A budget surplus with a values deficit

by Thomas Mills, Politics NC, May 11, 2015.

Republicans are crowing about the $400 million surplus while progressives are griping. The GOP should be given credit. They used conservative estimates in their budget projections because of the uncertainty of tax reform. To their benefit, the numbers came in better than expected. That’s smart politics and smart budgeting. It’s always better to have more money than expected than have less. 

However, Republicans can’t claim that cutting taxes led to increased revenue. Even Art Pope admits that. In fact, raising taxes on small businesses was a major factor in the increased revenue. Those small businesses did better than expected and taxing their first $50,000 of income, which had been exempted, brought in a lot of money. 

Republicans are loathe to admit that they raised taxes on businesses but they did. They like to claim that they instituted the $50,000 exemption as a temporary measure so, somehow, by eliminating it, they didn’t raise taxes. That’s not how politics works. 

A few years ago, Democrats let a temporary sales tax exemption expire. Republicans pounced and ran campaigns on the Democrats’ tax increase. The same politics applies here. 

Republicans also raised taxes on seniors when they eliminated the medical tax deduction. Given the power seniors hold at the ballot box, the GOP knows they screwed up and are working on fixing it before April 2016. They’ll have to get the money from somewhere else and you can bet your bottom dollar that it won’t be from rich people.

They also raised taxes on the working poor by ending the Earned Income Tax Credit. North Carolina is the only state in 30 years to eliminate the tax credit that Reagan called “the best anti-poverty, the best pro-family, the best job creation measure to come out of Congress.” Hitting the poor as they are struggling to climb out of the Great Recession was one of the more shameful acts by Pat McCrory and the legislature. 

The budget surplus had nothing to do with tax cuts and everything to do with tax increases on small businesses, seniors, and the working poor. But there wouldn’t even be a surplus if Republicans hadn’t slashed funding for public education. North Carolina cut per pupil spending by 4.7 percent this fiscal year and the drop has been 14.5% since 2008. Smart Start, the state’s model early childhood education program, has been cut by almost $60 million since 2008, serving fewer and fewer families while our population is increasing. The University system was cut $400 million in 2011 alone and sees more cuts coming this year. 

The GOP tax reform is really about priorities. They slashed taxes for the wealthy and corporations while raising taxes on small businesses, seniors, and the working poor. They helped the people who can already afford nannies, private schools, and private colleges while they hurt the institutions that serve those of us who can’t. That’s not really a budget surplus. That’s a values deficit.