RALEIGH – As legislators and other state leaders continue to discuss reforming North Carolina’s tax code and revisiting the job responsibilities of state and local government, it would be nice to see a greater willingness to set priorities with the existing flow of government revenues.
Few would question that a growing state will inevitably put pressure on public authorities to keep up with needs for schools, roads, water and sewer capacity, and other basic infrastructure. The system for financing these services – be it primarily state or primarily local, based on taxation by income flows or accumulated assets – should ensure that growth pays for itself over time. Some of these services, such as public education, are under our state constitution deemed entitlements and as such are properly paid for with broadly applicable taxes. Other services, such as water and sewer, are essentially government-franchised enterprises that should charge accurate prices based on usage.
State highways and streets are sort of in-between – they aren’t entitlements, like law enforcement or public education, and users should pay accurate prices. But for technical reasons, it has been impractical to charge drivers in real-time except in the case of limited-access highways (for which electronic toll collection is appropriate and increasingly common). So states opted for a broadly applicable tax that nevertheless bears some relationship to usage, such as a per-gallon gas tax. Now that technology is changing, it may be possible to charge drivers more accurate prices, say with an odometer-based assessment.
There are many challenging questions worth asking about North Carolina’s current system for financing these basic services. Should our current income and sales taxes be retained in their current form? Should they yield to a flatter, fairer, combined system that charges a single rate on all income consumed for goods and services? Or should each be reformed separately, with the sales tax expanded to include services and the rate correspondingly reduced? On public education, should the state play an even greater role in funding than it currently does, so as to reduce county disparities in resources generated by disparities in taxable property? Similarly, in the area of water and sewer, should the state shoulder a bigger role in assisting poorer counties by issuing state bonds to finance new capacity, in effect shifting the cost of rural infrastructure to urban and suburban families? And given the fact that increasing fuel economy has reduced the amount of gas tax collected per mile driven, thus creating a growing disconnect between highway demand and highway revenue, should the state given counties the option of levying additional sales taxes or other levies?
My colleagues and I have strong opinions about these issues, obviously. However, notice that they are all couched in terms of basic government services. That’s the bulk of what state and local governments spend their dollars on, yes, but not the totality. Before we can have a meaningful debated about how best to address these needs, wouldn’t it be wise stop spending scarce resources on lower priorities or activities that do not have a legitimate claim on coercive taxpayer funding?
Just in the past decade, North Carolina localities have spent hundreds of millions of dollars subsidizing sports stadiums, convention centers, performing-arts venues, and other projects that should be funded by customers, users, or private patrons. The state government has also plowed sizable sums, easily topping $1 billion within the period, into subsidizing such projects, often at the discretion of powerful legislative leaders or governors, as well as private corporations receiving various incentive packages.
Before telling North Carolinians once again that we are keeping too much of our own hard-earned money to spend as we wish, the politicians should demonstrate a willingness to set priorities. No more giveaways. No more bread and circuses. No more foolish convention centers in Raleigh, trolleys in Charlotte, and concert arenas in Fayetteville. No more city-owned golf courses. No more state-subsidized movie houses and country-music theaters. Asheville, sell your civic center.
Then let’s talk schools and roads.
Hood is president of the John Locke Foundation.