The Winston-Salem Journal says legislative Republicans “have some ideas about state tax reform that warrant serious consideration.” The major reform is broadening of the sales-tax base to include services, which the Journal says should enable the state to reduce the sales tax rate.
JLF’s Joe Colletti says it “would be simpler and more efficient, with less opportunity to hide taxes, if the state adopted a consumed-income tax instead of keeping the current income tax and adjusting the sales tax on purchases.”
But here’s the big picture:
Tax cuts are not a popular idea in the General Assembly, however. Legislators and special-interest lobbyists passed a budget that commits $750 million more in state funds than was actually spent the previous year. So the Finance Committee members are trying to pursue two goals at once. If past policy is prologue, a more rational tax system will lose out to one that takes more money out of the private sector. Lawmakers will not reduce the sales tax rate enough to offset the new services they would tax.
…State lawmakers know vaguely that their spending plans are unsustainable. They need a clearer picture of the long-term costs their programs impose on taxpayers. Without it, too many of them will continue to say it is a revenue problem instead of a spending problem. While they admit there is waste and abuse in the budget, their first impulse is to accept the spending as necessary and raise taxes.
You can certainly make that argument as the local governments keep trying to finance amenities like aquatic centers. More about that later.