Sunday, June 21, 2009

A Conservative Viewpoint
- Tar Heels Must Love Taxes

Article by Bob Steinburg
- Edenton, North Carolina: Cradle of the Colony

The Democrats in North Carolina’s General Assembly have controlled the State Legislature for 96 of the last 100 years. As a result of irresponsible spending, the state is facing a $4.5 billion dollar deficit while trying to pass a constitutionally- mandated balanced budget for the next two years.

The new budget will include interest payments on the state’s long- term debt of $6 billion. In `09, that’s a staggering $849 million. The state also is wrestling with trying to close a $250-300 million shortfall in the state’s health insurance plan. We didn’t get into this fiscal mess overnight.

In January every other year, the governor must submit a balanced budget to the legislature. The budget is alternately delivered to the House and Senate. This year the Senate had first whack at it. The Senate considers the governor’s request, modifies the budget, passes its version and then sends it along to the House. The House then adapts and passes its own budget.

A conference commission is then appointed to hammer out the differences between the two chambers. This year the budgets in both the House and Senate were passed with little to no Republican support. As a result Democrats will make up the appointed group of conferees. But in the end the final budget “compromise” will have little or no input from anyone other than Senate President Pro Tempore Marc Basnight, D-Dare, Sen. Majority Leader Tony Rand, D-Cumberland, and Speaker of the House Joe Hackney, D-Orange.

When the aforementioned three legislators feel assured there are enough votes to pass the budget in both houses, it will be sent on to each for an up or down vote. There will be no opportunity for amendment. The budget will then go to the governor to sign or veto. Not only is everyone from the same political party, and no doubt singing off the same sheet of music, the conference commission is a closed process. Not even the press has access to how legislators reach compromise decisions, assuming there are any compromises to begin with.

While it is the legislature’s responsibility to pass the budget, it is the duty of the governor to insure it remains balanced throughout the next two years. The state is still operating under the Easley budget until June 30. This explains why Gov. Perdue has had to deplete the state’s rainy day fund and furlough teachers to get through the end of this fiscal year.

The state also is also facing an 11 percent reduction in estimated state revenues. These numbers won’t be rosier any time soon given current economic forecasts.

Many thought North Carolina’s $6.1 billion in federal stimulus money could be used to help balance the state budget as well as help cure our economic woes. In May the states unemployment rate stood at 11.1 percent. Less than $1 billion is slated for badly needed infrastructure improvements, despite assurances from President Barack Obama and Congressional Democrats that the money would create shovel-ready jobs to help turn the economy around.

Almost half of the federal money will be spent on expanding social programs, which after 2012 will have to be state funded. And no stimulus money can be used to reduce either long-term debt or deficits. It’s no wonder some governors decided not to accept the “strings attached” stimulus money.

On June 13 the Democratic controlled House of Representatives passed its budget which included $873 million in increased taxes and fees for the upcoming fiscal year. Included is another $1.78 billion in additional spending hikes next year. Republicans offered a number of amendments to cut unnecessary and wasteful spending but most were rejected. In the end every Republicans voted to reject the budget as presented.

This budget includes an increase of the top marginal income tax rate for those married and filing jointly and earning between $120,000 and $500,000 from 7.75 to 8.25 percent. Earned income over $500,000 will be taxed at 8.5 percent.

This is a jobs killer because this tax bracket includes most small business owners. Increasing their taxes will reduce the working capital necessary for expansion and job creation.

Other tax increases passed in the House budget include extending the sales tax to warranties, installations and repairs, taxes on amusements and movie tickets along with taxes on courier services. Additionally the state portion of the sales tax will rise from 4.5 percent to seven percent.

The Senate’s budget includes $950 million in revenue increases by expanding the number of services subject to sales taxes and removing income tax deductions. While Senate Democrats are trumpeting lower income tax rates overall, it’s misleading because many taxpayers will be losing income tax deductions they currently receive.

But Gov. Perdue says still more money is needed-- as much as 1.5 billion in new taxes next year to protect public education and other services. Where will this taxing madness end?
State lawmakers would like to have their budget on the governor’s desk for her signature by July 1, which begins the state’s new fiscal year. House Majority Leader Hugh Holliman, D- Davidson, feels it will be difficult to get the votes necessary to raise taxes in our current economic environment, making the goal of passing a budget by then that much more difficult.

Obviously the state is in a fiscal mess. Perhaps Republican House Minority Leader Paul Stam, R-Apex said it best when he told a reporter in Raleigh last week: “Every year they (Democrats) want more and more taxes. The people ought to finally conclude, if they want to pay more taxes, they ought to vote for more Democrats.”

Since Democrats have totally controlled North Carolina for 88 of the last 100 years, why is it that most North Carolinian’s think that Republicans are the problem? Civitas polls indicate this is the consensus of most in our state. It is insane, but it is true. The answer is that Republicans don’t care about defending their track record. They care about a lot of social issues, like abortion. That neither the state nor local governments have any say in that issue does not dissuade Republicans. They defeat good candidates for board of education and county commissioner over minor disagreements about abortion, or run them out of the party so they become Democrats. Democrats then run ads blaming the Republicans for everything, and people who don’t want to be involved in politics believe them.

Republicans have two choices. They can denounce “the people” for not caring about politics or they can get their priorities in order. Don’t hold your breath waiting on the last.


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