrow money without voter approval (Civitas Institute, DecisionMaker Poll, May 2008).
• Pass a taxpayer bill of rights
  The most recent attempt to enact a taxpayer bill of rights came via HB 1773 in the 2007 session. The bill would have limited the growth in state spending for each fiscal year to the rate of population growth plus inflation. HB 1773 died in committee.
• Promote transparency in state government
  No legislation was introduced to establish a free, user-friendly website documenting how state dollars are spent. Seventy-nine percent of voters said they would support requiring state and local government to make budgets readily available and searchable by the public on the internet (Civitas Institute, DecisionMaker Poll, April 2008).
• Reign in corporate welfare
  State lawmakers chose to continue handing out millions of taxpayer dollars through cash awards and targeted tax cuts for preferred corporations and industries. Meanwhile, the rest of North Carolina businesses continue to pay either the highest corporate tax rate in the Southeast or the highest marginal income tax rate in the region (depending on filing status).
• Protect North Carolinians from the “inflation tax”
  Many taxpayers are pushed into higher tax brackets even when their incomes merely kept pace with inflation. No legislation, however, was introduced to index the tax bracket income thresholds to inflation to negate this unfair process. Sixty-six percent of voters would support the indexing of tax brackets to inflation, even if that meant slower revenue to state government (Civitas Institute, DecisionMaker Poll, May 2008).

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