No Way To Run a State No Matter Your Political Affiliation: NC Tax Reform
Here in North Carolina our legislature is about to enact major changes to our tax laws. As you’d expect, the bill lowers the income and corporate tax rates. Since it is a Republican proposal, it also eliminates the death tax even though Chapter 105 of Article 1A of the General Statutes is known as the Estate Tax. The bill broadens our sales tax and limits or caps certain deductions and credits. In other words, it makes a lot of changes to North Carolina’s tax code.
Predictably, the proponents envisage that the legislation will unleash economic activity as taxpayers have more money to spend and companies relocate into North Carolina. The opponents warn that this bill will increase the burden on workers and the poor and will force even more draconian budget cuts in future years.
Here’s what the legislature is touting. A married couple with two children making $60,000 would save $84, and a single person earning $250,000 would save $4,000 a year. They don’t provide examples of other areas of their bill. However, they don’t even get their headline example right. The family of four getting by on $60,000 would only net about $72 after you account for the net impact of federal taxes, and the single person’s $4,000 tax savings is closer to $2,600.
I’d like to offer thanks to the governor and legislature on behalf of the money management business and the City of New York. The wealthy folks who will enjoy the largest large tax breaks will have bigger financial nest eggs. This money will, for the most part, be wired to asset managers and brokers generating fees, profits, and tax revenues in other states. And, don’t tell me that some of that money will go to our financial center in Charlotte. Wells Fargo and Bank of America don’t manage money in North Carolina.
You know what I think of this bill. However, it’s really hard to express a fully informed opinion because there’s no detailed data available. I’ve spent the afternoon digging through state government websites. Governor Pat McCrory, who hails this legislation as “historic”, only has his press release on his website. I headed to the website for the State Office of Management and Budget. I was sure that Governor’s fiscal steward would have some analysis. After all, Art Pope, the Governor’s budget director, has been a longtime critic over the lack of proper fiscal analysis in North Carolina. Nothing.
The State’s Controller and Treasurer are Democrats, and therefore were excluded from the development of the tax bill. As a result, their websites don’t have any information. Of course, they’ll eventually have to explain the new tax law to the rating agencies and Wall Street.
Next, I headed to the General Assembly’s website. The bill is there for all to see (HB 998), but there isn’t any analysis, and the Fiscal Research Division, the financial brain of the legislature, had no information whatsoever. While I was rummaging about government websites looking for even a scintilla of information, the House and Senate were giving preliminary approval to the bill. How can this be?
Whether you agree with the governor and General Assembly or not, you can’t possibly think it’s fiscally prudent to enact a multi-billion tax bill without providing some analysis. If the legislature were considering a capital expenditure or appropriation, they’d require plenty of justification. Our state’s leadership has promised that they’d conduct themselves in a more business-like manner. I don’t know a company that would restructure its revenue stream in the cavalier manner exhibited by our political leaders.