By Rep. Ruth Samuelson
In Feb. 2002, when then-Governor Mike Easley appointed a 15-member panel to recommend reforms to North Carolina’s tax code, he rightly noted that our state’s revenue policy had been created during the Great Depression and had hardly changed in more than 70 years.
“Can’t we do better?” Easley asked rhetorically at the time. “Can’t we do better than what we did 70 years ago?”
The following year, the distinguished members of the Commission to Modernize State Finances issued a 21-page report and presented its recommendations at a joint meeting of the state House and Senate finance committees.
It is a testament to the extreme difficulty of tax reform, however, that the commission’s suggestions largely went nowhere — even with a legislature that was of the same party as the Democrat governor.
And today, we have a tax system that hasn’t changed in more than 80 years.
In November 2012, the voters of North Carolina elected a Republican governor and Republican majorities in both the state House and Senate, giving us a mandate to finally modernize our state government — including its tax system — for the 21st century. Rather than appoint another commission, Republican leaders have taken it upon ourselves to draft tax reform plans of our own.
Currently, our state income tax rates are higher than in any other surrounding state, and that is making it harder to attract new businesses and for existing businesses to grow.
The House tax reform proposal would eliminate personal income tax brackets and impose a fair, flat 5.9 percent tax rate. Corporate income tax would be reduced to 6.75 percent from 6.9 percent. The franchise tax would be cut by more than 10 percent. The House proposal would also bring the state greater fiscal stability by broadening the sales tax to include some services, making us less dependent on volatile income tax.
The plan proposed by leaders in the state Senate is similar in principle to the House plan, but it calls for bigger cuts to income taxes. It also broadens the sales tax further, to include a much wider array of services.
Both plans have been criticized — in some cases by legislators who were in the majority when the Commission to Modernize State Finances made its report. Even among Republicans, getting agreement on the details of a single plan won’t be easy. It’s going to take real compromise and political courage.
Crafting a plan that can win the support of at least some Democrats will be important. But I believe the most essential factor in finally passing a tax reform plan this year will be public support.
It’s simple: If your representatives in the state legislature hear from you that you want fiscally responsible reform now, then they will have no choice but to at least participate in the debate. If you are silent on the issue, then there will be too many who will be content to take the more politically expedient route — doing nothing.
For an excellent, objective primer on the issue, I’d suggest going to www.tarheeltaxreform.com, a website created by the North Carolina Association of Certified Public Accountants. The NCACPA doesn’t endorse any party or specific plan, but it does spell out in plain language why the tax system we have is increasingly untenable.
There is no question that we can do better than the tax system we have.
With the support of the citizenry, I believe we will do better.
Ruth Samuelson represents District 104 (Mecklenburg County) in the state House, where she serves as House Republican Conference leader.