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Daily Journal

This Year’s Reforms Mark a Good Start

Dec. 10th, 2013
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RALEIGH — The year 2013 has seen significant reforms in North Carolina — to our tax system, job-killing regulations, transportation and infrastructure priorities, and education. The result will be substantive and meaningful changes in North Carolina. We will be positioned to recover from the recession more quickly, encourage businesses to move and expand in the state, and create new and good-paying jobs.

Tax reform actually started in 2011, when a new Republican majority in the General Assembly allowed Democrats’ “temporary” one-cent sales tax hike to sunset, amounting to a $1.3 billion tax cut. They repealed the land transfer tax option, an additional tax on the sale of real property.

After that initial positive step, the General Assembly and a new governor got serious in 2013 about transforming a 70-year-old tax system. North Carolina now has a flat personal income tax rate — 5.8 percent for 2014 and 5.75 percent in 2015. No more higher rates for higher earners, just a simpler, fairer system.

The corporate tax rate (which was highest in the Southeast at 6.9 percent) will drop to 6 percent in 2014, 5 percent in 2015, and 3 percent by 2017, assuming the state government meets revenue targets. Dozens of carve-outs and special treatments were eliminated from the sales tax system. The death tax was eliminated.

The Tax Foundation’s analysis of North Carolina’s tax reform moves our national business tax climate ranking from 44th to 17th. We call this a good start!

But even with comprehensive tax reform, business owners tell us that the regulatory burden in North Carolina discourages business investment and expansion. Again, starting in 2011, the General Assembly began unraveling the complicated, outdated, and oppressive regulations that have been strangling our economy.

Administrative rules may be made by unelected and unaccountable bureaucrats, but they carry the same form, punch, and penalties as laws. Every regulation imposes a cost on someone. Businesses pass higher costs along to customers, affecting our overall economy. Many rules are outdated, unnecessary, burdensome, and inconsistent with regulatory principles or legislative intent.

Touted as the most important business bill this year, the 2013 regulatory reform requires government agencies to review their rules periodically and determine if they are still needed. Those that are not will expire. Rules that work and are fair will stay on the books. All new rules will come with a built-in sunset date — ensuring regular review and justification.

As entrepreneurs consider where to locate and invest, a well-designed infrastructure system is a critical part of their decisions. Reforms to the state’s transportation funding formula, based on safety, need, and congestion data rather than paying off politically connected patrons, will alleviate congestion, improve safety, and help get North Carolinians to work and goods to customers.

Expanded school choice with more charter schools and scholarship opportunities for low-income kids allow families, rather than Raleigh bureaucrats, to make education decisions. A high school diploma in North Carolina should be a ticket to success, whether to fill the demands of employers immediately or to facilitate continued learning in advanced programs.

While much has been accomplished, the work is not done. Responsible budgeting should be focused on rebuilding the state’s savings accounts. Repealing certificates of participation would curtail debt that has not been approved by taxpayers. Carefully considering hydraulic fracturing and alternatives to renewable energy mandates will lift burdens on our economy.

It will take a while to reverse 140 years of big, costly, and overreaching government. There is no quick fix. But committed leaders have made progress and are to be commended. With this new direction, North Carolina once again can be first in freedom.

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Becki Gray (@beckigray) is Vice President for Outreach at the John Locke Foundation.