RALEIGH – Today, the North Carolina House began debate on a budget adjustment for the 2002-03 fiscal year that contains a gaping hole of nearly $500 million (see http://www.heraldsun.com/state/6-250131.html). House Democrats, almost to a person, favor closing this gap with tax increases, though they differ about which ones. Republicans, almost to a person, oppose any tax increase this year.
Clarifies matters, doesn’t it?
Tax-hike advocates say that it is impossible to perform necessary government services at current rates of revenue growth. Opponents say that North Carolina already imposes a significant tax burden on its citizens, heavier by about $700 million due to last year’s tax hikes.
Tax-hike advocates say that North Carolina’s weak economy can only be rejuvenated by “investing” in education and generating the money to do so with either a state lottery or tax increases or both. Tax-hike opponents say that North Carolina already spends a healthy share of its citizens’ income on education, with mixed results at best, and that the state’s economy needs a dose of entrepreneurial spirit and investment today more than it needs to assume a speculative gain 20 years hence from big government budgets.
Tax-hike advocates downplay the potential consequences of a $455 million tax hike on a state economy reeling from low-tech and high-tech industrial meltdowns. What’s another half-billion bucks? they ask. Tax-hike opponents say that in order to make our state attractive to new investment and expansion of existing businesses, policymakers must make it more profitable to earn income here. An attempt to extort another half-billion-dollars from those who create economic value will result, they say, in less creation of economic value.
Tax-hike advocates say that corporations aren’t paying their fair share of taxes, and that the state’s reliance on business taxes is declining. Make those greedy corporations pay more, they say. Opponents point out that corporate taxes are just ways of collecting individual taxes, and that investment income is currently subjected to multiple layers of taxation that discourage capital formation and bias the economy in favor of short-run consumption rather than long-run investment. North Carolinians only get jobs if entrepreneurs and companies perceive the ability to make money here, they observe.
Tax-hike advocates say that most North Carolinians agree with them, that most voters will reward lawmakers to raise taxes in order to preserve or expand government programs. Tax-hike opponents say that most North Carolinians agree with them, that most voters will punish lawmakers who raise taxes again in a state with one of the worst economies in the United States.
I guess we’ll soon find out.