It’s budget season in the Tar Heel State. We have high hopes that this biennium budget can allow for substantial benefits to North Carolinians. The state House released its budget proposal for the biennium in March. The state Senate is expected to release its version in the coming weeks.
The final budget should do the following:
- Respect North Carolinians’ tax dollars through fiscal responsibility.
The John Locke Foundation has supported amending the state’s constitution to include a Taxpayer Bill of Rights. Such a bill would ensure spending increases stay below the rate of population and inflation growth. In this way, the cost of government to taxpayers remains steady over time, an agreeable alternative to the tax and spend cycles of the past.
Moreover, North Carolina’s budget outside of the General Fund contains significant federal dollars. As federal government leaders discuss raising the debt ceiling, North Carolina lawmakers would be wise to distance themselves from federal aid, including Medicaid Expansion.
2. Reward work by further lowering the personal income tax rate.
Money belongs to those who earn it. Cutting the personal income tax rate allows workers to keep more of their income and makes North Carolina more competitive regionally. Both state houses have introduced bills that cut the personal income tax rate further than the cuts already scheduled.
The personal income tax makes up more than half of the General Fund tax revenue in North Carolina. Even so, revenue collections have exceeded expectations. Other states are following suit, transforming their tax codes to the flat, simple rate and slashing rates. In any limited government, taxes should be low. 3
3. Promote economic growth by simplifying business-related taxes.
Leaders at the General Assembly have taken assertive action to eliminate the corporate income tax rate by 2030. This means more jobs and bigger paychecks in our state as workers ultimately bear the burden of this harmful tax.
More can be done, however, and the House budget proposal built on prior reforms to further reduce the state franchise tax. The franchise tax, often called a capital stock tax in other states, is a tax on the business’s net worth. It discourages investment and asset accumulation in favor of more immediate profit-taking.
This budget should also repeal the harmful, archaic, and redundant privilege license tax that disproportionately affects a handful of sectors.
4. Give more parents the ability to choose the appropriate education for their child.
School choice expansion is gaining momentum in North Carolina. This budget should expand eligibility for North Carolina’s Opportunity Scholarship program by removing the requirement that certain students attend public school before applying for a scholarship, as outlined in the House budget proposal. The budget should also enact changes proposed in SB 406 to remove income eligibility requirements and instead award scholarships to all who want one based on a sliding scale.
5. Prioritize budget transparency.
New reserves in the state budget should be included in the budget’s bottom line. This increases transparency and accountability. When separate reserves are not included in the General Fund total, this not only allows for more room for increased, recurring spending in the General Fund, but it also garbles transparency. For example, the House budget proposal would send $400 million to the Economic Development Project Reserve over the biennium, as well as more than $1 billion to the Regional Economic Development Reserve. This money is set aside before calculating General Fund availability, meaning the bottom-line spending number looks smaller than it actually is.
Along the same lines, North Carolina should enact the Insko Rule for budget transparency. Legislators should at the very least, be held accountable for their pork spending projects by attaching their name.
With these actions and more, this budget can build on the solid progress of the last one, upholding North Carolina’s legacy as the best place to live and do business.