A shell game of sorts is coming to the North Carolina General Assembly.
State Sen. Phil Berger, president pro tempore of the state Senate, said this week he plans to lead an effort to revamp the state tax code, possibly going so far as to eliminate the income tax altogether for both individuals and corporations.
Pardon us if we think this sounds more like a campaign tactic rather than sound fiscal policy. If Berger is successful in leading this effort, we can see him running for statewide office on the claim he’s the man who eliminated your state income tax, or perhaps his Republican party will use the slogan in an attempt to grow the party’s influence in the General Assembly.
The problem with this plan is that North Carolina collects more than $9 billion annually in state income taxes, according to the Tax Foundation, a non-partisan think tank in Washington, D.C. Unless the General Assembly is prepared to slash spending drastically — and that governing body has shown itself incapable of reining in spending — then taxes and state fees are going to go up elsewhere by a comparable amount.
According to an Associated Press report, Berger said he’s looking to institute a consumption-based tax system that includes more services subject to sales tax. While he was not forthcoming with specifics, we could see prescription drugs and doctor’s visits, higher fees for court and government services, higher fees on driver’s licenses and vehicle registrations, a hefty hike in sales tax and probably two dozen other new or higher fees we can’t even imagine.
He also intends to re-impose the full state sales tax on groceries.
This strikes us as wrong-headed for two significant reasons. First, individuals who can least afford it — families living paycheck to paycheck, struggling to keep their rent paid and feed their families — will be the ones least affected by elimination of income tax and most affected by raising sales and other taxes and fees.
Second, small local businesses in border communities along the North Carolina-Virginia line and North Carolina-South Carolina line could see a significant loss in business. If North Carolina imposes an 8-, 9-, even 10-percent sales tax, that’s enough money on major purchases or weekly grocery trips to justify driving a few extra miles to a neighboring state.
We do believe the entire budget process, including the state tax code, needs a major overhaul. We just don’t believe the state’s small businesses and struggling families should foot a disproportionate part of the cost.