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More Faulty Tax Cap Arguments from Big Government Promoters

The N&O published an oped by Richard Nordan, a Raleigh attorney and CPA, opposing the tax cap amendment slated to be on ballots next month. Big government apologists must be getting nervous about the amendment – as polling shows heavy support for lowering the constitutional income tax cap to 7% from its current 10%. Indeed, the latest Civitas poll showed 60% total in support versus only 22% total opposed.

The piece contributes essentially nothing new to the discussion. Instead, it makes a passing reference to a 1970s California cap on property tax increases and Colorado’s TABOR (which restricted the growth rate of spending). Neither of these examples are relatable to NC’s tax cap amendment.

After those meaningless passages, the article falls back on the well-worn mantra that such a cap will “tie the hands” of future legislatures in the event of a fiscal emergency.

First off, one thing that the tax cap opponents will never enter into the discussion is the concept of reducing government spending. No amount of spending will ever be enough.

Furthermore, as written here before, the “state’s hands will be tied” claim is absurd.

This tactic of creating the illusion that the state’s hands will somehow be tied during economic downturns is not unique to the N&R. But missing from their question is the fact that the amendment this fall would lower the state’s income tax cap from 10% to 7%, which would still allow a great amount of latitude. Income tax rates in North Carolina in 2019 will be 5.25% for personal and 2.5% for corporate.

In short, the corporate tax rate would still be allowed to nearly triple (180 percent increase) before reaching the 7% cap, while the personal tax rate could increase by a third before reaching the cap.

For quick reference with some back of the envelope estimates, with personal income tax revenues at $12.5 billion, a 33 percent tax hike would generate more than $4 billion in additional revenue (not taking dynamic effects into consideration). A tripling of the corporate tax would generate roughly $1.5 billion. I guess “limiting” legislators to just $5.5 billion in additional revenue (not even bringing in the option of raising sales taxes) is just not enough for big government advocates.

Finally, there is the article’s warning that with a lower income tax cap, there is a stronger likelihood that sales taxes will be increased to generate added revenue during emergencies. But how to explain the fact that legislators relied far and away most heavily on sales tax hikes during the last two downturns to generate revenue – even thought the income tax cap was at 10%?

It’s pretty disingenuous to pretend that a lower income tax rate cap will be to blame for sales tax hikes during emergencies, when legislators relied most heavily on sales tax hikes during emergencies at the current income tax rate cap.



Recent News Article Exploits Hurricane to Expand Government

The N&O yesterday published an article by the far-left NC Budget & Tax Center, a project of the NC Justice Center. The article’s aim was to exploit the tragic Hurricane Florence event in order to advance the Budget & Tax Center’s favorite hobby horses: income inequality and race baiting.

The “solutions” proposed in the article are just the tired and worn out laundry list of welfare programs that tend to make poverty worse.

Failing to expand health insurance, refusing to raise the minimum wage, attacking critical support programs like the Earned Income Tax Credit and SNAP (formally known as food stamps) are all ways in which our leaders have neglected North Carolinians who need help the most.

As I wrote previously on this issue:

For still more perspective, between 1992 and 2015, total state and local public welfare spending in North Carolina topped $570 billion. What sort of return on investment did North Carolina see from spending more than half a trillion dollars to fight poverty? Very little. If anything, poverty has worsened during this time.

Moreover, while highlighting poverty rates of various groups in North Carolina, the article fails to mention the elephant in the room: the undeniable link between fatherlessness and poverty. As I pointed out previously:

North Carolina families are roughly five times as likely to be in poverty when there is no father in the home.

Moreover, for households with multiple children, one of which is under five years old, headed by a married couple, the poverty rate is 15.6 percent in North Carolina.  In households in the same situation, except with no father in the home, the poverty rate jumps to a heart-wrenching 60.6 percent.

It is professional negligence to speak about poverty in North Carolina and ignore these facts.

The radical leftists at the NC Justice Center either don’t actually want to reduce poverty or are not interested enough to learn basic economics in order to understand how to reduce poverty.  They should not be taken seriously on such matters.

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