Shutdown the misleading rhetoric not the government

By: - June 29, 2005 5:47 am

Tuesday’s events at the General Assembly went as expected, setting the stage for a showdown between the House and Senate this week over ending an income tax increase on the state’s wealthiest taxpayers while continuing a hike in the state sales tax that falls disproportionately on the poor.

State government will shut down at midnight Thursday unless the General Assembly passes a continuing resolution to keep it operating at current levels. Both the House and Senate have passed resolutions that also include various tax changes.

The House plan extends the 2001 half cent sales tax increase for two more years and maintains the 2001 income tax hike on the wealthy. The Senate resolution makes the sales tax increase permanent and ends the income tax increase. 

House Democrats are insisting that the sales tax expire in two years, but this debate is really about who should bear the responsibility of paying more for vital state services, the poor, who pay a higher percentage of their income in sales tax, or the poor and the wealthy. The average income of people who would get an income tax cut under the Senate plan is $813,000 a year.

The Senate’s argument, actually the argument of the business lobbyists and parroted by Senate leaders, is that the state’s tax rate on the rich makes it harder to recruit businesses to North Carolina, scaring away CEO’s who make millions of dollars.

That argument is simply not true. While the top income tax rate in North Carolina is higher than other states in the South, the overall tax system is not.  CEO’s won’t pay more taxes in North Carolina than in other states, and it seems like CEO’s might be smart enough to figure that out and not just look at one tax rate.

The economic development argument is used to justify every regressive proposal on the corporate lobbyists’ agenda, from opposing an increase in the minimum wage to supporting less compensation for workers hurt on the job to fighting a meaningful increase in the cigarette tax that would stop thousands of kids from smoking.

North Carolina has a lot of problems but competing with other states to convince companies to come to the state is not one of them. Virtually every ranking of state’s industrial recruitment efforts have North Carolina at or near the top.

An economic development magazine recently recognized North Carolina and Alabama as the best states in the South in attracting new industry.  Apparently that tax rate on the wealthy didn’t cause too many problems.

Then there is the question of fairness, which always seems to be an afterthought in many of these tax debates. The House and Senate seem to agree that the state needs more revenue to avoid damaging education and human services. The question is where the revenue should come from. 

Time for legislative leaders to revisit that recent report from the Budget and Tax Center that shows that currently the wealthiest one percent of families in the state paid 9.2 percent of their income in state and local taxes, 6.3 percent after federal deductions.

Families earning between $25,000 and $30,000 paid 10 percent and families earning less than $15,000 a year paid 10.9 percent.  And that is now, with both the sales tax increase and the income tax hike in place.

Dropping the income tax in the wealthy would make those figures even more disturbing unless we want to make our tax system even more regressive, forcing the poorest people to pay the most while still cutting the services the same poor people rely on to make ends meet.

Brings to minds an addition to the saying often cited in debates.  There are lies, damn lies, and statistics. Then there are the perennial positions of the single-minded corporate lobbyists and the legislators who always seem to do their bidding.


Our stories may be republished online or in print under Creative Commons license CC BY-NC-ND 4.0. We ask that you edit only for style or to shorten, provide proper attribution and link to our web site. Please see our republishing guidelines for use of photos and graphics.

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