Political spin can’t hide flaws in tax deal

by Alexandra Sirota

The political spinning began even before the ink had dried on the final tax deal between North Carolina House and Senate leaders and Gov. McCrory, with some supporters inside and outside the legislature backing away from earlier claims that everyone would benefit from the tax plan and that jobs would be created. Many taxpayers, it turns out, will pay more, and the consensus among supporters that the plan is a good strategy for job creation is fracturing.

The legislature’s Fiscal Research Division ran scenarios of how particular taxpayers would fare under the tax changes. These are fine tools, but inherently limited. They can’t show you that everyone — or even most people — will have the same experience.

Looking at the entire universe of North Carolina taxpayers, it is clear that the majority of the benefit of the income tax cut will go to the wealthiest taxpayers. Meanwhile, those earning less than $84,000 will pay more on average given the other tax changes included in the plan.

This tax shift should be alarming to all North Carolinians. Not only will it make our tax system less fair by asking those who can least afford it to pay more, it will undermine our long-term ability to raise the revenue needed to support schools, public safety and other core services we rely on every day. It will also hurt the very job creators it purports to help by taking money out of the wallets of middle-class and low-income consumers.

Income tax cuts for the wealthy and corporations are a misguided strategy for job creation. State income taxes are a small part of business costs, but they play a big role in funding the things that businesses and entrepreneurs look for when they decide where to locate or expand — things like the education of the workforce, access to research and innovation and the quality of life for employees. With fewer resources to invest in these assets, North Carolina will have a harder time competing for jobs.

North Carolinians deserve an honest conversation about what our communities really need to thrive and how to balance everyone’s interests in growing our economy and attracting good, well-paying jobs. This is the conversation about taxes we should have been having all along: one that engaged diverse viewpoints and made an honest assessment of how to make sure everyone benefited. Facts, not ideology, should drive our public policy decisions.

For now, unfortunately, we need to prepare for the reality of this new tax plan. North Carolinians who can least afford it will pay more; schools, health care, public safety and other core services will be subjected to big budget cuts and the jobs that the tax plan supporters promised will almost certainly not materialize.

Put simply, once this plan takes full effect, there will be more work ahead rather than less if we are going to rebuild our state. Let’s hope state leaders come to this realization sooner rather than later and get serious about joining in such an effort.

—Alexandra Sirota is the Director of the North Carolina Budget and Tax Center.