It’s an ambitious goal – too ambitious. Some North Carolina Republican lawmakers say they want to reduce this state’s personal and corporate income-tax rates until they no longer exist.
That sounds sweet until you consider the consequences. State government, after all, costs money. We can’t stop running our schools, paving our highways and fixing our broken infrastructure. Income taxes generate more than $10 billion a year in revenue. That’s not easy to replace.
Yet Sen. Bob Rucho, a Mecklenburg Republican who is the tax-reform field general in the Senate, says “the bottom line is we have a destination, that being zero personal (income tax) and ultimately zero corporate.”
Getting there would mean the removal of many tax exemptions and a vast expansion of the sales tax to a variety of goods and services that have long gone untaxed. A trim for your hair or your hedges may suddenly grow more costly. And even that wouldn’t replace $10 billion.
It’s no surprise that many of the businesses that would be on the losing side of that equation are heading to Raleigh to lobby against the part of tax reform that would affect them. So has it ever been when the General Assembly talks tax reform. To date, legislators have failed to stand up to that pressure. That’s why we have a tax code remarkably unchanged since the days when tobacco, textiles and furniture drove North Carolina’s economy.
Eliminating all income taxes would be a bad idea, because it would shift the burden to levies that would do more damage, or drastically cut services that are basic to a functioning society, like education and a social safety net.
Gov. Pat McCrory and House leaders have a better, more realistic goal: Cut our corporate and personal income taxes so they’re comparable to those of our neighbors, Virginia and South Carolina. That removes our built-in handicap as we compete with those states to lure new businesses, but it doesn’t destabilize a still-fragile economy. Tax revenues are beginning to rise, but only gradually. Tax cutting needs to be gradual too.
But before we even begin talking about how much to cut those tax rates, we’ve got to extract a more fundamental pledge from our representatives in Raleigh: They will listen respectfully to the barrage of lobbying, but then act in a way that best benefits all the residents of this state.
Tax reform is too important to leave to a flotilla of lobbyists. This year, the General Assembly really needs to get it done.