April 28, 2003
RALEIGH — The North Carolina Senate is considering a state budget plan for the next two years that relies heavily on collecting higher taxes from families with children in order to close a projected deficit and fund new programs, according to a preliminary analysis published Tuesday by the John Locke Foundation.
Among the $499 million in tax increases in the Senate proposal are $37 million in higher income taxes on families with children, a $19.3 million increase in taxes on Blue Cross and Blue Shield health insurance premiums, and a $25.5 million net increase in the sales taxes families pay on candy, soft drinks, and prepared foods. These taxes come on top of the $384 million that both the House and Senate want to collect by extending sales and income tax increases first passed in 2001 with the promise that they would only be “temporary.”
“The Senate plan would quite literally tax our children’s candy, soft drinks, and snack foods to finance more state spending,” said John Hood, president of the Raleigh-based think tank and author of the new Spotlight briefing paper. “Families would also pay hundreds of millions of additional dollars in sales and income taxes next year, particularly if they have children living at home or enrolled in Blue Cross health plans.”
Overall, the Senate proposal would increase spending by $726 million in the 2003-04 fiscal year, or 5.1 percent, compared with the previously passsed House plan’s spending hike of $619 million, or 4.3 percent. The cost of servicing the state’s bonded debt would skyrocket by nearly $250 million over the next two fiscal years, with healthy spending increases authorized in such areas as corporate subsidies, Medicaid, corrections, and regulatory agencies. While the House plan closed a projected deficit in the 2003-04 continuation budget with roughly equal amounts of higher taxes and budget savings, the Senate proposal relies overwhelmingly on tax increases.
“Our fiscal problems stem from our government’s insatiable appetite for spending, not from our children’s appetite for sweets,” Hood said.
The Locke Foundation proposed an alternative budget in early April entitled “The Freedom Budget.” It identified hundreds of budget-savings recommendations and proposed a large cut in personal and corporate income taxes to enhance the climate for economic growth in the state. The foundation’s opinion surveys of both business executives and the general public suggest little support for further tax increases.
“North Carolina is already leading the Southeast in government growth and tax increases while trailing the Southeast in economic recovery,” Hood said. “Instead of repeating their big-spending errors of the past, our leaders should be focused on reforming and reducing state bureaucracies and focusing scarce taxpayer resources only on core state functions.”
The Spotlight briefing paper on the Senate budget proposal can be read online at https://www.johnlocke.org/spotlights/2003042974.html. For more information on fiscal policy issues in North Carolina, call 919-828-3876.