It is increasingly clear that the changes to state law in the tax plan enacted last year by the North Carolina General Assembly and Governor McCrory are setting the stage for big problems this year and well into the future.
Indeed, we can no longer blame budget shortfalls and our inability to invest enough in critical things like our schools on the Great Recession and its aftermath. Across the country others states are watching as their tax revenues begin to recover, and as a result, they are beginning to boost public investments back to old levels. North Carolina, on the other hand, is poised to keep cutting.
North Carolina also can’t blame “out-of-control” spending. In fact, North Carolina continues to spend less as a share of the economy than the 40-year average. At the same time, it is containing costs in key budget areas, like health care, better than most states.
In truth, North Carolina has no one to blame but itself. Because what is really happening here is the fallout from state policymakers’ foolish pursuit of tax cuts for the wealthy and profitable corporations on the dangerous gamble that it would create jobs.
Latest reports find that the state’s revenue is down $445 million in the current fiscal year and $191 million next fiscal year. This is likely just a sneak preview of the long-term problems this plan will cause if state leaders allow the tax plan to continue move forward. Policymakers must move immediately to stop any future tax cuts from being implemented and reassess what has already been done.
The growing cost of the tax plan means the stakes are high. Policymakers have limited their ability to invest in proven foundations of economic growth—an educated workforce, modern infrastructure, and research and development at institutions of higher education. There will be lots of excuses in the days and weeks ahead. But the decision to deliver costly tax cuts to the wealthy and profitable corporations is central to why policymakers can’t invest in these areas that their constituents know bring opportunity and prosperity.
At a time when qualified teachers are leaving the classroom, when students are struggling to finish their much-needed post-secondary education with less financial aid and higher tuition, when working families earning low wages have lost a tax credit proven to help them get ahead and support their families, falling short on critical public investments will only erode our competitive position – now and in the years to come.
After all, North Carolina had achieved a solid position compared to our neighbors and the nation by educating our citizens, investing in the roads, electricity and broadband that connected all communities to modern-day infrastructure, and ensuring that the health of our citizens was supported not just by a strong public health system but by a vibrant private health care industry.
North Carolina’s story is not unlike those of other states that have seen their economies perform best when they make smart investments in public services. A classic example is Kansas – which continues to lag the nation in job creation and experience slow income growth after having enacted massive income tax cuts. Tax cuts for the wealthy and profitable corporations have failed to deliver economic booms in other states. North Carolina should expect no different.
The fiscally responsible move now is for policymakers to stop further tax cuts from being implemented and begin repairing the damage. To move forward with a plan that benefits so few and costs us all so much is a mistake we will spend decades paying for.
Alexandra Forter Sirota is the Director of the North Carolina Budget and Tax Center.