State lawmakers have been talking about reforming North Carolina’s tax code for the better part of the past two decades.
It’s no big surprise that in all that time, they never got past the point of just talking about it.
But Republican legislative leaders are vowing to overhaul the state’s tax system this year with the ultimate aim of eliminating the individual income and corporate income taxes altogether. New Gov. Pat McCrory also has expressed strong support for tax reform, with an initial goal of at least reducing income tax rates to those of neighboring states
Lawmakers say they could make up for the billions in lost revenue the elimination of income taxes would entail by raising the sales tax, applying it to services and reinstituting the state sales tax on groceries, among other measures.
Liberal activists have correctly decried this idea as regressive, forcing poor and elderly North Carolinians to pay higher taxes while substantially cutting the amount paid by businesses and the state’s wealthiest residents.
Deputy Budget Director Art Pope weighed in on the matter last week, saying he has “great concerns” about the idea, which he said he feels would amount to double-taxation on retirees who paid income taxes throughout their working lives and would be faced with greater sales and service taxes when they spend their retirement savings on living expenses.
Pope, a former Republican state lawmaker and conservative philanthropist, agreed with his liberal counterparts that collecting sales taxes on all services would indeed be regressive, “a gross transaction tax without any regard to whether you’re actually making any money.”
The state tax code is a complicated behemoth and its effects on people, businesses and the economy are myriad and interconnected. Any overhaul of the system must be thoughtful, pragmatic and thoroughly consider as many consequences of potential changes as possible.
And it should not be rushed.