The experts at the N.C. Budget and Tax Center will be out with more detailed analyses in the hours and days to come, but here are some preliminary takes on state Senate President Phil Berger’s big tax plan announcement/opening salvo in his race for the 2014 GOP U.S. Senate nomination:
#1 – Same ol’, same ol’ – This is what we had to wait more than four months for? After all the delays and big promises, all Berger and his aides could come up with was a plan to slash the state’s most progressive taxes (i.e. the personal income tax, the corporate income tax and the inheritance tax) and raise more money from the tax that hits poor and middle class people the hardest — the sales tax. Oh, and since the plan won’t bring in the revenue necessary to keep government going at its already underfunded levels, the plan also contemplates lots more spending cuts to essential services. No wonder these guys are championing bills to raise class sizes and cut pre-K!
#2 – Perverting a good idea – The sad thing about this is that there is a kernel of a good idea in this plan. The idea of expanding the base of the sales tax to cover more services that are currently untaxed and more frequently purchased by people of means is a good idea, provided we lower sales tax rates significantly and provide for ways to assure the poor and middle class aren’t unfairly targeted. At this point, however, it appears the Berger plan is to simply make more things subject to the sales tax at the current rate or something close to it. The BTC has already shown in its analysis of a similar plan why such a scheme will simply make our already regressive state tax system even more regressive.
#3 – Making us more like the rest of the Deep South – The bottom line on the Berger plan, is that it’s ultimately predicated on the fatally flawed idea that what North Carolina needs is to be more like Florida or Alabama or Tennessee — other Deep South states with hyper-regressive tax codes and inadequate and threadbare public services. The Berger premise is that such an approach will make North Carolina more “business-friendly” and thereby somehow spur economic development. But, as study after study has demonstrated, this is simply incorrect. The truth of the matter is that lowering tax rates has precious little impact on economic development while other items like the quality of a state’s public education and transportation systems (and overall quality of life) are vastly more important.
In short, the Berger tax plan is just a gussied up version of the same old far-right prevarication that taxes (especially those that impact corporations and the wealthy) are inherently evil and that public structures and services that actually bind our society together and make us stronger should be run, if at all, on a shoestring.
Let’s hope House leaders and the Governor — who have already sent signals of skepticism regarding Berger’s radical and regressive approach — dismiss it ASAP so that lawmakers can get on with the business of passing a responsible budget and tax package in the coming weeks.