The state must generate revenue to pay for government provided
goods and services. The main sources of revenue
for North Carolina’s government are the personal income
tax and the sales tax, amounting to 87 percent of the state’s
tax revenue. The state’s major spending priorities have been
education and health and human services, with these two
categories of expenditure making up 79 percent of the 2016-
17 General Fund budget. Because the state constitution
mandates a balanced budget, the tax burden is a function of
spending levels. A lower tax burden depends ultimately on
Few people object to paying taxes if the taxes are fairly
assessed and the money is properly used. Taxes are the price
citizens pay for government, so a reasonable tax burden
can provide services that are of benefit to the citizens who
consume them and pay for them through those taxes.
However, problems arise when a complicated tax code
creates targeted tax breaks for select citizens, thus creating an
unfair tax assessment and uneven distribution of the state’s
resources. When writing legislation or creating policy around
taxes, this needs to be in the forefront of lawmakers’ thinking.
Most of the tax revenue collected is spent through the
General Fund, which includes the majority of the state’s
operations. There are, though, some major components of
the state’s expenditure that are located outside the General
Fund. In short, the General Fund amounts to around $22
billion, while total state spending amounts to more than
double that, approximately $52 billion. The major differences
between these two budgets are highways and the Highway
Trust Fund, federal funding, and some debt service, which
are located outside the General Fund.
- Total tax revenue in the current fiscal year is forecast to
be $21.3 billion, with 87 percent coming from personal
income and sales taxes: 54.5 and 32.7 percent respectively.
While the 2013 tax reform changed the rate, personal
income tax will still be the largest source of revenue for
- General Fund spending has decreased since 2009, but
total state spending has increased. The shift of spending
outside of the General Fund has created a lack of transparency
in the state budget process.
- Federal spending continues to be a major part of North
Carolina’s total budget spending, accounting for one third
of spending in 2016-17.
- Non-tax revenues will amount to $816 million this fiscal
year, or around 3.7 percent of total General Fund revenue.
- Set fiscal priorities each year. Search the base budget
for items or programs to cut if new spending is needed
in other areas
- Eliminate existing and avoid future targeted tax
exemptions, deductions, and other tax biases. Tax
breaks for select companies and higher taxes for certain
activities complicate the tax code and feed wasteful lobbying.
These special tax exceptions raise the tax burden
while distorting economic decisions.
- Pass a constitutional amendment to limit spending
growth such as a Taxpayer Bill of Rights. Laws passed
by the current legislature are not binding on future
legislatures, and other attempts to instill discipline
without the force of a constitutional amendment have
been brushed aside.