NC tax cuts are taking a toll
Published December 16, 2014
Editorial by News and Observer, December 15, 2014.
The General Assembly’s Republican leaders appear remarkably calm about what is shaping up to be either a serious budget shortfall or an income tax shock for those who have not had enough state tax withheld.
Tax revenue flowing into the state is running about $190 million below projections following tax cuts that took effect in January. That is worrisome because state spending already is at a spartan level. There’s no slack for filling the budget hole with easy cuts. The state could dip into its rainy day fund (even though it’s not a rainy day), but that simply puts off the budget reckoning for a year.
State Rep. Skip Stam, a Wake County Republican and House speaker pro tem, said the budget shortfall isn’t much given the state’s $21.1 billion budget and the federal government’s spending on North Carolina’s Medicaid and transportation projects. He told Time Warner Cable News, “The difference is hardly even a rounding error.” A rounding error? It seems like more than that to state agencies that are trying to meet the needs of a growing state. Their budgets have been tightened first by the Great Recession and then by Republicans taking control of the General Assembly in 2011.
State funding needs
The Department of Public Safety, for instance, just told a legislative committee that it needs an additional $20 million to better treat more the 4,600 inmates with mental illness. The state courts system is so strapped it’s running out of money to pay jurors. Local schools systems are coping with reductions in state funding. The University of North Carolina system has been repeatedly cut, and its funding could shrink more since it represents a large share of state spending.
The cause of the shortfall is a tax overhaul that took effect last January. It expanded the sales tax base, cut corporate income taxes and condensed three personal income tax brackets into one lower rate. As a result, state tax revenues year over year are down $410 million and $190 million below projections.
Too early to know
State Budget Director Lee Roberts said the extent of the shortfall won’t be clear until sales taxes from the Christmas shopping season come in. “We’re not saying that we’re not going to have a problem,” he said last week. “We’re saying it’s too early to tell.”
One possible reason there’s a gap is that many taxpayers did not properly adjust their withholding under the new income tax rules. If that’s the case, there may be a surge in revenue in the spring, but there will be a lot of unhappy taxpayers who will owe rather than get the refund that typically goes to about two-thirds of filers.
Whatever the reason and the final numbers, it’s not too early to say the tax cuts are creating unnecessary headaches for state agencies and preventing investments in education, infrastructure and services for the needy. It’s one thing to be frugal about government budgets. It’s another to give money away in tax cuts when the state is falling short of meeting its needs.
Some states are struggling because of the drop in oil prices. But North Carolina has a self-inflicted problem. The national economy is improving, and states are spending more, but North Carolina keeps tightening its belt. The National Association of State Budget Officers reports that 43 states increased their general fund spending in fiscal 2015. And that’s after a healthy increase in fiscal 2014 when average state spending increased by 4.9 percent, the fastest rise in general fund expenditures since fiscal 2008.
North Carolina, by contrast, is cutting its revenue in hopes that smaller government and lower taxes will spur the state’s economy. But that result, like the missing $190 million, has not shown up.
December 16, 2014 at 11:37 am
Norm Kelly says:
Based on the title of this editorial, there were only a few choices of the source. The N&D editorial board. Chris. Some other lib. In all cases, the source just had to be a lib. Haven't read the editorial yet, as it's gonna be a waste of time.
But it does bring up one obvious question for every lib out there. When the demon party raises taxes, which they always do, which lib asks, wonders about, writes an editorial wondering, how the new tax increase will take a toll on CITIZENS and tax payers? When was the last time the N&D editorial board questioned the need for a tax increase or how that increase would negatively affect anyone? When the demon party refused to prevent a gas tax increase, showing virtually no concern for any resident, did the N&D write any editorials about how damaging the new gas tax PLUS gas price hikes would negatively affect anyone in the state? Just wondering. I doubt they did. After all, the N&D is an ally of the demon party and if the demons wanted to increase the tax, their ally would go along with it.
One other clue the author is of the 'progressive' liberal persuasion? Just read this one statement, which echoes their demon allies verbatim, 'state spending already is at a spartan level'. Remember when the libs controlled Raleigh and told us the budget had been cut to the bone, there was nothing left to cut, yet the tea cup museum was funded? Remember when the state purchased a lake-rated ferry to ferry kids from the 'ocean bound' outer banks islands? They had to dock the ferry for safety concerns. Then there's the case when Gov Bev hired a State DPI leader, while leaving the existing State DPI leader in place, but without authority or control. The state is still spending money on items that they shouldn't be, but it's at a spartan level?!!!
Typical of libs, they want it both ways. Take abortion as a perfect example of the confused mind of a lib. When a woman voluntarily gets her baby aborted, libs refer to it as a tissue mass, and it's legal at any stage of pregnancy. If libs can get tax payers to pay for the abortion, they are even happier. Let's assume the woman violated the lib creed and decided not to abort her 'tissue mass'. On the way home from the clinic, she is in a terrible car accident and the tissue mass is eliminated. Suddenly, for libs, that tissue mass mysteriously, instantaneously became a baby and now it's a baby that was killed. The driver of the offending vehicle must be convicted of manslaughter. In one instance, so long as taxpayers foot the bill, it's just a tissue mass. But when it fits the lib philosophy, they want you to accept that it's a baby all of a sudden. Same thing when it comes to politics. Libs believe that the state should participate in 'incentives', which is simply corporate welfare. But when it comes to everyone being treated the same, offering incentives to everyone who want to do business, then they see 'cut corporate income taxes' as a bad thing. Every business gets to benefit by a lower tax rate. Businesses who move here are encouraged to open their business here because they also will be able to take advantage of a lower tax rate. But unless it's the libs playing games with picking winners & losers, they want to have nothing to do with it. Give a tax break in the form of incentives, libs love it. Give every business a tax break, libs are completely opposed to it. And their ally will do what they can to convince the masses that the give-away program is the better alternative. Eventually the company that benefits from 'incentives' knows that they will be on the penalized side of the equation. Penalize one group in order to benefit another group. And make sure the benefited group is aware of who they owe for the benefit.
So, do the FACTS show that NC state spending has gone DOWN since 2011? Or has state spending actually gone up since 2011? It CAN'T be both ways, regardless of whether you call yourself a 'progressive' (to make yourself feel good) or if you call youself a lib. Same animal, different description. But the facts need to be on your side before you whine about tax & spend policies of the state legislature.
