Seeing trepidation on tax reform

By Scott Mooneyham | May 07, 2013

RALEIGH -- Well, it is May. The birds are chirping, the sun is shining (OK, not a whole lot), the lawn is green.

This year's session of the North Carolina General Assembly is likely well past its midway point.

And we have yet to see a complete tax reform plan to which any of the true powers at the legislature have attached their names.

Sure, there is talk that a plan will tumbled out onto the agenda of a state Senate committee this week.

When it comes to restructuring taxes in North Carolina, there has been plenty of talk.

Gov. Pat McCrory says he is for it. So does the state House speaker, Republican Thom Tillis of the Charlotte suburb of Cornelius. The Senate leader, Republican Phil Berger of Rockingham County, is all in too.

In fact, Berger has signed onto a bill that would reduce the individual income tax, from its current range of 6 to 7.75 percent, to 4 percent, by 2016.

He and the other bill sponsors have explained that this is just one part of tax reform. I guess so. Because it contains no other provisions -- i.e, tax increases to offset the tax cuts -- it would unbalance the state's general operating budget by roughly $5 billion.

But we could always shut down the schools or universities tomorrow. Or, would opening the prison doors be a better alternative?

That bill, and most of what has preceded it regarding tax reform, has been politics and posturing, not serious policy.

Serious policy involves balancing budgets. Balancing budgets, when you provide tax relief in one area, means higher taxes in another area.

Somewhere, behind the bluster, trepidation exists because of that very fact.

It takes about $20 billion in general operating revenues to run state government right now. The Republican-controlled legislature might wish that were not the case, and its policies may act to slow budget growth.

It can't alter the basic reality without cutting popular programs or ignoring fundamental state responsibilities.

So, putting out a comprehensive, realistic tax plan that is supported by legislative leaders will require those leaders to say precisely what taxes that they would like to raise in order to get to those broad cuts in income taxes.

The proponents of tax reform have readily acknowledged that a big part of any tax reform plan will involve expanding the sales tax to cover services.

Saying "services" and spelling out exactly which services you want to tax are two different things.

One rumor floating around the Legislative Building last week shows why that is the case. It held that among the new service taxes would be one for the services performed by morticians.

Joked one lobbyist, "Now they will really be taxing you from cradle to grave."

Or, perhaps the levy could be considered the "new death tax."

Might was well laugh now. If and when a serious plan is put on the table, those morticians and some others may not be doing a whole lot of laughing.