A Reuters article out this morning highlights the plans by the Republican-controlled North Carolina General Assembly to decimate the income tax base of our state’s revenue system.
We have no choice but to make change," said Bob Rucho, a Republican state senator in solidly Republican North Carolina, who is leading a push in that state for major tax changes.
Rucho and other like-minded lawmakers have a plan to do away with all state individual and corporate income taxes. The plan would replace lost revenue with a new business license fee and a higher sales tax on goods and services not now taxed by the state, such as legal, accounting and spa services, and food.
In his inaugural address on Saturday, Republican North Carolina Governor Pat McCrory promised to work with business "as partners" to eliminate taxes and regulation that stifle growth.
Rucho's plan would remake the North Carolina budget, which now derives 65 percent of its $18.5 billion in total tax revenues from individual income and corporate taxes.
To make up for that much lost revenue, the state sales tax rate would have to rise to 6.53 percent from 4.75 percent, according to a supportive study done by a consulting firm run by Arthur Laffer, a former adviser to Republican President Ronald Reagan and one of the fathers of "trickle-down" economics.
All of that would, of course, significantly shift the tax burden further down the economic chain, forcing low and middle-income North Carolinians to shoulder a much higher percentage of taxes than those who can better afford it.
North Carolina's Rucho acknowledged the argument that the poor would be hit disproportionately by higher sales taxes. But he said new sales taxes on services would also hit higher-income taxpayers.
He said low-income people got more government assistance that could help offset higher tax costs. Also, he added, cutting income taxes would spur economic growth, a key supply-side tenet, helping everyone.
In other words, Sen. Rucho knows the poor will pay more – he just doesn’t care.