NC Budget and Tax Center

Top 5 Reasons why TABOR is wrong for North Carolina

There are at least 10 million reasons that the House shouldn’t change North Carolina’s constitution to arbitrarily limit what the state can do to build a stronger economy in every community: the 10 million people of North Carolina who deserve leadership that finds out what our state needs and what it will reasonably take to meet those needs,  instead of insisting on a budget formula that lawmakers pretty much picked out of thin air.

Here are five more reasons that a state constitution restricted by arbitrary and flawed formulas and income tax caps limits NC’s ability to do great things for all of its people and is the wrong approach for North Carolina.

  1. It’s already been tried and failed. Colorado enacted the nation’s only TABOR in 1992. In 2005, voters temporarily suspended it because of the deep damage it caused K-12 schools, colleges and universities, and health services. It neither improved Colorado’s business climate nor its economy. Rather, it contributed to a credit rating downgrade and so many other financial problems that and business leaders who originally supported it joined the broad coalition that won TABOR’s suspension.  As a result, other states are avoiding TABOR. It has been rejected in the nearly 30 other states where it’s been seriously considered, including at the ballot box in five states.
  2. It will lead to a tax shift and costly losses across the state. Already North Carolinians are clear that the income tax cuts pursued by state leaders are shifting taxes onto middle-class and low-income taxpayers, while giving the biggest breaks to the wealthiest households. Just today in Senate Finance, members heard that another $140 million will be raised through the sales tax to fill the hole from income tax cuts – $140 million that will come disproportionately from the pockets of those who can least afford it.  Limits to income taxes will continue to push policymakers to pursue revenue through sales tax collections, and local governments will feel the pressure to raise property taxes too.
  3. It messes with the state constitution. Pursuing amendments to the state Constitution should be done with great care and attention to core principles that advance our shared commitment to be part of a community that works.  TABOR and other tax limits would actually hurt the intention of the state Constitution to set up the rules that govern our communities by reducing our ability to make the public investment in the things that make our communities thrive.
  4. It makes future decisions more complicated and harmful. There will be no further progress toward the national average in teacher pay. There will be no effort to turn the tide on infant mortality or child abuse. There will be no possibility to revitalize rural communities or protect the health and natural resources of our state and its residents. There will be no flexibility to make sure the state has what it needs in case of a natural disaster or big economic downturn. Rather than simplicity,  TABOR is another gimmick that makes it more complicated for future policymakers faced with the needs of a growing state to represent their constituents.  Common-sense investments will be less common under a rigid formula.
  5. It doesn’t do anything that policymakers can’t already do. Already the Governor and House have chosen to be guided by the flawed formula of population plus inflation in setting the state budget. The Senate will do the same and continue to aggressively pursue more ill-advised income tax cuts at the expense of our future. North Carolina leaders have continued to cut public investments year over year despite an economic expansion and they have enacted income tax cuts that fuel these cuts. If they are already sticking to a flawed formula, why do they need to enshrine it in the state constitution?

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