Make state taxes fair (or fair-er, anyway): What Perdue could've done

by

8 comments

taximpactjpg.jpg

Last time I checked, there was a philosophical difference in this country about taxes. On one side, "fair tax" (a.k.a., tea party) folks think everybody should pay taxes at about the same rate. On the other side, progressive-minded people like myself think people's tax rates should reflect their ability to pay. That is, the rich would pay at higher rates than the poor and the middle-class because they can ... and because they're benefitting from a well-ordered society to a greater degree than others. (That's often, e.g., because they inherited property and, as tempting as it might've been to the rest of us, no angry mob formed to steal it from them or even levy a serious estate tax on their windfall.)

All that said, however, to my knowledge no one argues that the poor and middle-class should pay taxes at higher rates than the well-off, let alone the really really rich. (That last group would be your top 1 percent of income recipients — I don't use the term earners in this context — whose "labors" net them upwards of $367,000 a year per household, with average household income of $929,000 a year.)

No one argues it (out loud), but that doesn't stop our North Carolina lawmakers from causing it to happen, which they do.

In North Carolina, state and local tax rates not only aren't progressive, they're not even flat ("fair"). Instead, they're regressive, as the above graph produced by the N.C. Justice Center's budget and tax experts illustrates. You make $15,000 a year, you pay almost 10 percent of it in state and local taxes. You make $15 million a year, your tax rate is less than 7 percent.

Tea-party conservatives and liberals alike have gotta think that's just wrong.

Gov. Bev Perdue
So if you were Gov. Bev Perdue, a Democrat at the time of her election, and you were trying to raise revenue to help fill a $2.4 billion budget hole, wouldn't you look to raise it from the folks who have it — the rich — while also trying to make the tax system in North Carolina at least slightly less regressive?

And it would've been so easy for Perdue to accomplish, or at least to propose (let the Republicans who control the General Assembly nowadays make the case for doing the wrong thing). The Justice Center's Budget & Tax Center experts did all the heavy lifting for her in their tax modernization plan issued this week.

Alas, Perdue didn't just whiff the tax issue, she picked up the bats from the Democrats' dugout and handed them over to the Republicans.

***

The Justice Center's plan spelled out a straightforward path to filling HALF (not all, half) of the budget hole with new revenues and doing so in a slightly progressive way. Details are on the Justice Center's website; suffice it to say here that the plan would raise about $1.3 billion, half again as much as Perdue's $824 million, and would:

1) Make the state income tax ever so slightly progressive — it's essentially a flat tax now — and by doing so generate a good deal of money for the state, almost all of it from those who have a good deal of money;

2) Broaden the sales tax to include most services, thus raising somewhat more money via the sales tax overall while reducing the sales tax rate.

3) Change the corporate tax rules so the North Carolina subsidiaries of national and multinational firms can no longer dodge their in-state tax responsibilities.

***

Instead, Perdue proposed a tax cut for corporations with no requirement at all that the money they save be invested in North Carolina.

(As the Budget & Tax Center's Alexandra Sirota said, some of the money will instead go to shareholders who don't live here or else be invested in other states or other countries. Or it will go to the federal government, since every dollar not paid in state taxes is a dollar not deductible from federal taxes. Sirota cited a study by the Center for Budget and Policy Priorities, a national group, pooh-poohing the idea that a state can spark job creation by cutting corporate tax rates.)

And Perdue proposed to extend 0.75% of the 1-cent sales tax increase enacted two years ago as a "temporary" revenue measure; but she does not want to extend the income-tax surcharge on the highest income brackets.

It's as if Perdue went out of her way to spare the wealthy while socking the middle-class and below with higher taxes.

Of course, what Perdue proposes and what comes out of the Republican legislature will be two different things. But Perdue's budget lowers the bar on what Republicans can get away with.

Perdue could've said, I'll veto a budget if it's balanced only with spending cuts and regressive tax increases. But she didn't, and now the door is open for Republicans to walk through with a budget that cuts education funding and social services and hands the "savings" to business and the wealthy.

Comments (8)

Showing 1-8 of 8

Add a comment
 

Add a comment

Quantcast