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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.

General Assembly Approves Hurricane Relief Package

The General Assembly quickly passed an initial $56.5 million bipartisan aid package (read the legislation here) to address problems created by Hurricane Florence. The money will provide the state match for federal disaster assistance programs and help pay relief efforts in counties designated under a major disaster declaration by President Trump.

Specifically, the legislation:

When state agencies complete hurricane needs assessments next week, the General Assembly will reconvene to further refine the aid package.

Can you attend college without spending a bundle?

If you’re a college student or the parent of a college student, you know all too well about the high cost of higher education.

Something you may not know about however are a couple of new programs specifically designed to help hold down the cost of attending college. In 2016, The Republican led legislature approved a fixed tuition plan for all UNC campuses. The plan provides fixed tuition for students who stay continuously enrolled at a UNC campus for four years. In addition, in 2016 the legislature also approved the the NC Promise Tuition Plan that provides $500 semester tuition for students at three UNC institutions and $5,000 tuition for out-of-state students. The lower cost tuition plan applies to students at UNC-Pembroke, Elizabeth City State University and Western Carolina University.

A recent poll found that few North Carolinians had heard of either of these programs. To make sure more students can benefit, the legislature recently appropriated money for a campaign to publicize the programs.

Want to attend college and not spend a fortune?   These programs can go a long way toward making that goal a reality.

What the N&R Editors Missed in Their Amendment Opposition

The Greensboro News & Record this week expressed opposition over the six constitutional amendments going on ballots this fall in NC. One concern they had was the alleged limited knowledge likely voters had of the amendments.

So it’s unfortunate that only one in five of you polled by HPU then said you had heard very much about these amendments. As low as that percentage is, it’s remarkably higher than a similar poll conducted about a month ago by Elon University.

That brings us to this essential point: Will you have any idea what these amendments say, how they might be enacted and whether they are a good idea for our constitution and — more importantly — you?

So twenty percent of poll respondents said they hadn’t heard “very much” about the amendments – and that raises alarm bells to the N&R editorial staff.

But compare that to the 41 percent of poll respondents that could not name the sitting governor of North Carolina, according to Civitas’ latest poll (this poll was taken pre-Florence, however). In other words, twice as many people do not know Roy Cooper is the current governor than have reportedly “heard very much” about the amendments. Do the N&R editors share the same concerns about people having “any idea” about the impact Roy Cooper’s governership will have on them when they voted for him?

Moreover, they raise questions on each of the amendments to try to cast doubt on them. Here is what they said about the tax cap amendment:

More than six out of 10 like the idea of reducing the state’s maximum income tax.Should the constitution engrave a rate that may need periodic review because of economic pendulums?

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.

All this is not to advocate for tax hikes during recession, of course. That’s the worst thing to do. Much better to cut spending. But the point of this post is to point out the baseless fear-mongering by statists in an attempt to turn out opposition to sensible restraints on government largesse.

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