Weekend reading for Senate leaders

By: - June 24, 2005 7:26 am

Rank and file lawmakers spent most of Thursday plodding through the differences between the House and Senate budgets while legislative leaders began the public battle over a tax cut for the richest people in the state.

The Senate wants to end the 2001 income tax increase on the wealthy, the House wants to leave it in place, arguing that it helps balance the revenue package that also includes the half cent increase in the state sales tax, also passed in 2001. The battle will be waged as part of the continuing resolution that lawmakers must pass by June 30 to keep state government operating while they work on next year’s budget.

It is not surprising that Senate leaders are willing to play chicken with state employees and people who rely on state government services to cut taxes on the richest people in the state. After all, the Senate budget pays for the tax cut and a reduction in the corporate tax rate by reducing services to the aged, blind, and disabled. 

Senate leaders ought to take a look at a new report from the North Carolina Budget and Tax Center that not only proposes a comprehensive revenue package, but also shows who pays taxes now and how the House and Senate plans would affect taxpayers at different income levels.

In 2003, the wealthiest one percent of families in the state paid 9.2 percent of their income in state and local taxes. Those are families with an average income of more than $800,000 a year. Add in the itemized deductions that are part of the federal tax code and the families effective state and local tax rate was 6.3 percent.  Families earning between $25,000 and $30,000 paid 10 percent after the deductions and families earning less than $15,000 a year paid 10.9 percent of their income in taxes. Sure seem like the wealthy need a break.  As for the poor, just raise their taxes and cut their services. That is the Senate way.

The report proposes a revenue package that actually lowers the state sales tax rate, provides an earned income tax credit for the poor, and raises enough money to avoid most of the damaging budget cuts. 
It raises money by closing corporate loopholes, making the income tax more progressive, raising the cigarette tax to the national average, and ending many sales tax exemptions.
In other words, it is fair, lowering some taxes, raising others, and providing a more stable revenue base that will end the annual budget shortfall madness.
The plan would raise taxes .9 percent on the wealthiest taxpayers and .1 percent on those folks with the lowest income.  That might be a novel concept for some lawmakers, a revenue plan based on fairness instead of on the wishes of the powerful lobbying interests, but sounds like some good weekend reading for Senate leaders.

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Chris Fitzsimon

Chris Fitzsimon, Founder and Executive Director of N.C. Policy Watch, writes the Fitzsimon File, delivers a radio commentary broadcast on WRAL-FM and hosts "News and Views," a weekly radio news magazine that airs on multiple stations across North Carolina. [email protected] 919-861-2066