Fitzsimon File

The tone of the legislative committee considering an overhaul of the state sales tax changed dramatically Tuesday as Republicans presented their proposals for tax reform that included everything from amending the constitution to changing the way the budget is put together.

Ironically, the proposals came after a national expert nudged lawmakers to think more broadly about reform.

Michael Mazerov with the Center on Budget and Policy Priorities told the Joint Finance Committee that expanding the sales tax to services could provide more revenue for state programs and make the state's revenue system more stable and less prone to wild swings when the national economy changes dramatically.

But Mazerov said that since the sales tax is inherently regressive, falling disproportionately on the poor, an increased reliance on even a broadened sales tax will not make the tax system fairer. That is especially true if revenue from the broader sales tax is used to reduce the personal income tax rates for the wealthy, the most progressive aspect of the state tax code.

Mazerov's call to think beyond the sales tax was heeded by Republican legislative leaders, but they took the advice in a much different direction, laying out a list of principles for tax reform focused as much on making it more difficult to raise taxes than changing the state's antiquated revenue system.

House Minority Leader Paul Stam and Senator Bob Rucho want any tax reform to be what they mischaracterized as revenue neutral, raising as much money as the current tax system. But the Republicans do not want this year's billion dollar tax increase counted as part of revenue neutrality, meaning their proposals could actually force more deep cuts in education and human services.

The plan calls for either a constitutional amendment limiting the sales tax rate to three percent or requiring a 2/3 vote in the House and Senate to raise taxes.  Both ideas make little sense. Changing the constitution to prevent a tax increase ties the hands of the lawmakers the people send to Raleigh to make decisions about the state budget.

Requiring a 2/3 vote elevates tax policy above all else, education, health care, criminal justice, and it's more of a gimmick than a serious proposal. Congress can declare war with a majority vote. Surely raising revenue in North Carolina is not a more serious decision.

The Republican leaders wholly endorse reducing tax rates of course. They are still claiming that this year's state budget shortfall wasn't that serious and should have been addressed with deeper cuts.

Stam and Rucho ought to ask families struggling to find care for a loved one with mental illness about the cuts. Or maybe the kids who used to be served by afterschool programs to keep them off the streets and out of trouble.

When the Joint Finance Committee convened , the worry was that any recommendations for reform would sit on the shelf alongside the other high profile efforts to expand the sales tax base and the bring the state tax code into the 21^st century.

That is still a concern but now there are questions about where the committee could end up, like calling for a broader sales tax to raise revenue to cut taxes on wealthy individuals and corporations, or falling for some version of the Republican scheme of budget cutting and rigid restrictions on tax changes.

Neither is in the best interests of the state or the folks at the bottom of the economic ladder who are already paying more than their fair share of taxes while seeing services dwindle.

The state tax code still desperately needs an overhaul, but not one that rewards the wealthy or bows to an anti-government ideological agenda.

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This entry was posted on Tuesday, December 1st, 2009 at 7:01 pm and is filed under Fitzsimon File. You can follow any responses to this entry through the RSS 2.0 feed.