by Brian Balfour
Senior Vice President of Research, John Locke Foundation
Bill will require an estimate of interest payments and potential tax increase
To “protect” consumers, the Federal government passed the “Truth in Lending” Act in 1968. A major part of this act was for lenders to disclose to borrowers a complete payment schedule of the loan – including principal and interest payments. Anyone with a mortgage knows how much interest payments can add to the total payment schedule.
Unsurprisingly, however, state and local governments here in North Carolina do not provide such “protections” to taxpayers when offering voters a chance to vote for or against a bond referendum – a loan that the taxpayers will be forced to pay back with interest.
The North Carolina Senate just introduced a bill that would require similar “truth in lending” disclosures on local bond referendums. SB 99 will require language on the ballot both estimating the total amount of interest that will be added to the taxpayer’s burden in addition to the principal amount being borrowed, as well as an estimate of the property tax increase needed to pay off the totality of the debt.
Currently, bond ballot language only needs to say that voters are considering a debt of X amount “plus interest” and that “additional taxes may be levied in an amount sufficient to pay the principal of and
interest on the bonds.” And that minimal amount of disclosure wasn’t added until legislation passed in 2013.
More transparency in government operations and finances is always welcome. It seems only fair that governments would provide the same kind of “consumer protection” to taxpayers making decisions on their debt levels as are applied to mortgage applicants.