The tax reform debate in the General Assembly has moved in recent days from frustrating and confusing to simply embarrassing.
It hasn’t been about reform for a while. House and Senate leaders keep coming up with different ways to do the same thing – cut taxes on wealthy individuals and corporations and pay for it by slashing education funding and making low and moderate income families pay more.
It’s all about cutting taxes now, not reforming anything.
In the last week the wheels have completely come off as Senate leaders are offering plan after impulsive plan in a desperate attempt to come up with something that Gov. Pat McCrory and House leaders will at least partially support.
The New Bern Sun-Journal reports that Senator Norm Sanderson told a crowd of realtors in Carteret County Monday that the fifth and latest version of a Senate tax plan would maintain the current deduction for mortgage interest payments that the realtors support.
The tax cut bill the Senate preliminarily approved last week would eliminate the mortgage interest deduction, but that was the fourth edition of the tax proposal. Senate leaders have apparently moved on to a different plan, the mysterious fifth incarnation.
Tuesday afternoon Senate President Pro Tem Phil Berger postponed the final vote on version four to Wednesday after saying that there were conversations underway with House leaders and Gov. McCrory.
Rushed and poorly thought out plans have become the norm in the tax debate, especially in the Senate, as lawmakers consider making massive changes that could reduce state revenue by several billion dollars over the next few years and force more deep cuts to education and human services.
It was only a little over a month ago that Berger released the details of the first edition of the plan with a slick campaign style video and website touting the expansion of the sales tax to food and medicine and dozens of services currently not subject to the tax.
Version four that passed a Senate vote last week was just a big tax cut paid for by blowing a giant hole in the state budget. Berger’s website now calls the fourth version of the plan the largest tax cut in North Carolina history. The word reform does not appear.
That plan passed the Senate Finance Committee last week after committee members heard from four senior economists from North Carolina who pointed out that there is no consensus about the fundamental assumption behind the proposal, that slashing taxes on corporations and the wealthy will spur economic development.
A fifth economist also spoke, a recent college graduate now working at the right-wing Tax Foundation in Washington, who interestingly came to Raleigh with a detailed analysis of the plan that had just been released to lawmakers. He claimed that research clearly showed that lower taxes encourage economic growth.
But the research is not conclusive at all, as a detailed report released Monday afternoon by the Center on Budget and Policy Priorities made clear.
And those are not the only troubling interpretations of economic evidence that are informing the current tax debate. Many lawmakers are pointing to other claims by the Tax Foundation that the fourth version of the Senate tax cut plan will increase the state’s standing in the group’s business climate rankings.
They never mention that the ranking system itself is controversial. The Tax Foundation is committed to lowering all taxes and has created a ranking system designed to further that objective that cherry picks data and makes unsupportable assumptions about the impact of tax rates on economic activity.
Then there is the absurd legislative process. The tax packages are coming and going so rapidly, it’s hard for the public to have any idea what’s happening, much less understand the changes enough to let the people who represent them know what they think.
This is the biggest decision lawmakers will make in their two-year term. It will have serious ramifications for the state budget for years, affecting education, health care, criminal justice and every other part of our public infrastructure.
Multi-billion dollar decisions should not be made in secret backroom meetings or by frantically revising versions of huge tax cuts on the fly. And they should not be based on controversial economic claims made by hand-picked ideologues.
Let’s have a thoughtful, open, and honest debate about changing our tax code with plenty of time for the public and experts of all stripes to weigh in. Nobody will lose anything. Most of the current proposals call for phasing in the tax cuts anyway.
Let’s leave tax reform for next year so we can get it right.
We simply cannot afford to get it wrong.
Fitzsimon is the executive director of NC Policy Watch.