News & Observer gets it wrong on taxes
Raleigh News & Observer editor Ned Barnett continues to be of the belief that what ails North Carolina is a state government that is too small. In his Jan. 29 editorial, he expresses frustration that hard-working North Carolinians are keeping too much of their money.
Claiming that “excessive tax cuts” over the past several years have led to “curtailed state services” and has “set back public education,” Barnett warns that Republicans’ goals to further reduce the tax burden on its citizens is reckless and puts the state’s future in jeopardy.
On several counts, however, Barnett gets it wrong.
For starters, Barnett ignores opportunity costs. Every dollar North Carolina’s state government spends, it first must tax from its citizens. Ignoring this, Barnett pretends that government spending only brings benefits with no costs. There’s no acknowledgement that higher tax rates come with trade-offs, such as fewer jobs and less investment. The poor are of course disproportionately harmed when job opportunities become more scarce.
Moreover, Barnett laments that “the state has lost billions of dollars in revenue” over the past several years due to tax cuts. But he’ll never acknowledge that working North Carolinians will lose billions of dollars in revenue if taxes are raised, or prevented from falling further. It’s clear where his allegiance lies.
So, what is some of the damage caused by past tax cuts? According to Barnett, among the problems are “high vacancy rates in state agencies,” “worsening a shortage of public school teachers,” and that state “employees’ pay has lost ground to inflation.”
On that last note, it’s ironic that Barnett praises the “big-government spending at the federal level” that has “masked how negligent the legislature has been in meeting the state’s basic obligations,” while ignoring that it’s the big-government spending fueled by newly created money causing runaway inflation to begin with.
Beyond that, worker shortages are not unique to North Carolina state government. According to a June 2022 Axios article, “There’s an unusually high number of government job openings at the federal, state and local level.” And worker shortages are not just for government jobs either. In late January, the U.S. Chamber of Commerce released a report documenting a national labor shortage in private sector jobs, most notably in hospitality, leisure, and construction.
“We hear every day from our member companies — of every size and industry, across nearly every state — they’re facing unprecedented challenges trying to find enough workers to fill open jobs,” according to the report.
For Barnett to blame tax cuts for a worker shortage in North Carolina state government jobs is completely disingenuous. The worker shortage is a nationwide phenomenon that spans government and private sectors.
Furthermore, fretting about teacher shortages is a News & Observer tradition dating back more than a century. In a 2021 blog post by my former colleague Terry Stoops, he linked to an old N&O article saying that complaints about teacher shortages is “a back-to-school tradition in North Carolina.” The article was from 1918.
Also ignored by Barnett is the fact that, during the five-year period from FY 2014-15 to FY 2019-20, North Carolina’s teachers received the third highest pay increase in the country. Barnett also omits the fact that teachers — and state government workers generally — receive significant benefits as part of their total compensation package. Focusing exclusively on salary only tells part of the story.
For the decade 2011 thru 2021, total compensation for teachers increased 27.2%, outpacing total inflation of 19.7% during that time. So much for Barnett’s claim about losing ground to inflation.
Additionally, Barnett makes the claim that thanks to tax cuts, “school funding has fallen far short of the need.” Without defining what he means by “need,” Barnett conveniently leaves out any actual data about school funding.
Total per pupil expenditures for North Carolina K-12 public schools increased from $8,414 in FY 2010-11 to $12,345 in FY 2020-21, good for a sizeable 47% increase, more than doubling the pace of inflation.
And what do the public schools do with these increases in funding? Like so many government agencies, they in no small part go to padding administration and bureaucracy. For instance, from FY 2011-12 to FY 2021-22, student enrollment in public schools (including charters) increased by just 4.9%. Central office administrators, however, increased 18.9%, and instructional support personnel (such as guidance counselors, instructional coaches, and social workers) increased by 24.4%.
Making matters worse, North Carolina public schools continue to struggle with figuring out how to spend the billions of federal dollars Barnett praises so highly. As of Dec. 31, 2022, 37% of the $6.2 billion in federal COVID relief funds sent to North Carolina schools remain unspent. Of the money already spent, about 55% went to employee bonuses, salaries and benefits. Less than 5% was spent on HVAC contract work that could have improved circulation to mitigate the spread of COVID variants and future viruses. Recall this funding was supposed to be for ‘emergency relief’ from the virus.
To left-wing progressives like Barnett, a state budget that consumes a smaller share of the state’s economy is a bad thing. They believe that the political class should be in charge of spending more of your money and controlling more of the economy’s scarce resources.
There is perhaps a fair discussion to be had about the proper size and scope of government. However, Barnett seems uninterested in fair discussion and prefers unfounded and inaccurate claims to advance his preconceived narrative.
Brian Balfour is Senior Vice President of Research for the John Locke Foundation specializing in fiscal policy issues.