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OK, some regressive taxes are better than others

But why have them at all?


Now that I've actually met Pope "Mac" McCorkle, I'll drop the Pope part. Mac says that I "mischaracterized" his views in this column in the course of writing about country-club Democrats who don't speak for--or to--the common folk in the party. (See "Are the Democrats turning left, or to what's right?" March 2.)

To that charge, I'm going to plead, uh, guilty of columnizing.

He's also got an argument about progressive taxes that's interesting, but I don't think it gets the job done--not the job I'm talking about, anyway. What I want is political leaders who align themselves forcefully with the interests of working people, which more and more requires that they also speak out against big corporations and the self-indulgent rich. He thinks, I gather, that you can do the former without resorting to the latter. I don't.

But, first things first. Based on a conversation we had over a beer in a bar in Durham, where he lives, I'm going to concede that when I was blasting the country-club set, I made his quoted remarks at a conference in Chapel Hill--plus the fact that he's a policy adviser to Gov. Mike Easley, among his other clients--into a too-convenient whipping post.

That's what columnizers do, even though it's wrong. They pick out some stray remark made at a basketball game, say, and use it to proclaim that N.C. State fans should be ashamed of their behavior. Maybe we should, or maybe the officiating in the ACC really does suck. But it's wrong to tar us all (oh, right, not "all" of us) with something a few idiots supposedly said, as reported secondhand by Wake Forest's sports staff, when our serious critique was addressed to Mr. Karl Hess & Co.

Similarly, it's wrong to blame one guy for a party's mistakes, or take a swipe at him based on what a student reporter quoted him as saying without picking up the phone and talking to him directly. Especially when that guy was trying, as in McCorkle's case, to address the question of how North Carolina can raise needed revenues in a progressive way without, however, opening the door to a Republican takeover.

So, what did McCorkle say? First, that progressives should consider whether consumption-based taxes can be made progressive. Second, that whether a tax is progressive or regressive depends not just on who pays and at what rate, but also who benefits. And third, that the reason to look at the first two is that North Carolina's nominal corporate and personal income tax rates are the highest in the South at 6.9 percent and 8.25 percent (the top personal rate), respectively. "We are reaching the end of our rope in terms of reliance on the income tax," he said in an e-mail written after we talked.

He added that if progressive-minded people think the state can raise substantial sums of money by closing corporate tax loopholes, we should make a list, add them all up and be sure they aren't just higher "regressive" taxes on consumer services, because he doesn't think there's enough money there to pay for the "however-many billion dollar spending package" we seem to want.

McCorkle's arguments all revolve around a central theme, which is that if a state's income taxes get too high, business owners and other well-heeled people--especially if retired--will take their money to some other state. That's true, I suppose, to some extent. Which is the reason why it's so vital that our national taxes be progressive.

Only the national government, remember, has the constitutional power to restrict the entry of persons or companies if they locate elsewhere for purposes of tax-avoidance. The states cannot interfere with interstate travel or commerce.

The fact that, since the Reagan administration, and at an accelerating rate under George W. Bush, the national government has cut taxes on corporations and the wealthy while also allowing them unfettered access to our 50 states is what has this country's budget and trade balances so deeply in deficit and the states fighting with each other for scraps from the global table.

Southern Democrats should be raising the roof over this national sell-out and leading their party's counterattack against it. Instead, we see Mike Easley declining to associate himself with the national Democratic ticket, and country-club Democrats throughout the state calling themselves "progressive" when it comes to state issues but tacitly supporting Liddy Dole, Richard Burr and--back in the day--even Jesse Helms in elections to Congress.

The effect is one step forward in Raleigh, maybe, while Washington pushes us two steps back, and then three more, and on and on until one of the two parties--and I'm thinking it's gotta be the Democrats--can unite and say, "Enough."

In the meantime, though, one step forward is better than none. And in that vein, McCorkle's right that consumption (sales, value-added) taxes can be made mildly progressive if necessities (food, medicines) are exempt, high-end services (legal, banking) included, and an earned-income tax credit (EITC) added that gives rebates, in effect, to the working class. The European countries do it.

I see that N.C. State economist Mike Walden, often associated with the conservative John Locke Foundation, says that since services are a growing part of everyone's purchases, including them in the sales tax is the only way to avoid losing money or ratcheting up the rates.


Over to you, Raleigh Democrats.

McCorkle's not right, though, when he says a state lottery shouldn't be considered regressive if it pays for benefits that go mainly to people of lesser incomes. "Any serious economist" knows this, he says. Yes, but the rest of us understand that a program can be progressive and the tax that's supposedly earmarked for it still be regressive.

All tax money goes in the same pot, after all. And if a lottery can raise $500 million a year, it will nonetheless come disproportionately from blue-jean pockets, not suits. (McCorkle says recent studies question the supposed "severe regressivity" of lotteries. OK. Not severe.)

Meanwhile, we're telling ourselves we can't afford a Georgia-style college scholarship program in North Carolina unless poor folks pay for it? Then I'd say we can't afford it.

Except that I see from the proliferation of McMansions and limo-sized SUVs all around me that we can afford it.

To repeat, according to the well-respected N.C. Budget & Tax Center, the rich in North Carolina are paying less in taxes--as a percentage of income--than the poor and middle class; also, our state and local taxes overall are in line with or below those of neighboring states.

Unless the rich are stupid, they get that. And where else do five of their teams make it to the Big Dance?

Anyway, last word from Mac to me: "I look forward to continuing the discussion of progressive strategies for North Carolina." Good. Me, too.

Leandro who?
Speaking of affording things, the Easley administration, champions of public education, propose to spend nothing more over the next two years--zip, zero--to help at-risk schoolkids, despite two rulings by the state Supreme Court in the Leandro case declaring that the state is failing its constitutional duty.

The plaintiffs in the case--the school districts of several low-wealth counties--want a court to order the state to come up with the $300 million extra a year that the rulings (in 1997, and again in 2004) seem to require, not just the $23 million the Easley administration came up with so grudgingly a year ago and proposes to spend again in each of the next two years.

The $300 million figure is calculated based on an estimated 300,000 at-risk kids and the $1,000 extra per year that both sides in the case say should be spent helping each of them get up to speed. The amicus plaintiffs in the case, five public-interest groups, charge that Easley's stalling is "not the type of visionary and firm leadership that the state's school children need, or Leandro demands. "

Write Citizen at rjgeary@mac.com.

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