The N&O continues to drive their pre-determined narrative that last year’s tax reform will spell doom for the state budget, leaving a path of poverty-stricken and unemployed teachers in its wake. This time, they publish an article written by a former state Revenue Department employee. The misleading nature of this article is especially disappointing considering that the author should know better.
Even more alarming than the existence of this deficit is its cause. The structural deficit is not the result of a sudden downturn in the economy or another unexpected event. On the contrary – it is the result of the 2013 tax law changes that reduce expected revenues below expected expenses. Public information on the General Assembly website explains that the 2013 tax plan reduces tax revenue by over half a billion dollars in the year of full implementation and that revenues continue to decline in subsequent years.
See what the author did there? First she correctly states that the 2013 tax law changes reduce expected revenues below “expected expenses.” Yes, that is the whole point of a tax cut!
But in the next sentence, the author misleads readers by saying that the tax reform “reduces tax revenue” and that “revenues continue to decline in subsequent years.” This is typical politician and bureaucrat speak. Projected revenues from the new tax code are not estimated to be reduced, or to decline. Rather, they are projected to increase at a slower rate compared to what the previous tax code would have collected. This document (scroll to last page) shows projected tax revenue to increase every year of the five-year forecast, increasing from $20.3 billion in the current fiscal year to $23.3 billion in FY 2017-18 – a 15% increase in projected tax revenue.
But a 15% rise in tax collections over the next four years falls short of the projected increased pace of spending required to prop up our bloated state government, so the N&O again goes into spin mode to declare this a looming budget disaster of “gigantic proportions.”
The author justifies the projected increase in state spending, in part because it is “not realistic” to expect that the number of K-12 students will do anything other than continue to grow.
I guess she needs to check with the state’s Department of Public Instruction – because that is exactly what they assume. DPI projects K-12 student enrollment to decline slightly between now and FY 2017-18, and decline even further during the four years after that.
Lastly, the demand that tax revenue be sufficient to pay state government’s projected “bills” doesn’t call into question if these “bills” have become unnecessarily high. A review of long-term spending trends helps to shed light on the issue. For the 30 year period from 1979-2009 (the three decades before the great recession) North Carolina’s state budget skyrocketed at an alarming and unsustainable pace, more than tripling even after adjusting for inflation. The rate of inflation-adjusted spending growth outpaced population growth in the state by a 3 to 1 margin.
Don’t be fooled by misleading figures coming from the N&O. Tax revenues are projected to increase every year, and much of the increasing spending obligations are a result of a decades-long spending binge that have been revealed to be irresponsible and unsustainable.
Civitas would like to see tax revenue and state spending actually decrease in nominal terms, but in the meantime can’t we have an honest discussion about last year’s tax changes?