Senate leaders unveiled their latest version of a massive tax cut for the wealthy Monday, the same day federal emergency unemployment benefits were cut off to 70,000 laid off workers simply because legislative leaders and Governor Pat McCrory stubbornly refused to change the effective date of cuts to state unemployment benefits they approved earlier in the year.
Most of the coverage of the latest Senate tax cut scheme focused on what it would mean for the negotiations with the House over a final tax package and budget deal and the end of the legislative session.
Senate President Pro Tem Phil Berger said the new Senate plan moved closer to the House position on many issues including the mortgage interest deduction, child tax credit, and limited expansion of the sales tax base.
The Senate plan still costs more than the House proposal. It would reduce state revenue $3.28 billion over the next five years. That’s almost as much as the entire budget of the community college system and the university system combined.
The House plan would mean a loss of $1.75 billion over five years, far less than the Senate but still a significant blow to a state budget still reeling from the deep cuts made to education and other vital state institutions during the Great Recession.
There are differences between the latest Senate plan and the House proposal on income taxes too. Both plans would slash personal income tax rates on the wealthy and replace them with a flat tax with the Senate rate slightly slower.
The House wants to lower the corporate income tax rate too; the Senate wants to completely eliminate it in five years.
There’s no word yet from House leaders about their reaction to the latest Senate proposal, though the fact that the Senate offered it in public instead of during the ongoing backroom talks is a sign that it is merely the latest move in the negotiations.
The focus on the details of the latest tax cut offer and the speculation about the possibilities for a deal are important and understandable.
But far more significant is what the two regressive plans have in common and the context in which they are being considered.
Both plans are based on the flawed assumption that slashing taxes on corporations and the wealthy will jumpstart the state’s economy and create jobs. Most economists don’t think so and three senior North Carolina economists told members of the Senate Finance Committee recently that there is no consensus about the positive economic impact of cutting taxes.
One economist disagreed—a recent college graduate with the right-wing Tax Foundation flown in to testify in favor of the tax cuts.
Both plans leave the state without the resources needed to make desperately needed investments in public schools, higher education, and human services that have been devastated in the last several years.
Senator Berger told the committee that the latest Senate tax plan allows state revenue to grow enough–a few percent a year–to meet the state’s basic needs.
But the N.C. Budget & Tax Center reports that if state revenues had been limited to the same growth levels for the last 20 years, the state would have had $93 billion less to invest in education and health care and other vital services. The current budget would be $6 billion in the hole.
And finally and most importantly, both the House and Senate plans shift the tax burden from the wealthy to low and moderate-income families.
Legislative leaders seemed determined to give wealthy people a big tax cut and pay for it by making middle class families pay more and slashing funding for public schools and higher education.
That doesn’t make any sense to most people in North Carolina. And they especially don’t understand how lawmakers can give corporations and millionaires huge tax breaks while at the same denying emergency unemployment benefits to 70,000 laid off workers desperately trying to make ends meet for their families.
That’s a big reason why thousands of folks are marching on the Legislative Building every week on Moral Mondays and why they were back in force this week, because of the immorality of the decisions being made in the legislative halls by the folks who are supposed to be representing everybody in North Carolina, millionaires, middle class families and laid off workers alike.