Tax Gamble

Gary Pearce posted on January 17, 2013 10:21

North Carolina Republicans are stepping out on a political high-wire.

Surely, most people love the idea of not paying personal or corporate income taxes.

But then you start looking at the details. Every business would pay a receipts tax. Everybody would pay (and businesses bill and pay) a tax on services – medical care, lottery tickets, haircuts, dentist visits, housekeeping and lawyers’ fees, just to name a few.

And your grocery taxes go up 400 percent.

Tax reform plans usually start out great, then wither when people see the details.

This one will be fun to watch.

Posted in: General, North Carolina - Republicans , Issues

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# Luther Snyder

Thursday, January 17, 2013 2:31 PM

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# Chris

Friday, January 18, 2013 1:07 PM

Unfortunately, the GOP proposal doesn't address one of the big problems of that state's tax system: it is very dependent on the economic health of the state. We saw this after the '07 collapse, when revenue from income and sales taxes declined enormously, just at a time when needs for revenue were increasing. As a result, we had to borrow billions from the Feds to pay unemployment benefits.

Further, tying revenue to the economic health of the state is something of a one-way ratchet in the size of government: when tax revenues increase, politicians love to spend the extra money expanding the size of government. When they decrease, though, programs are rarely cut altogether; instead, they are just temporarily cut back.

The better option is a tax system where revenue increases with the number of people in the state and with inflation, but doesn't allow the one-way ratchet. For that, you need... a property tax. Since property is reappraised only occasionally, it does not suffer the same ups-and-downs as either an income or sales tax.

Tax Gamble

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