The rigged debate on tax reform

By: - January 24, 2013 10:41 am

The current debate over tax reform in North Carolina is the latest reminder of how far out of the mainstream some of the political leadership of the state now is. But it’s also serving a practical purpose for those on the Right who understand the benefits for their own tax policy and budget slashing goals of forcing people to take a ludicrously extreme proposal seriously.

Senate President Pro Tem Phil Berger actually stood before reporters recently and offered kind words for the shockingly radical and regressive tax proposal by one of his key lieutenants, Senator Bob Rucho. The plan would eliminate the corporate and personal income taxes and replace some of the revenue with a higher and broader sales tax that would raise taxes on 60 percent of North Carolinians, give the wealthy a huge tax break, and force low income people to pay more for food.

Rucho has been travelling the state for months with a PowerPoint presentation about his plan. The Pope Civitas Institute fleshed out the details for him recently by releasing an absurd study by discredited economist Arthur Laffer that claims the proposal would create tens of thousands of jobs in the state and cut taxes for many families.

Laffer himself came to town to pitch the plan that an analysis from the N.C. Budget and Tax Center shows will increase taxes by $500 on a family earning less than $24,000 a year and give a $41,000 tax break to folks who make more than a million dollars.

The claims about job creation and economic growth are simply silly. The Institute on Taxation and Economic Policy released a report this week showing that the Civitas/Laffer/Rucho plan is fundamentally and methodologically flawed, ignoring many factors that influence economic growth, cherry-picking data, and relying on a series of assumptions that have been widely discredited by mainstream economists.

In other words, the plan is a lose lose. It is not only startlingly regressive, it’s not a job creator either. It’s simply a way to shift more of the responsibility for paying taxes from the wealthy to low income and middle class families while at the same time reducing the state revenue available to invest in education and other vital state services.

It’s too much even for State Budget Director and primary funder of the Civitas Institute Art Pope who said this week he was troubled by replacing income taxes with the regressive sales tax. That’s widely interpreted as opposition to the plan by Governor Pat McCrory who campaigned on reducing taxes but didn’t talk much about abolishing the personal income tax.

House leaders don’t appeared to be thrilled with the Rucho/Civitas nonsense either, though they may have to work hard to keep some tea party freshman in their chamber from supporting it.

Many folks in Raleigh are waiting for the other tax reform shoe to drop, another proposal reportedly coming from another of Pope’s think tanks that may call for the elimination of the corporate income tax and significant cuts in the personal income tax with maybe a flattening of its rates, but not its abolition.

That may first be seen as a reasonable plan considering the lunacy of the Rucho/Civitas/Laffer approach and that may be the idea, to build political support for a more regressive and inadequate tax system by comparing it to the more radical proposal.

It’s worth remembering in the blizzard of reform talk that overall taxes in North Carolina are not out of line with the rest of the country and that state spending per capita is at a 40-year low.

We need a stable, adequate and fair revenue system. We certainly don’t need to slash state spending again after several years of sharply cutting funding for public schools, universities, and human services.

And we don’t need to force middle class families and low-income workers who are still reeling from the recession to pay more so corporations and the wealthy can pay less.

Let’s have an open, honest debate about tax and budget policy, not a choice between a radical regressive proposal and a less extreme but still regressive proposal that doesn’t provide enough revenue to make the investments that the people of North Carolina support and deserve.

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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