It’s clear that North Carolina’s political leaders want to make big changes to the state’s tax code, but exactly what route they’ll choose to follow has been called into question. At a journalist roundtable yesterday, deputy budget director Art Pope distanced himself from an idea put forward by state Senate leaders to potentially eliminate North Carolina personal and corporate income taxes and increase sales taxes.
When asked whether he thought eliminating the personal and corporate income taxes would help spur the economy, Art Pope practically bristled at the suggestion he favors that kind of plan. He thinks the state’s current tax code has lots of problems, but he says shifting the burden completely to a sales tax isn’t good for North Carolina.
"That almost becomes a gross income, a gross transaction tax that without any regard to whether you’re actually making any money on taking that income, that can hurt the economy, it is regressive in nature, there is no doubt about it."
Pope emphasized that he was expressing his opinions and not Governor Pat McCrory’s. Still, as deputy budget director and as a leading Republican donor, he has the governor’s ear. Pope said that if the state were designing a tax code from scratch, a broad-based consumption tax could be the way to go. But he says it would penalize retirees and others who’ve worked hard to accumulate their nest eggs.
"To go there from where we are now, I think it has lots of impracticalities, so I have great concern for that."
Pope’s statements came as a surprise to many, including Meg Wiehe, a policy director with the national non-partisan Institute on Taxation and Economic Policy.
" I fully expected Art Pope and potentially even the governor to embrace the same plan that Senators Berger and Rucho have been talking about or at least elements of that," said Wiehe.
Just last week, Senate President Phil Berger and Senator Bob Rucho said they supported replacing personal and corporate income taxes with a higher sales tax. Both Berger and Rucho did not respond to requests for interviews today. Many national groups support ending income taxes, including the conservative Americans for Tax Reform, founded by the anti-tax advocate Grover Norquist. Policy Director Patrick Gleason says ATR has been working with state leaders across the country, including Governor Bobby Jindal in Louisiana and politicians in North Carolina.
"We’ve seen Senator Rucho’s proposal- actually quite similar to Bobby Jindal’s plan- we like a lot of provisions in that, but there’s also a number of other degrees of tax reform you could do as an alternative that would also get you to a much improved tax code in North Carolina," says Gleason.
Republican leaders say lowering corporate and personal income tax rates would help boost the state’s competitiveness, but they don’t agree on the details. While Senate leaders like Rucho are closely aligned with a plan proposed by the Civitas Institute, others prefer a plan put forth by the John Locke Foundation that would only tax income used for consumption. So far, all the ideas put forward concern Meg Wiehe, with the Institute on Taxation and Economic Policy.
"While there seem to be different plans and we’re not really clear yet what idea will be the one that really gains legs and moves forward, from where I sit the proposals that I’ve seen…all have one thing in common and it’s that they would clearly shift the responsibility from wealthy taxpayer onto the backs of low-income residents," says Wiehe.
Wiehe thinks it’d be better for the state to make improvements to its current tax code. She believes in eliminating some loopholes and deductions in personal income taxes that benefit upper income residents. And she thinks the sales tax should have a broader base. Many are waiting for Governor McCrory to weigh in with some specifics. On the campaign trail, he said he favored lowering corporate and personal tax rates. But he didn’t say by how much.