North Carolina tax bill
July 16, 2013 Leave a comment
It is not as radical as were earlier versions, especially in the Senate, but moves to one personal income tax rate and a declining corporate tax rate that will drop further unless revenue projections don’t add up. The realtors won big early on (though they are still opposed due to capping the mortgage deduction, but there had been notions of adding sales tax to home sales and inspections, for example) and the hospitals won late as the state sales tax refund cap was set at a level that applies to no hospitals, but which would eventually onset over time. In the end, it is basically a tax cut of around $2.4 Billion over the years 2013-14 to 2017-18, with some simplification, but there is still some old style winners picked (read sections 3.5.(a) G.S. 105-164.14A(a) (4) for special NASCAR stuff & § 105-164.13E for special farmer stuff; there are other examples).
In the end, the most important tax reform decision is collecting the required amount of money, which of course is a policy choice and I don’t think this bill does that.
One of the most distressing aspects of the past few months in Raleigh for me is what I view as the callous disregard of the poor/struggling in our State by our elected leaders: rejecting an advantageous Medicaid expansion for ideological reasons, cutting unemployment benefits early during a slow economic recovery, removing the Earned Income Tax Credit from our budget (I am old enough to remember this being a Republican idea). Republicans will respond that we need to create jobs to help the poor, and I agree with that sentiment and goal wholeheartedly.
But if you go back to what they said in the Spring, we didn’t end up doing a lot of what they said was most important to spur jobs (ending the corporate income tax that they said was key), and now if jobs don’t emerge, they will simply say we didn’t cut taxes enough, etc., as we race to the bottom.
I would actually be in favor of more substantive tax reform that what they have done, based on the best research about economic growth, that was balanced with the creation of a coherent safety net via the Medicaid expansion, earned income tax credit and the like. A shift toward more regressive taxation could be balanced by more progressive spending via Medicaid, etc. but they seem incapable of such subtlety, or too mean-spirited, not sure which. My fear is that with this tax bill they have put us in no man’s land….directly harming the poor while not building a tax code that is most conducive to economic growth.
I hope I am wrong about economic growth.
update: cleaned up some typos. Update 2: what are the predictions on economic growth and job creation by proponents? Haven’t see them.