January 29, 2013
RALEIGH — North Carolina’s elected leaders would adopt a new pro-growth tax system, promote parental choice in education, say no to Obamacare’s health insurance exchanges and Medicaid expansion, and redesign state government’s “operating system,” if they follow key recommendations from the John Locke Foundation’s new book.
Each idea ties into the book’s title, First In Freedom. “At the John Locke Foundation, we believe it is time for North Carolina to reclaim its heritage and resume its leadership in the cause of liberty,” JLF President John Hood writes in the book’s introduction. “It is time for our state to become First in Freedom once more.”
Hood and the JLF research staff are releasing the book as a new Republican governor and a newly re-elected Republican-led General Assembly return to Raleigh to tackle the state’s top policy issues. “About a year ago, it became evident that 2013 might be a window of opportunity for North Carolina conservatives,” Hood writes. “We saw the prospects for conservative reforms of the tax code, state budget, education, regulatory agencies, health care, and government operations as greater in 2013 than at any time since JLF’s founding.”
Given that window of opportunity, JLF experts have devoted more than 220 pages of detailed analysis to seven key areas within state government that could face major overhauls: North Carolina’s tax system, state government spending, parental choice in education, rules governing traditional district-run public schools, the state’s regulatory climate, North Carolina’s response to federal health care reform, and reorganization of state agencies and elections.
The key element of JLF’s tax proposal involves abolishing North Carolina’s existing personal and corporate income taxes, sales tax, and estate tax, and replacing them with a single-rate consumed-income tax. It’s dubbed the Unlimited Savings Allowance, or USA, Tax.
Researchers from Suffolk University’s Beacon Hill Institute have studied the likely economic impact. “They estimate that taking this approach to tax reform would increase North Carolina’s gross domestic product by over $11.76 billion in the first year and by almost $13 billion after four years with an immediate first-year increase in employment of 80,500 jobs and an employment increase of 89,000 jobs by 2017,” said Dr. Roy Cordato, JLF Vice President for Research and Resident Scholar.
Cordato also explores the “second-best” option of adopting the new USA Tax at a lower rate, while preserving the sales tax at a slightly lower rate and continuing to eliminate North Carolina’s personal and corporate income taxes and the estate tax.
Turning from revenue to spending, JLF recommends a state constitutional limitation known as the Taxpayer Bill of Rights. It would limit state spending increases to rates no greater than inflation plus population growth. Higher rates of growth would require voters’ approval.
“As state spending consumes a larger and larger share of the economy, a constitutional remedy is necessary to transfer greater authority back to the people and place North Carolina on a sustainable path,” said Fergus Hodgson, former JLF Director of Fiscal Policy Studies.
North Carolina devotes much of its budget to education, and First In Freedom tackles that topic in two distinct chapters. The first offers a “nuts and bolts” guide to school choice. The second focuses on reforms within traditional district-run public schools.
School choice options include tax-credit scholarships, individual tax credits and deductions, education savings accounts, vouchers, charter schools, and other options.
“Most proponents of school choice envision an education system that ensures that all families have the means to choose the school that best meets the needs of their children regardless of provider,” said Dr. Terry Stoops, JLF Director of Research and Education Studies. “The way that those funds are collected and delivered may vary, but the principle remains the same. Families, not bureaucrats, should be in charge.”
A chapter on regulatory reform urges North Carolina to build upon changes made during the past two years. “They have made good progress, but the journey is incomplete,” said Jon Sanders, JLF Director of Regulatory Studies. “The final phase requires restoring transparency and accountability to the rulemaking process and putting the ultimate authority for major policy matters back in the legislature’s hands.”
First In Freedom urges North Carolina leaders to reject two key components of the 2010 federal health care reform law.
“The strongest strategy for blunting the federal government’s attack on federalism begins with holding the federal government accountable for the laws it passes,” said Sean Riley, JLF Adjunct Policy Analyst. “Refusing to build state exchanges and refusing to expand Medicaid places the responsibility of the law in the hands of those who support it, and represents a first step in moving toward real health care reform.”
Hood’s final chapter — titled “North Carolina 6.0: A new operating system for state government” — outlines a series of structural government reforms, including expansion of the governor’s veto power, merger of several state agencies, legislative session limits, and the return of party labels to judicial elections.
“Some of the ideas you will encounter in First In Freedom may be new to you,” Hood writes. “They aren’t really new ideas. JLF has advanced a consistent, coherent set of conservative policy reforms for more than two decades. Furthermore, many of the recommendations in this book are based on successful programs or policies already in place in other states or countries.”
Copies of First in Freedom: Transforming Ideas Into Consequences for North Carolina are available at the John Locke Foundation’s online store.