We have been highlighting the views of experts about where North Carolina needs to invest to have the maximum impact and will continue to do so throughout the budget debate. The combined potential of smart spending with adequate revenue can improve the state’s economy and ensure more people can contribute to the activities and institutions that make our state great.
There has been very little, however, to suggest that policymakers are willing to tackle the challenge of a tax system that no longer is capable of supporting the core public services that deliver opportunity. Instead, there continue to be proposals to cut the income taxes and shift limited revenue around without addressing the fundamental issue that there are too few dollars.
As we have written about at Prosperity Watch, the state’s revenue is not only coming in far below projections it is growing far below historic averages. The result is that today we don’t have the revenue needed to invest for our future. And in that future we can anticipate ongoing self-inflicted revenue challenges unless policymakers address the inadequacy of our tax code.
North Carolina is not broke. There are the resources to make a commitment together to building that foundation. It will require that the state’s wealthiest residents—who have captured the entirety of income growth since the recovery began—and profitable corporations—who continue to reach record profits—contribute according to their ability. They, like the state, stand to benefit. After all a stronger economy is possible when more Tarheels are educated, more businesses have skilled workers, more main streets have vibrant small businesses and more communities are safe and healthy places to live.
Here are some of the big picture ideas that policymakers should consider in developing a tax system that can achieve our shared goals of strengthening the state’s economy and supporting families and communities across the state.
- Restore an income tax rate structure that ensures that all taxpayers carry an appropriate share of the tax load. This could provide $390 million if you keep the current 5.7% rate for the majority of taxpayers and add two brackets for the wealthiest in the state.
- Restore a vital tax credit for low-income working families before expanding the sales tax any further.
- Make sure that large, profitable corporations are paying to support the services they use and benefit from. This could provide $200 million if the corporate income tax rate is set at 6 percent which is in line with the region.
- Eliminate special-interest tax preferences that aren’t helping the state’s economy.
North Carolina has the capacity to make sure that our investments can grow an inclusive and strong economy. Policymakers just need to recognize—as they have done in the sales tax allocation debate—that revenue serves as the mortar in the foundation to supporting a vibrant economy.