Who’s going to pay for my tax cut?

Published 12:00 am Monday, June 10, 2013

Am I rich? Not like the local businessman who said that this year’s tax increase would cost him $100,000 meaning he earns $3 million per year. That’s way out of my league, but with my education, I’m probably a 2 percenter.
In other words, 98 percent of taxpayers would probably trade their incomes for mine. Of course, my business could collapse and my income would disappear. In fact, my company was in bankruptcy when I bought it, so it’s experienced both bad and good.
Last year, the North Carolina legislature gave me and other businesses like mine a tax cut of almost $4,000. Now, the legislature is trying to reduce my income tax rate by almost 2 percent. That will save me another $4,000, or a total of $8,000.

The hitch is that someone must pay more taxes to cover my tax cuts. Republicans believe that raising the sales tax on about 170 services — like barbers, car repairs, legal fees, non-profit organizations and drugs — is the way to do it. Under that plan, a married couple, both earning the minimum wage, about $30,000 combined, will get no income tax cut and will pay $400 more in sales tax.
In other words, 20 minimum-wage families will each pay an extra $400 to make up for my $8,000 tax cut. Republicans believe that to be fair since the tax burden should be spread among more taxpayers. That’s not my idea of fairness.
Taxing health care is cruel and stupid. Health care already consumes $1 of every $6 spent in the United States, so adding sales taxes to hospitals, doctors and drugs will generate lots of tax receipts. But, it will cost more than the taxes it generates.
My pharmacy specializes in chronic care. Many of our patients have diseases requiring high cost but life-saving drugs often costing more than $1,000 per month. Even with insurance or Medicaid, many of our patients can’t afford their co-pays. (We have programs to help those patients.)
Insurance companies and Medicaid aren’t going to cover the sales tax. Taxing drugs will cost many of our patients another $100 per month or more, so many will not get their prescriptions filled. Our profit margins are 1-to-2 percent, so if a 6.5 percent sales tax is imposed on pharmacies, every pharmacy in North Carolina will close.

Medicaid costs in North Carolina have risen at least 11 percent above projections for the last four years because the Great Recession pushed more people down the income ladder. Republicans apparently don’t realize that taxing drugs is the surest way to increase Medicaid costs. When patients can’t afford medicine, they don’t get it and end up in the hospital where the cost for one day exceeds the cost of drugs for one or two months.
The only way to address Medicaid costs is to address poverty. Reducing benefits can save money. The tradeoff is that the poor live unhealthier and shorter lives. Investing in education is the only path to reducing poverty and moving more people into good jobs. Instead, Republicans are also cutting spending on education from kindergarten to universities. Failing to connect the dots between poverty, education, jobs and health-care costs plants the seeds that guarantee higher Medicaid costs — and higher costs to the taxpayer — for decades to come.
To be clear, I do not want a tax cut if those less fortunate than I am must pay more. North Carolina should keep both my $4,000 business tax cut and my $4,000 income tax cut and spend it on education. In the 1960s, North Carolina reversed its economic fortunes by investing heavily in education. Fifty years later, the state thinks it can do the same by investing less. Go figure.

David Post lives in Salisbury and serves on the Salisbury Planning Board. Email: DavidPostOpinion@gmail.com.