Tax plans mean big cuts to state investment
Once upon a time, North Carolina’s policymakers pledged not to decrease investments in public schools, universities, parks or courts as they restructured our tax system. “Revenue-neutral” tax reform appeared to be a bedrock principle policymakers weren’t willing to betray.
Now, just a few months later, our state leaders are on the verge of approving a tax plan that would dramatically cut public investments that are fundamental to our economy in order to pay for tax cuts that mostly benefit the wealthiest taxpayers and profitable corporations.
How did we get here?
Policymakers quickly found it difficult to balance the budget while cutting taxes for the wealthy and profitable corporations. To enact these tax cuts for the rich while also avoiding harmful cuts to public investments, they would have had to raise taxes for the middle-class, or push the burden onto local governments. Needless to say, these are unpopular options.
But instead of acknowledging that cutting taxes for the rich would require huge sacrifices of the middle-class and low-income North Carolinians, policymakers have dug in their heels and decided to cut investments that people and businesses rely on every day. And as special interests clamored to keep their tax breaks, the cuts to services grew deeper and deeper.
So here we are at the end of June with two competing tax plans, each of which will bring in between $500 million and $1 billion less than the current tax code. The $1 billion decrease in revenue in the state Senate tax plan is equivalent to the entire annual budget for the state community college system which provides 840,000 North Carolinians with an affordable education each year and helps train North Carolina’s next generation of skilled workers.
These massive revenue losses will damage more than just public institutions like our schools and universities; they will hurt our economy too.
Cuts to higher education will mean fewer North Carolina workers have training in high-demand, high-tech fields, so local businesses won’t have the qualified employees they need to expand. If seniors can no longer receive support like in-home meal deliveries, more will have to enter long-term care facilities, which is bad for seniors and costs families and the state more money. If businesses have to wait longer to settle disputes in the courts, it could delay their production, hurting the business and its employees.
There is good reason to be concerned about the immediate harm of these tax plans and even greater reason to sound the alarm about the long-term consequences. Year after year, these tax plans will continue to hold revenues down, likely causing new cuts in services each year or at the very least an inability to meet changing needs in the state. That is because of the adoption of a flat income tax rate won’t benefit from growth in the economy and won’t be able to keep up with a growing population that means more children in our already crowded public schools, more cars on our already congested roads, and more lawsuits filed in our already clogged state courts.
Put simply, the current proposals on the table will only make the problems with North Carolina’s tax code worse. North Carolina policymakers should remember the promises they made a few months ago, and go back to the drawing table to create a tax plan that would protect our state’s vital investments.
Alexandra Sirota is the Director of the North Carolina Budget and Tax Center.