The tax cut hole

by Chris Fitzsimon, NC Policy Watch and NC SPIN panelist, May 24, 2014.

No matter how many ways Governor Pat McCrory and legislative leaders try to deny it, the main reason they are struggling to find enough money to give teachers and state workers a meaningful raise next year is the massive tax cut they passed last summer for the wealthy and out of state corporations.

They based their budget projections for next year on a forecast that the tax cuts would cost the state $438 million. And it turns out that was too optimistic.

The budget that Gov. McCrory released last week adds another $200 million to that lost revenue total and even that may not enough. There is evidence that the bill for the tax changes may rise by several hundred million dollars more before the end of the next fiscal year.

And while there is a heated debate about what percentage of the population pays more under the plan and what percentage pays less, there is no dispute that the bulk of the tax cut goes to corporations and folks at the top of the economic ladder. The conservative groups readily admit that. Millionaires, for example, received of a break of more than $10,000.

That leads to the inescapable conclusion that McCrory and the leaders of the General Assembly decided last year that the tax cuts for the wealthy were more important than paying teachers and state employees more.

You may not agree with it, but that was the philosophy behind their budget. The tax cuts were so important that lawmakers also cut funding for textbooks and school supplies and human services programs to pay for them.

The state budget is simply a list of priorities. Tax cuts were the priority. They were made first.

It might seem like this year things are different, that Republicans leaders heard the outrage about the education cuts and low teacher salaries and are responding by addressing those needs first, moving them up on the priority list.

McCrory’s budget did call for a small across the board increase for teachers and state workers after all, and key legislators have also promised that raises would be included in their final budget plan.

But part of the way McCrory pays for the raise is with even more budget cuts, primarily to the university system and health and human services programs.

McCrory’s budget does nothing about the next round of tax cuts that are coming. The personal income tax rate and the corporate income tax rate will both fall again January 1 unless the General Assembly acts, and that will cost the state another $300 million.

And legislative leaders are not stopping there. They are also pushing for yet another tax break for multistate corporations that will cost the state millions more.

Some Republican House members have questioned the newest corporate tax cut proposal, citing the uncertain state revenue picture, but their words of caution are being largely ignored.

The oft-cited clichй in the legislature holds that when you realize you are in a hole, the first thing you do is stop digging.

Not when it comes to cutting taxes for big business and millionaires. Not with this General Assembly. The digging for tax cuts continues.

That is their priority, not our schools or our teachers or our state employees.

http://www.reflector.com/opinion/fitzsimon/fitzsimon-tax-cut-hole-2487795