State revenue forecast shows $3.25 billion surplus; Ford says give it back to taxpayers

Published 12:00 am Friday, February 17, 2023

RALEIGH — The state is expected to see a good-sized anticipated bump in tax revenues this year — in fact, 10.7 percent more will be collected during fiscal year 2022-2023, according to the newly released revenue forecast for North Carolina, amounting to a surplus of $3.25 billion.

Sen. Carl Ford (R-Rowan) was matter-of-fact on what he said he wants done with the surplus: “Give it back to the people who paid it in, that’s what we’re going to continue to do: cut taxes. See we keep cutting taxes, we keep making more money. They can’t learn that in Washington,” Ford said Thursday. “That’s where we’ll start, give it back to the taxpayers.”

Economists in the office of state budget and management worked with the General Assembly’s fiscal research division and released the consensus revenue forecast.

According to the revenue forecast, there are four reasons that have driven the surplus:

• A smaller-than-expected decline in individual income tax collections, especially due to larger-than-expected tax payments from pass-through businesses electing to be taxed at the entity level.

• Persistently high corporate profits, particularly among large multi-national corporations.

• Resilient consumer spending despite longer-lasting inflation in goods and services subject to sales taxes.

• Higher-than-expected investment returns on the General Fund balance.

In a news release, North Carolina Gov. Roy Cooper said he hopes the surplus will be used to increase funding in state schools, increase pay for teachers, provide more child care for parents in the workforce and to pay for the tax cuts for working families that were put in place last year.

“I hope we can negotiate a bipartisan budget that makes these investments without more tax breaks for the wealthiest among us,” Cooper said.

In response to Cooper’s comments on what to do with the surplus, Ford said all of that will happen anyway.

“But when you’ve got that large of a surplus, you start off by giving it back to the people, then you go from there,” he said. “Teachers are going to get raises. There’s money going to be spent for schools.”

North Carolina Senate Leader Phil Berger commented that the revenue forecast has confirmed that North Carolina’s tax policies are working and fueling economic growth.

“While this year’s surplus is welcomed news, we need to be cautious as we prepare the budget. We must continue to prioritize responsible spending, addressing our state’s workforce needs, and providing additional tax relief to our citizens,” Berger said.

The forecast also predicts the state to enter a “slow-cession characterized by stagnant real growth in the economy over an extended period in 2023, followed by a period of slow growth” for the next two years.

The forecast also anticipates inflation continuing to slow and get closer to the Federal Reserve’s goal of two percent “but remaining above that target well into 2024.” The consumer price index for all urban consumers for the South increased 0.8 percent in January, according to the U.S. Bureau of Labor Statistics. Inflation in the South is currently at 6.9%.

Cooper will present his budget proposal in May, but Republicans will ultimately be in charge. They have a supermajority in the Senate and a majority in the House. If Cooper intends on vetoing their proposed budget, Republicans will only need one House Democrat to vote with them to override the governor’s veto.