Legislative Republicans may soon head down a path that always seemed to befuddle their Democratic predecessors.
Assuming that they still control the North Carolina General Assembly in 2013, GOP lawmakers say that they will take a stab at tax reform.
Democrats talked a lot about the same subject for a number of years.
Gov. Beverly Perdue, near the end of her first year in office, called tax reform “a must-do.” Before that, former Gov. Mike Easley created a commission to examine reworking the state’s tax structure.
During both the Perdue and Easley administrations, various heads of the House and Senate Finance committees have discussed a major overhaul of the state’s tax laws.
Even before then, in 1998, I remember talking about the issue with a prominent Republican legislator during the GOP’s earlier reign in the House.
In just about every case, the ideas discussed involved broadening the sales tax to cover services like car repairs and legal representation while lowering the overall tax rate. Behind the ideas lay the notion that, in an increasingly service-based economy, a sales tax focused mainly on goods doesn’t reflect or keep pace with economic growth.
The efforts never went anywhere. Without any hue and cry, the politicians had little to gain and everything to lose by shaking up the status quo.
Closed-door discussions about tax reform are apparently again in vogue in the Legislative Building.
Republican ideas, though, may involve much more than expanding the sales tax base.
House Speaker Thom Tillis recently mentioned doing away with the personal income tax as an idea worth considering. Republicans may also be reviving the idea of eliminating the corporate income tax, as well as dropping state estate taxes.
No one enjoys paying taxes, so perhaps everyone should stand up and cheer on the honorables.
Supporters of eliminating income taxes see an added benefit of better competing economically with states like Tennessee and Florida, which don’t have personal income taxes.
Legislators might want to consider, though, that Tennessee has the highest state and local sales taxes in the country. Florida has some of the highest (and wackiest) property taxes in the country.
As for North Carolina, slightly more than half of our annual tax revenue — $9.7 billion — comes from individual income taxes. Another $1 billion or so comes from corporate income taxes.
To make up that revenue solely through the sales tax would require that those tax rates nearly triple, or that you taxed so much new stuff that they raised almost three times the current $5.9 billion in revenue.
Or, perhaps you just throw off current state responsibilities onto local government, like a lot of other states do.
However you bite at this green apple, you are going to get a little sick. Whether lawyers collecting sales taxes or property owners paying higher property taxes, someone will see to that.
It’s why Democrats kept putting the apple back on the shelf, hoping it would ripen a bit.
By Scott Mooneyham
The Mountaineer
March 26, 2012
