Fitzsimon File

It was tax Groundhog Day at the General Assembly Tuesday as a packed committee room heard a detailed presentation by a national tax expert urging lawmakers to overhaul the state's revenue system by expanding the sales tax to more services and lowering the overall rate.

It was almost exactly three years ago in the same room that a committee of lawmakers and business and civic leaders heard a similar call at the first meeting of the State and Local Fiscal Modernization Study Commission, a group appointed by Governor Mike Easley and legislative leaders.

Four years before that, on the sixth floor of a building just a block away, Governor Mike Easley told the members of the Governor's Commission to Modernize State Finances at their first meeting that he wanted them to come up with ways to make the state's tax code fair, predictable an efficient.

That commission's principal recommendation to the General Assembly was to broaden the base of the state's sales and income taxes and lower the rates. The proposal was largely ignored by the General Assembly in the 2003 session, despite the presence on the commission of key legislative leaders from the House and Senate.

The first recommendation on the list of proposals from 2006-2007 Modernization Commission was to broaden the sales tax base to include more services. That call was largely ignored by the General Assembly in the 2007 session.

The Institute for Emerging Issues released a report on tax reform in February of 2006, in between the two government-created commissions, and it too was organized around a call for a broader tax base with lower rates to tie the system more closely to growth in the economy.

That brings us to Tuesday, the first meeting of the Interim Joint Finance Committee on Tax Reform, when lawmakers heard William Fox from the University of Tennessee discuss the problems with the current state sales tax and call again for the broadening of its base to include services and a lowering of the overall rate.

The Joint Finance Committee was directed by House and Senate leaders to consider tax reform after the first real legislative debate about it took place in the budget negotiations this past summer.  Senate leaders wanted to raise revenue by expanding the sales tax to more services and broadening the base of the income tax.

House leaders objected, saying the idea needed more thoughtful debate, and the two sides agreed to work on tax reform before the 2010 short session that convenes in May.

There has never been much disagreement on two major points about the current state tax system, that it is in dire need of an overhaul and that it makes sense to broaden the overall base and lower the rates.  And this is the first time that the House and Senate Finance Committee have met jointly to work on the problem.

But almost every service that is not currently taxed has a lobbyist. Throw in the knee-jerk anti-tax rhetoric of many of the forces on the Right and you have a recipe that has derailed the proposals from commissions and left most political leaders cowering in the corner, afraid to make tax reform much of a priority. 

That may finally be changing thanks to the perseverance of Senator Dan Clodfelter and a handful of other influential legislators and the economic downturn that has focused attention like never before on the state's antiquated system of raising revenue.

But the deck is still stacked against reform in 2010. Lawmakers are up for reelection next November and more lobbyists than ever are patrolling the legislative halls. The political right is already exploiting the recession in its efforts to scare voters about health care and global warming and is ready to distort any meaningful effort to reform the tax code.

Despite all that, it will be a surprise if the Joint Finance Committee does not recommend some overdue expansion of the sales tax base. What happens next depends on the willingness of Governor Beverly Perdue and legislative leaders to lead the right for tax reform next session and to confront the Right's propaganda machine head on and explain to the public what's at stake—adequate funding for education, human services, and public safety.

There are enough tax reform recommendations on the shelf. The time has come today for something new—action.

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This entry was posted on Tuesday, November 3rd, 2009 at 5:57 pm and is filed under Fitzsimon File. You can follow any responses to this entry through the RSS 2.0 feed.