Candidates for governor talk taxes and reform

Published 12:00 am Sunday, September 16, 2012

By Scott Mooneyham

RALEIGH — North Carolina voters need to be paying close attention when the two major party candidates for governor talk taxes and tax reform.
Whether you listen or not, who is elected and how state tax policy may be revised next year will affect your pocketbook in the future.
Republican Pat McCrory has said that he wants to lower corporate and personal income taxes in North Carolina, with an eventual goal of eliminating them. He hasn’t said how he will make up for the lost revenue.
Democrat Walter Dalton isn’t pushing major tax reform. He proposes some specific tax breaks that carry a small price tag. Dalton has jumped on the McCrory talk by claiming that the Republican’s proposal will cause middle-class taxpayers to shoulder more of the tax burden as sales taxes increase and are applied to more goods and services.
McCrory and his camp deny that he has committed to any such thing.
Both men are likely aware of something that neither is saying.
While they are wooing voters, Republican leaders in the state Senate are working to put together a major tax reform plan that would replace personal and corporate income taxes with much broader sales or consumption taxes.
By some accounts, the plan will completely eliminate the state income tax in favor of sales and business franchise taxes.
That tax reform plan, if it comes together, would be the big policy proposal before the General Assembly next year.
Actually, it would be the biggest policy proposal considered by the General Assembly in decades.
To be fair to McCrory, he hasn’t endorsed this or any other specific tax reform plan.
And maybe it isn’t fair to call this a plan, given that the proposals haven’t been finalized to the point of becoming even draft legislation.
But let’s put all of this in a little perspective.
Of the $19.5 billion that rolled into the state’s general operating fund last year, $10.3 billion came from personal income taxes. Another $1.1 billion came from the corporate income tax.
Sales taxes brought in $5.3 billion.
There is going to have to be a lot of widening and deepening of that sales tax base to fill an $11 billion hole.
McCrory, in defending his talk of tax reform, has said that whatever he supports would be revenue neutral, meaning that overall taxes wouldn’t rise.
It’s not a good enough explanation. If you lower or eliminate the income tax, you’ve got to make it up somewhere else. When you do, there are winners and losers.
There are a lot of good reasons to rework North Carolina’s tax structure in reasonable ways that involve lowering sales tax rates while widening the sales tax base.
That McCrory might want to get behind that kind of plan is laudable. Eliminating the income tax is an entirely different proposition.
To dismiss the vast complications of such a proposal as something to worry about in the future is a disservice to voters.
Scott Mooneyham writes about state issues for Capitol Press Association.