The Bond Buyer, an insider investment industry publication, has taken note of North Carolina Senators’ passage of a proposed change to the state’s Constitution that would limit the income tax rate to the low and arbitrary level of 5.5 percent.
In a recent article on the risk to the state’s “gilt-edged credit rating,” the reporter quotes a Moody’s analyst who provided general comments about the challenges with the direction that Senators seek to take North Carolina in. From the article:
“A majority of state budgets rely on a combination of income and sales tax revenues, according to Nick Samuels, vice president and senior public finance credit officer with Moody’s Investors Service. … Whatever the source, state budgets are sensitive to volatility in revenue, depending on how spending plans are structured, said Samuels. He declined to comment directly on North Carolina’s bill because it hasn’t passed. …
“Illinois has a flat income tax rate mandated by the state’s constitution that can be difficult to change, he pointed out.
“Moody’s rates Illinois’s senior debt Baa2 with a negative outlook as the state nears its second fiscal year without an adopted budget due to a political stalemate over spending issues between parties.
“In North Carolina, Moody’s rates the state’s general obligation bonds AAA because of its strong fiscal management and economic growth, which benefits tax collections, the agency said in a report in February. …
“Samuels said state ratings tend to be high because budget leaders have flexible governing strength.”
Read the full article here.