RALEIGH – The North Carolina General Assembly convenes its 2005 session this week accompanied by a familiar refrain: “There’s a great big hole in the budget/ And it’s the taxpayers’ fault / They’re hording too much money/ So we’ll break into their vault.”
Well, I never said the refrain was peppy and uplifting. It’s more like the blues – only it’s the audience, not the singer, that has good reason to be morose.
The latest estimates of the FY 2005-06 budget gap now approximate $1.3 billion, up a bit from just a few weeks ago. Apparently revenues remain relatively weak and costs in certain areas, such as state-funded health programs, are soaring at higher-than-expected rates. I would take these trends as a sign that 1) North Carolina households and businesses are still recovering their economic footing from the recent recession, and thus should not be saddled with higher taxes, and 2) state spending, particularly for health care, needs to be brought in line with short-term fiscal reality and long-term affordability.
Though stunned into stupified disbelief by this, I feel duty-bound to overcome the disability and let you know that the powers-that-be in North Carolina state government do not agree with my reading of the trends. Faced with lackluster revenues, they are convinced that the state’s tax code is too lenient on drinkers, smokers, non-bald people, grease monkeys, shoppers, and job creators. That’s why many legislators and policymakers want to hike taxes on cigarettes, alcohol, haircuts, and auto repairs and retain some of the highest tax rates in our region on retail sales and personal income.
Another round of tax increases will have deleterious consequences for our economy and our freedom. The legislature could balance the budget without higher taxes, by setting firm priorities, reorganizing and merging state agencies, contracting out some services, and having the courage to take on difficult issues such as our screwy system of higher-education subsidies and our inordinately expensive and expansive Medicaid program.
But I fear that the whatever willingness the political class in Raleigh may have once exhibited to address fiscal problems with probity and foresight has been dissipated by carefully engineered campaign victories, back-room arm-twisting, and constant propaganda about North Carolina’s “need to invest” and its “outdated tax system,” as if the idea is anything other than a grab at other people’s wallets. How would the hundreds of millions of dollars North Carolinian may lose in 2005 have been otherwise spent? How many goods and services would they have purchased? How many jobs created? How many debts paid off, personal goals met, gifts exchanged and evenings out for dinner and a movie?
Government has steeply diminishing returns. We need it to do certain, basic tasks for us that we cannot do for ourselves through private, voluntarily action. Beyond that core mission lies sloth and intrusion. This is the founding philosophy of our state, our Republic, but its beautiful melody is being drowned out by something else: a cacophonous cry for bigger public budgets and smaller private ones.
It’s a bad song, performed badly, to bad reviews. But the show’s being held over until at least July, if not later.
Hood is president of the John Locke Foundation and publisher of Carolina Journal.