November 5, 2020

RALEIGH – With the return of fiscally conservative majorities to the North Carolina House and Senate, North Carolinians have given a thumbs-up to spending restraint and tax reforms enacted over the past decade. It’s a governing approach that ensures working women and men keep more of what they earn and that the state has stable resources to provide core services and deal with emergencies.

New analysis from the John Locke Foundation provides a rationale and recommendation to keep North Carolina on its sound fiscal path for the long term. In the report, Senior Fellow Joseph Coletti outlines the benefits of a constitutional tax and expenditure limit (TEL) and urges lawmakers to act.

“As we’ve seen through the COVID crisis, lower spending means state government has resources to provide core services and to care for the vulnerable in difficult times,” Coletti said. “A constitutional limit on all state revenues, expenditures, and debt would ensure North Carolina’s budget expends money on legitimate needs and sound policy choices, but not on unwise pet projects. It would ensure money is available for future storms, pandemics, and economic downturns.”

The report — Big Government, Big Price Tag: More Spending = Higher Taxes For North Carolinians — is the third in a series that uses rigorous economic modeling to assess the impact of big-spending plans touted by Gov. Roy Cooper and his progressive allies. Importantly, it offers a roadmap for shielding North Carolinians from the economic hit that would flow from irresponsible policies.

“In his victory speech, Gov. Cooper spoke of the need to listen to all North Carolinians,” Coletti said. “He’s right, and with this recommendation, we offer the governor an opportunity to do that. We urge him to listen to the clear path endorsed by North Carolinians on election night.”

Coletti’s analysis explains why an effective way to stabilize state finances is to tie spending to the combined rate of inflation plus population growth. He looks at the controversial approach employed by California through its infamous Proposition 13 freeze on private property assessments, and at the more successful path chosen by Colorado through its Taxpayer Bill of Rights (TABOR). Based on those differing experiences and building on recommendations to improve TABOR, Coletti urges state lawmakers to pursue a TEL in the upcoming legislative session.

To illustrate the power of the TEL to protect North Carolinians, Coletti analyzes the tax implications of the progressive Left’s previously proposed spending increases and two costly ideas that would put North Carolina on the wrong path, steering it away from fiscal stability.

First is the Left’s proposal to add at least 623,000 adults to North Carolina’s Medicaid program, detailed in Part 1 of the Big Government, Big Price Tag series of reports. Second is progressives’ wish to repeal North Carolina’s decades-old ban on collective bargaining by public-sector unions, detailed in Part 2 of the series. Together with other reckless spending proposals, the total could add an additional $14 billion in spending over the next four years. The economic effects of paying for the new spending would be a loss of more than $7 billion in economic output and 5,500 job opportunities each year.

With the election over, Coletti sees North Carolina as Ground Zero for Medicaid expansion activists and union executives seeking to implement ill-advised, destabilizing policies. “We hope the governor and the General Assembly will stand with us to ensure North Carolinians are not defenseless against spending increases that could cripple the state’s economy. Adding a tax-and-expenditure limit to the state constitution is the first line of defense,” Coletti said.

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To interview Joseph Coletti, send an email to
[email protected]. Or, call 919-219-3552 (cell).