Editorial: NC Tax Cuts Taking a Toll
We've been saying it since last year: the reckless tax cuts passed by the General Assembly will wreak havoc on the budget in North Carolina. Today the News and Observer is out with an editorial calling attention to the looming budget crisis that these tax cuts are causing. So far North Carolina is over $400 million short of the revenue at this point last year, and nearly $200 million short of projections. The editorial warns of budget cuts, but rightly points out that most services in NC have been cut to the bone already. From the editorial,
The General Assembly’s Republican leaders appear remarkably calm about what is shaping up to be either a serious budget shortfall or an income tax shock for those who have not had enough state tax withheld.
Tax revenue flowing into the state is running about $190 million below projections following tax cuts that took effect in January. That is worrisome because state spending already is at a spartan level. There’s no slack for filling the budget hole with easy cuts. The state could dip into its rainy day fund (even though it’s not a rainy day), but that simply puts off the budget reckoning for a year.
State Rep. Skip Stam, a Wake County Republican and House speaker pro tem, said the budget shortfall isn’t much given the state’s $21.1 billion budget and the federal government’s spending on North Carolina’s Medicaid and transportation projects. He told Time Warner Cable News, “The difference is hardly even a rounding error.” A rounding error? It seems like more than that to state agencies that are trying to meet the needs of a growing state. Their budgets have been tightened first by the Great Recession and then by Republicans taking control of the General Assembly in 2011.
State funding needs
The Department of Public Safety, for instance, just told a legislative committee that it needs an additional $20 million to better treat more the 4,600 inmates with mental illness. The state courts system is so strapped it’s running out of money to pay jurors. Local schools systems are coping with reductions in state funding. The University of North Carolina system has been repeatedly cut, and its funding could shrink more since it represents a large share of state spending.
The cause of the shortfall is a tax overhaul that took effect last January. It expanded the sales tax base, cut corporate income taxes and condensed three personal income tax brackets into one lower rate. As a result, state tax revenues year over year are down $410 million and $190 million below projections.