Fitzsimon File

Tax policy will be front and center in the General Assembly session that convenes in January.  That is always true, but the debate about taxes will be even more important than usual this year.  

State lawmakers are likely to face a budget shortfall that may approach a billion dollars after accounting for programs that must be funded, like increased enrollment in schools, a cost of living increase for teachers and state employees and higher health care costs.

That means no new money is available for the myriad of needs in the state, especially in human service areas like mental health, child care, and affordable housing. If the shortfall is as bad as some predict, there will be pressure to cut budgets of human service programs, not increase them.

With that backdrop, Friday brings a 1/4 cent reduction in the state sales tax that lawmakers approved last session. They also reduced the income tax rate on the state’s wealthiest taxpayers by a 1/4 percent. Both taxes were raised half a percent in 2001 in what was described as a temporary increase.

Both are scheduled to come down the other 1/4 of a percent next year unless lawmakers intervene and they ought to consider it, given the revenue picture and the backlog of needs.  With 38,000 children languishing on the waiting list for a child care subsidy, it seems like an odd time to be cutting taxes on the wealthiest people in the state.

Tuesday brought the first meeting of the State and Local Fiscal Modernization Study Commission, a high powered group appointed by the legislative leadership to come up with recommendations to do all sorts of things that have been tried before, like updating the state’s tax code, looking at the relationship between the state and local governments, and figure out a way to relieve the counties of paying for a share of state Medicaid costs.

Senator David Hoyle, one of the group’s co-chairs, announced that he didn’t foresee any major recommendations to the General Assembly until May of 2008, which of course is an election year, leading some cynics to wonder if this commission’s work will end up like the tax commissions before it, having little effect on the state’s outdated revenue system that desperately needs reform. Let’s hope not.

The undeniably good piece of news in the budget and tax world comes from voters in Maine, Nebraska, and Oregon, who in the November election all defeated state spending caps modeled on the misnamed Taxpayer Bill of Rights (TABOR) pushed by the anti-government crowd across the country, including here in North Carolina.

The measure calls for a constitutional amendment to limit state spending every year to a formula based on inflation and population growth. Versions of TABOR are in effect in states around the country, most notably Colorado, which has sharply fallen in national rankings of quality of life measures since voters approved the amendment in the early 1990s.

The restrictions of TABOR were so damaging that Republican Governor Bill Owens, a darling of the right wing and former TABOR hardliner, led a successful effort last fall in which voters decided to loosen some of the amendment’s requirements.

TABOR advocates tried to make the arbitrary spending limits an issue in North Carolina’s legislative elections, circulating a TABOR pledge for candidates to sign. It didn’t work and combined with the failure in three states this fall and Colorado’s experience, the bloom appears be off that reactionary rose.

Now maybe we can talk about progressive tax reform, not be distracted by calls for misguided, draconian spending limits.

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This entry was posted on Tuesday, November 28th, 2006 at 4:13 pm and is filed under Fitzsimon File. You can follow any responses to this entry through the RSS 2.0 feed.