Loading...
BYH Zoning Commission. Take your chairs and sit in the field by Bostic Sugg in morning or afternoon and tell the...

North Carolina should give back sales-tax windfall

john hood.jpg

John Hood

Loading…

Monday, July 9, 2018

After decades of debate and litigation, the U.S. Supreme Court has settled a contentious matter: governments will now be authorized to tax the online purchases of their residents even if the vendors have no physical presence in the taxing jurisdiction.

In North Carolina, depending on how the ruling is implemented, state and local sales-tax collections will go up by somewhere between $200 million and $400 million a year. Although the Supreme Court decision came near the end of the legislative session, you can be sure that policymakers, spending lobbies and other insiders have already thought of plenty of ways to use the revenue windfall.

I think the simplest answer is also the best one: give it back.

Democrats, progressives and some Republicans will want to spend the money — on school construction, for instance, or more pay raises for public employees. But as I have argued repeatedly, North Carolina’s state government has kept a prudent cap on annual budget growth. Many localities, by necessity or design, also have maintained spending discipline.

During past economic expansions, North Carolina leaders spent too much, expecting the good times to last in perpetuity, only to have to cut state and local budgets dramatically when recessions came. This boom-then-bust policy was disruptive and costly. I’m all for spending tax money on high-priority programs. But let’s think long-term, not short-term. Let’s be the tortoise, not the hare.

On the other end of government’s income statement, some conservative lawmakers and activists would like to phase out North Carolina’s income tax entirely over time. They’ll be tempted to make another downpayment on their objective by using the sales-tax windfall to nudge the income tax still lower from what will soon be a flat rate of 5.25 percent.

I understand and agree with the sentiment that taxing total income, rather than the share spent each year, is economically destructive. It discourages work, savings and investment. Because saved money will eventually be consumed by someone — either the income earner or heirs — it is unfair and counterproductive to tax both the principal being saved and its earnings.

But abolishing the income tax isn’t the only means of solving the problem. Another one is to subtract savings (and charitable giving) from taxable income, so that the remainder is, by definition, what was consumed that year. North Carolina ought to take steps in that direction, such as slashing taxes on capital gains (as South Carolina has done, for example).

At the present moment, however, I think the most logical response to our coming sales-tax windfall is to devote the proceeds to reducing North Carolina’s sales-tax rate. The state rate is 4.75 percent. Depending on the county, local levies add another 2 to 2.75 percentage points to the rate.

Even if a bill passed last year by the Senate, setting a threshold of $100,000 in sales or 200 transactions to require online vendors to collect and remit sales tax, proves to be the model for implementing the ruling in North Carolina, I’m not aware of a hard estimate of its revenue implications. So I don’t know exactly how far state and local tax rates would have to drop to keep sales-tax collections on their projected course. But we’re probably talking about multiple tenths of a percentage point.

Holding consumers harmless ought to appeal to both Republican and Democratic policymakers. Under GOP control, the North Carolina General Assembly has actually overseen decreases in both our income and sales tax burdens. Lawmakers did expand the sales tax to some services in 2013, but that followed an even larger drop in the sales-tax rate.

Back then, the Democrats were the ones who wanted higher sales taxes. Now, as the minority party, they’ve been stressing the regressivity of the sales tax. So I presume they’ll like a tax change that disproportionately benefits lower-income North Carolinians.

Funding core services and continuing to reform the income tax are laudable goals. But for now, let’s broaden and lower sales taxes at the same time.

John Hood (@JohnHoodNC) is chairman of the John Locke Foundation and appears on “NC SPIN,” broadcast statewide at 7:30 p.m. Fridays and 12:30 p.m. Sundays on UNC-TV.

Loading…

Humans of Greenville

@HumansofGville

Local photographer Joe Pellegrino explores Greenville to create a photographic census of its people.

Op Ed

February 16, 2019 - 25 minutes ago

With confidence in government at record lows, where have all our leaders gone? Where is the James Madison of today, or the Thomas Jefferson, or even Everett Dirksen? He was the Republican leader who partnered with President Johnson to pass civil rights legislation in the 1960s.

These people were…

eleanorclift.jpg

February 15, 2019

On Bleecker Street in Manhattan, you can find both a Planned Parenthood clinic and a boutique for pregnant women.

According to Vogue, the store, Hatch, "is arguably the first of its kind, in that it was designed specifically for pregnant shoppers: Changing rooms have a size chart to help you figure…

kathrynlopez

February 15, 2019

The decision by Virginia's top three elected officials to hunker down and cling to their jobs is bad for both the state and the Democratic Party. If they won't go, the only thing to do is investigate them all.

Gov. Ralph Northam, Lt. Gov. Justin Fairfax and Attorney General Mark Herring have all…

Eugene Robinson

February 14, 2019

Of all the headlines about the scandals concerning the alleged past sins of one after another high official in Virginia, one struck me most poignantly. It was this, from the front page of The Washington Times:

"Democrats to vet candidates closely for secrets in past."

Maybe I have spent too much…

February 13, 2019

As our new legislative session fully uncoils, it's good to recall that just a few weeks ago workers in 20 states saw an increase in the minimum wage. The federal minimum, $7.25, was last raised in 2009. Since then, 29 states and dozens of cities and counties have chosen to exceed the federal floor.…

Gene Nichol

February 13, 2019

President Trump, in his State of the Union speech, broadly and wrongly portrayed illegal immigrants as murderers, rapists and drug dealers who must be stopped. But Trump does not limit his anti-immigrant zeal to them. In service to Trump, authorities are now handcuffing and shackling non-citizens…

Take Back North Carolina Press Conferece - US Attorney Robert Higdon speaks at press conference.jpg

February 13, 2019

Ten states and Washington, D.C., have legalized the recreational use of marijuana. Twenty-two other states, along with U.S. territories Puerto Rico and Guam, allow marijuana to be used for medical purposes. Let's examine some hidden issues about marijuana use.

Before we start, permit me to…

Walter Williams

February 12, 2019

Serving as speaker of the House has been good for Tim Moore's bank account.

The job of speaker isn't itself lucrative: $38,151 annually, plus $104 a day for housing and food when the legislature is in session. That's a decent income for many North Carolinians, but it's not going to buy you that…

Colin Campbell

February 11, 2019

North Carolina's franchise tax is a punitive and opaque tax levied on businesses organized under one of the usual corporate forms. It is inconsistent with both good economics and good government and should be abolished.

Conceptually the franchise tax is quite simple. It is a tax on the net value or…

Roy Cordato

February 11, 2019

There is a reason why most rural communities in North Carolina do not have broadband speeds of 25 megabytes per second, even after the state has spent more than $500 million on infrastructure over the last 10 years.

According to internet service providers, or ISPs, it is simply not profitable to…

021019bunnysanders
316 stories in Op Ed. Viewing 1 through 10.
«First Page   «Previous Page        
Page 1 of 32
        Next Page»   Last Page»