There he goes again

There he goes again

SRS-12-04-2013B

Governor misleads on tax outcomes in letter to the editor

As noted at some length yesterday, Governor McCrory gave a remarkable pair of interviews to two Charlotte news outlets recently in which he complained mightily about the criticisms directed his way over his hard right political turn.

Taylor Batten, the Editor of the Charlotte Observer editorial page and a 2012 McCrory supporter, concluded the damning story about his sit-down with the Governor (and McCrory’s weird and incessant complaining about his treatment by the news media) this way:

“There’s much more he sees, but you get the idea. Most of McCrory’s troubles stem, in his mind, not from his support of policies that a majority of North Carolinians disagree with but from a media that, through bias or incompetency, just can’t understand his greatness.”

The Batten story also called out the Governor for another large factual misstatement – this one about the state’s largest-in-the-nation cuts to unemployment insurance. The article says that McCrory later called Batten to admit his error.

Another factually-challenged claim

After such treatment, you’d think the Governor might want to tread very lightly and carefully in crafting any kind of response or attempt at damage control. For better or worse, however, this does not appear to be in the man’s DNA.

Instead of a measured and fact-based response, the Governor dashed off a letter containing still more complaints (published Monday in the Observer and in Raleigh’s N&O) that sounds a lot like an excerpt from a campaign speech and that, yet again, plays it fast and loose with the facts.

Perhaps most notable among the many shaky claims in the letter is the one in which, after taking credit for North Carolina’s sluggish jobs growth (a trend that’s basically just in keeping with national patterns) the Governor said this:

“Starting Jan. 1, the income tax rate will go down for every North Carolina taxpayer.…North Carolinians will see more money in their paychecks next year…”

This claim is, as with so many other uttered by the Governor in recent months about the new laws and policies he’s helped put into place (remember when he claimed that teachers making $40,000 per year would receive a one percent increase in take home pay?), badly misleading at best and downright false at worst. Here’s why:

The full picture

While it’s true that personal income tax rates will fall January 1, a huge proportion of North Carolinians will actually see their overall tax bills rise.

As tax policy analyst Cedric Johnson of the North Carolina Budget and Tax Center has noted repeatedly in recent months (e.g. here and here), taxpayers earning less than $84,000 a year,  will see their taxes increase on average under the tax plan.

He even provided the following concrete examples earlier this week:

  • A married, non-elderly couple with two kids earning $21,000 per year will see their state and local taxes increase by about $265 under the tax plan.
  • A married, elderly couple with $35,000 in income (which includes $6,000 in public pension benefits) will see their state and local taxes increase by about $187 under the tax plan.
  • A single, small business owner with $70,000 in income (and who qualifies for the full $50,000 business income deduction, which is eliminated under the tax plan) will see his state and local taxes increase by around $2,700 under the tax plan.

Johnson could have crafted hundreds of other examples, but that’s not really necessary since, in case you didn’t notice, there’s a pattern at work here: people of low and moderate income are the ones hardest hit. Wealthy individuals and profitable corporations, in contrast, will receive huge tax cuts. Indeed, more than 65 percent of the net overall tax cut will flow to the top one percent of income earners in the state.

Meanwhile, the state Earned Income Tax Credit – a program first put into place at the federal level by Ronald Reagan in the 1980’s and that has provided hundreds of millions of dollars of tax relief to low-income working families in North Carolina in recent years (including 64,000 military families) – was repealed.

Put simply, many, many North Carolinians will see less in their paychecks. As Johnson explained in this post last week, this is likely to become painfully apparent in the near future after workers complete the new NC-4 tax form and employers adjust their withholding. And however the NC-4 changes are ultimately implemented; most taxpayers certainly won’t see more in their bank accounts.

When you think about it, it’s actually a fairly remarkable feat: Under the plan crafted by the General Assembly and approved by the Governor, state government will bring in hundreds of millions of dollars less in state revenue to fund essential structures and services at the same time that most people will pay more in state taxes!

The broader impact

Of course there is much more to the sad story of the giant tax shift enacted by the Governor and legislative leaders that isn’t immediately apparent in a discussion of the taxes paid by average North Carolina families. Again, here’s Cedric Johnson:

“The personal income and corporate tax cuts in the plan alone will reduce annual state revenue by at least $964 million once the plan is fully implemented. Additional revenue from changes to the sales tax and the elimination of a handful of tax breaks will not be nearly enough to make up for that, resulting in $650 million in net annual revenue loss upon full implementation of the plan, or more than $2.4 billion in total over five years.”

In other words, the plan is trickledown economics at its worst; it transfers vast amounts of wealth from already struggling families and the structures and services that help make middle class society possible (e.g. schools, roads, emergency services) to the small group of individuals who are already doing better than ever.

Setting the record straight

Ultimately, it’s hard to know what’s really at the root of the Governor’s latest claims about his new tax laws. If it’s a matter of intentionally disingenuous word parsing, we’re really in big trouble. Let’s hope it’s just another case of the Governor being flummoxed by a complex but critically important subject. Whichever the case, it’s clear that he would do well to devote a lot more time to mastering the facts surrounding his policy initiatives and a lot less to spinning them and complaining about his treatment in the media.

About the author

Rob Schofield, Director of NC Policy Watch, has three decades of experience as a lawyer, lobbyist, writer and commentator. At Policy Watch, Rob writes and edits daily online commentaries and handles numerous public speaking and electronic media appearances. He also delivers a radio commentary that’s broadcast weekdays on WRAL-FM and WCHL and hosts News and Views, a weekly radio news magazine that airs on multiple stations across North Carolina.
rob@ncpolicywatch.com
919-861-2065