By Chris FitzsimonÂ
House and Senate leaders continue to make steady progress in resolving the differences between the two chambers’ spending plans as lawmakers continue their push to pass a final budget by Friday.
That deadline seems difficult to meet unless they come to an agreement on taxes and a plan for the state to take over the county share of Medicaid, two topics that hover over all the predictions about reaching a final budget, though legislative leaders aren’t saying much about either one.
Senate leaders still insist on ending the 2001 income tax increase on the state’s wealthiest 60,000 people. The priority of House leaders appears to be making sure there is enough revenue to meet the state’s future needs and balancing the tax break for the rich with a refundable Earned Income Tax Credit for the working poor.
Both the House and Senate want to end the county share of Medicaid, the Senate by forcing counties to raise the local sales tax, while the House prefers a plan that doesn’t force most counties to raise taxes and lets them raise revenue with an additional sales tax or a small real estate transfer fee if the voters approve it.
That proposal was tentatively accepted by Senate leaders a couple of weeks ago, but rejected by the Senate Democratic Caucus after intensive lobbying from the N.C. Association of Realtors, whose massive distortion campaign against any transfer tax continues.
There is new information for lawmakers to consider when they resume the debate about taxes and Medicaid plans. The N.C. Budget and Tax Center finds that despite all the claims otherwise, the state’s overall tax rates are not out of line with the rest of the country and haven’t grown since the 1990s as a percentage of personal income.
The latest BTC report finds that according to census data, total state and local taxes represented 10.4 percent of total state personal income in 2005, which ranks North Carolina 35 among the 50 states.
Taken by decade, state and local taxes represent the same percentage of personal income in the last five years as they averaged during the 1990s. The message of the report is clear. North Carolina taxes are not out of line with the rest of the country and they are not increasing at unreasonable rates.
That makes the Senate leaders’ insistence on cutting taxes on the wealthy even more misguided. The state’s future problems are more about ensuring that we have adequate revenue to pay for schools and other essential state services. Giving up roughly $100 million a year in revenue by cutting taxes on 60,000 taxpayers makes little sense.
The other message this week is that the public gets it. The latest Carolina Issues Poll finds voters oppose the tax cut for the rich. For an analysis of all the poll numbers, see Rob Schofield’s Weekly Briefing on the poll.
The BTC report, the poll and simple common sense ought to help lawmakers resist the simplistic tax rhetoric offered by the free-market fundamentalists that the special interests protecting their profits like to hide behind.
One of the realtors’ spokespeople said earlier in the session that lawmakers shouldn’t consider any sort of transfer tax because the state “doesn’t have a revenue problem, it has a spending problem.â€
The problem in Raleigh is actually the misinformation and absurdly simple slogans that have influenced the debate about taxes and the state budget. Now that they have once again been discredited, let’s move on and pass a progressive budget and tax package.