SC

North Carolina Ponders Tax Shift

North Carolina is contemplating the elimination of its income and corporate taxes – and offsetting those cuts with increases in the sales tax. This plan – pushed by Republican State Senator Bob Rucho of Charlotte – would scrap the state’s 6.9 percent corporate levy as well as its individual income tax brackets,…

North Carolina is contemplating the elimination of its income and corporate taxes – and offsetting those cuts with increases in the sales tax. This plan – pushed by Republican State Senator Bob Rucho of Charlotte – would scrap the state’s 6.9 percent corporate levy as well as its individual income tax brackets, which range from 6 percent to 7.75 percent.

The plan’s “cost?” Around $12 billion.

To offset this “lost” revenue, Rucho is proposing to raise the state’s combined state and local sales tax limit from 6.75 percent to 8.05 percent – and apply that rate to dozens of items which are currently exempted from the sales tax (including groceries).

The “take?” Around $12.9 billion.

Wait … does that make this a $900 million tax hike? Pretty much …

This website has made no bones about its support for income tax relief. We believe it is the absolute best thing a government can do if it wants to raise income levels, empower the consumer economy, stimulate job creation and encourage capital investment.

But politicians dilute – or completely lose – this stimulative effect when they raise taxes as part of a “swap.” Just look at the disastrous effects of the 2006 property tax-sales tax swap in South Carolina.

Economic growth isn’t achieved by shifting a tax burden … it is achieved by reducing one.

Sadly politicians – especially “Republican” ones – are slaves to the doctrine of revenue neutrality, which maintains tax relief occurs in a vacuum and every dollar worth of tax cuts must be “paid for” with a corresponding tax hike. Or absent these offsetting hikes, they propose ridiculously small cuts with absolutely no stimulative value …

Whatever North Carolina winds up doing, South Carolina must pay very close attention (which lamentably isn’t our strong suit). Changes to the tax code in our neighboring state will have a direct impact on our economy (particularly in the eleven counties which border North Carolina) – and our leaders must be on the lookout for risks as well as potential competitive advantages.

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40 comments

Comrade1917 February 26, 2013 at 9:14 pm

Dump all income taxes.

Reply
Comrade1917 February 26, 2013 at 9:14 pm

Dump all income taxes.

Reply
vicupstate February 26, 2013 at 9:47 pm

Sales taxes are very regressive, which means the poor are hit hardest. A very brazen yet typical example of the GOP war on the middle and lower income classes, to the benefit of the well off. Yet the GOP complains about Democrats promoting class warfare.

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scarolina February 26, 2013 at 11:37 pm

Yep. Particularly in this economic environment Replacing income tax and raising a sales tax, and doing away with a food exemption is a really bad idea.

Reply
sweepin February 26, 2013 at 11:38 pm

As you suggest, this is the typical goddamn Republican boiler plate solution to taxation. This idea defies any logical construct of fairness and it simply will not work.

Not only are sales taxes regressive, but they are a poor source of dependable/predictable revenue. They are subject to both minor and major economic disruptions/contractions and should not be substituted for other more predictable and steady streams of revenue.

For God’s sake, won’t someone in the GOP step forward with rational thinking and cut the bullshit of right-wing dogma?

Is there an IQ in the GOP over 85? This is absurd.

Reply
vicupstate February 26, 2013 at 9:47 pm

Sales taxes are very regressive, which means the poor are hit hardest. A very brazen yet typical example of the GOP war on the middle and lower income classes, to the benefit of the well off. Yet the GOP complains about Democrats promoting class warfare.

Reply
scarolina February 26, 2013 at 11:37 pm

Yep. Particularly in this economic environment Replacing income tax and raising a sales tax, and doing away with a food exemption is a really bad idea.

Reply
sweepin February 26, 2013 at 11:38 pm

As you suggest, this is the typical goddamn Republican boiler plate solution to taxation. This idea defies any logical construct of fairness and it simply will not work.

Not only are sales taxes regressive, but they are a poor source of dependable/predictable revenue. They are subject to both minor and major economic disruptions/contractions and should not be substituted for other more predictable and steady streams of revenue.

For God’s sake, won’t someone in the GOP step forward with rational thinking and cut the bullshit of right-wing dogma?

Is there an IQ in the GOP over 85? This is absurd.

Reply
Squishy123 February 26, 2013 at 10:35 pm

In before the liberals start screaming, “think of the poor people who don’t pay income tax.”

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vicupstate February 27, 2013 at 7:08 am

Just about everyone pays SC STATE income taxes because the minimum tax bracket is very low. Something like $3,000 as I recall.

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Squishy123 February 26, 2013 at 10:35 pm

In before the liberals start screaming, “think of the poor people who don’t pay income tax.”

Reply
vicupstate February 27, 2013 at 7:08 am

Just about everyone pays SC STATE income taxes because the minimum tax bracket is very low. Something like $3,000 as I recall.

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stickler February 27, 2013 at 12:01 am

“Revenue neutrality” my ass.

Eliminating corporate and income taxes and raising sales taxes, including groceries, may be “neutral” as far as the state receipts, but takes from the poor to give to the rich.

But what else can you expect from a Jindal-wannabe Republican?

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tomstickler February 27, 2013 at 12:01 am

“Revenue neutrality” my ass.

Eliminating corporate and income taxes and raising sales taxes, including groceries, may be “neutral” as far as the state receipts, but takes from the poor to give to the rich.

But what else can you expect from a Jindal-wannabe Republican?

Reply
sid February 27, 2013 at 1:24 am

I’d be interested in seeing the real details on this proposal, rather than offer some knee-jerk, partisan reaction. What has been the experience in other states that have gone this route?

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Comrade1917 February 27, 2013 at 8:15 am

Prosperity.

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vicupstate February 27, 2013 at 10:39 am

Pro sperity for whom?

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sid February 27, 2013 at 1:24 am

I’d be interested in seeing the real details on this proposal, rather than offer some knee-jerk, partisan reaction. What has been the experience in other states that have gone this route?

Reply
Comrade1917 February 27, 2013 at 8:15 am

Prosperity.

Reply
vicupstate February 27, 2013 at 10:39 am

Pro sperity for whom?

Reply
Jon David Musick February 27, 2013 at 9:27 am

While I agree with you that less tax is always the best thing, I am inclined to think that a sales tax is better than a income tax. Doing away with the income tax would encourage working harder to make more money and raising the sales tax would possibly discourage more spending (encourage savings), which we all can agree would be a good thing.

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Jon David Musick February 27, 2013 at 9:27 am

While I agree with you that less tax is always the best thing, I am inclined to think that a sales tax is better than a income tax. Doing away with the income tax would encourage working harder to make more money and raising the sales tax would possibly discourage more spending (encourage savings), which we all can agree would be a good thing.

Reply
Smirks February 27, 2013 at 9:48 am

http://www.nytimes.com/2013/01/25/us/politics/republican-governors-push-taxes-on-sales-not-income.html?_r=0

This type of proposal is being made in several states. The poor and middle classes often spend far more of their pay within the state lines and on necessities. Also, these proposals often include increasing use tax (which is hard as hell to collect, making it a not-so-reliable source of revenue) and taxes on services (which will likely take an even heavier beating on the working class). There is a lot of opportunity for the tax burden to be shifted to those of us who are least able to afford it.

It might be more acceptable in a state that does heavy amounts of tourism, where people coming in-state to buy goods (or services) shoulder a portion of the tax burden, but it is still a regressive tax.

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nitrat February 27, 2013 at 10:16 am

ALEC at work.

Any time these Red legislatures start doing the same thing all over the country, it’s a sure sign ALEC is at work.

Listen up, people. When you elect a Red legislature, you elect people who are not interested in what’s happening in their own state. All they care about is pushing a national ideological agenda that they are getting campaign contributions to push from the likes of Howie Rich and his Cato buddies the Kochs.
And, replacing income taxes with sales taxes is a big Koch goal…while they get all their oil and agricultural tax breaks.

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sid February 27, 2013 at 12:14 pm

I’d say the same argument regarding electing a “Red legislature” is equally applicable to electing a “Blue legislature.” It’s just a different national ideological agenda, and the campaign contributions come from different folks, like Soros. Similarly, NCSL is the left’s equivalent of ALEC.

Now that we’ve established that, let’s try to focus on discussing the merits or failings of the proposal, rather than trying to villify it based on who you think is behind promoting it.

Reply
sid February 27, 2013 at 1:43 pm

I was pleasantly surprised that I actually found the article fairly neutral. Good for the NYT!

I particularly liked this excerpt:

“Along the way these governors are taking small first steps into a debate over what kind of tax system most encourages growth in a 21st-century economy. In particular they are focusing attention on the idea, long championed by conservatives but accepted up to a point by economists of all stripes, that the economy would be better served by focusing taxation on consumption rather than on income.”

So, even the NYT admits that the concept, in at least some form, is accepted by economists who are not just horrible Republicans. I presume, at least, that “conservatives” would include some Democrats, and “economists of all stripes” would include some liberals, as well as Democrats who are not necessarily liberal.

Reply
Smirks February 27, 2013 at 9:48 am

http://www.nytimes.com/2013/01/25/us/politics/republican-governors-push-taxes-on-sales-not-income.html?_r=0

This type of proposal is being made in several states. The poor and middle classes often spend far more of their pay within the state lines and on necessities. Also, these proposals often include increasing use tax (which is hard as hell to collect, making it a not-so-reliable source of revenue) and taxes on services (which will likely take an even heavier beating on the working class). There is a lot of opportunity for the tax burden to be shifted to those of us who are least able to afford it.

It might be more acceptable in a state that does heavy amounts of tourism, where people coming in-state to buy goods (or services) shoulder a portion of the tax burden, but it is still a regressive tax.

Reply
nitrat February 27, 2013 at 10:16 am

ALEC at work.

Any time these Red legislatures start doing the same thing all over the country, it’s a sure sign ALEC is at work.

Listen up, people. When you elect a Red legislature, you elect people who are not interested in what’s happening in their own state. All they care about is pushing a national ideological agenda that they are getting campaign contributions to push from the likes of Howie Rich and his Cato buddies the Kochs.
And, replacing income taxes with sales taxes is a big Koch goal…while they get all their oil and agricultural tax breaks.

Reply
sid February 27, 2013 at 12:14 pm

I’d say the same argument regarding electing a “Red legislature” is equally applicable to electing a “Blue legislature.” It’s just a different national ideological agenda, and the campaign contributions come from different folks, like Soros. Similarly, NCSL is the left’s equivalent of ALEC.

Now that we’ve established that, let’s try to focus on discussing the merits or failings of the proposal, rather than trying to villify it based on who you think is behind promoting it.

Reply
sid February 27, 2013 at 1:43 pm

I was pleasantly surprised that I actually found the article fairly neutral. Good for the NYT!

I particularly liked this excerpt:

“Along the way these governors are taking small first steps into a debate over what kind of tax system most encourages growth in a 21st-century economy. In particular they are focusing attention on the idea, long championed by conservatives but accepted up to a point by economists of all stripes, that the economy would be better served by focusing taxation on consumption rather than on income.”

So, even the NYT admits that the concept, in at least some form, is accepted by economists who are not just horrible Republicans. I presume, at least, that “conservatives” would include some Democrats, and “economists of all stripes” would include some liberals, as well as Democrats who are not necessarily liberal.

Reply
Eddie617 February 27, 2013 at 10:18 am

The govenor in NC has decided not to tax 40 oz. malt liquor and mint flavored cigarettes. This should make it fair for the poor as this is all they really pay for. I dont believe the free food, sectiona 8 housing and other perks the poor get from my tax dollars would be effected

Reply
vicupstate February 27, 2013 at 10:43 am

So you are willing to soak the middle class with more taxes, to benefit the wealthy. Sounds like 1900 all over again.

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Eddie617 February 27, 2013 at 10:18 am

The govenor in NC has decided not to tax 40 oz. malt liquor and mint flavored cigarettes. This should make it fair for the poor as this is all they really pay for. I dont believe the free food, sectiona 8 housing and other perks the poor get from my tax dollars would be effected

Reply
vicupstate February 27, 2013 at 10:43 am

So you are willing to soak the middle class with more taxes, to benefit the wealthy. Sounds like 1900 all over again.

Reply
Charlemagne, King of France February 27, 2013 at 10:50 am

i have a con-law question. how will this affect citizens united rulings….if they arent being taxed then surely they cannot receieve representation

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Charlemagne, King of France February 27, 2013 at 10:50 am

i have a con-law question. how will this affect citizens united rulings….if they arent being taxed then surely they cannot receieve representation

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GodSaveThePeople February 27, 2013 at 11:23 am

Trickle down Reaganimcs does not work. Do you want to live in a country by and for the corporation? Do you want to replace government with the corporation? At least government operates by rules and regulations and rules pertaining to fairness and equal opportunity. Businesses don’t. The GOP wants to take us back in time to the Age of the Robber Barons with no meat inspection, no prescription drug regulations, and no child work rules. The GOP would return us to a primitive past. We cannot allow the GOP to hand us over to Business, which is greedy, selfish, and disinterested in worker welfare.

Reply
GodSaveThePeople February 27, 2013 at 11:23 am

Trickle down Reaganimcs does not work. Do you want to live in a country by and for the corporation? Do you want to replace government with the corporation? At least government operates by rules and regulations and rules pertaining to fairness and equal opportunity. Businesses don’t. The GOP wants to take us back in time to the Age of the Robber Barons with no meat inspection, no prescription drug regulations, and no child work rules. The GOP would return us to a primitive past. We cannot allow the GOP to hand us over to Business, which is greedy, selfish, and disinterested in worker welfare.

Reply
hum_dinger February 27, 2013 at 4:04 pm

They could do better – just eliminate all taxes, and when bankrupt, just call the bernanke to print’em some bailout.

Reply
hum_dinger February 27, 2013 at 4:04 pm

They could do better – just eliminate all taxes, and when bankrupt, just call the bernanke to print’em some bailout.

Reply

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