Senate leaders and their supporters at the conservative, D.C.-based Tax Foundation argue that the state’s revenue collections are a sign that North Carolina can cut income taxes again for the wealthy and profitable corporations. We can’t expect to continue to compete and deliver a better quality of life to North Carolinians if we continue the march to zero income tax.
The state’s Fiscal Research Division has conservatively estimated $680 million in rising costs over the next fiscal year due to increased enrollment in public schools and universities, rising health care costs and requirements to pay down debt and match federal dollars for rebuilding Eastern North Carolina. This figure does not include the investments with bipartisan support that are required to protect children in the foster care system, expand access to job training (especially in rural communities), increasing slots in early childhood programs, and fully addressing the housing, small business and agricultural damage of Hurricane Matthew.
Cutting taxes again to the tune of $1 billion in a way that primarily benefits the state’s wealthiest and profitable corporations is fiscally irresponsible in the face of these identified needs. It fails to consider as well the unknown costs of a federal budget that contemplates at least $340 million in cuts to federal grants for North Carolina.
Given that Fiscal Research identifies personal income growth as the primary reason for the greater-than-expected revenue growth, over-collections should be read as a sign that the income tax represents a core component to the state’s tax code. It should not be allowed to erode or be eliminated as the Senate would like. It is the engine that will drive better outcomes for children and families today and pave the way to a stronger economy in the future.
What we don’t hear in the reporting of the state’s revenue collections is what could have been collected under the old tax code. Given the state’s economic recovery, we actually would have more like $3 billion more today if we had kept the old income tax structure.
Bottom-line: The news of North Carolina’s revenue collections coming in over projections should provide an opportunity to pay down the state’s growing needs. Just because we have more than what we thought we would, doesn’t mean we have what we need to build thriving communities across the state.