McCrory still open to dumping state income tax
Posted January 24, 2013
Raleigh, N.C. — Despite the reservations of his budget director, Gov. Pat McCrory said Thursday that he still wants to look at the possibility of eliminating North Carolina's income tax.
Republican Senate leaders have proposed replacing the personal and corporate income tax with an increase to the state sales tax rate, which would then be applied to a broader array of goods and services, from groceries to haircuts to car repairs.
Raleigh businessman Art Pope, whom McCrory appointed to oversee his budget proposals, said Wednesday that he has "great concerns" about trading income taxes for sales taxes. He called the idea "regressive" and said it would unfairly burden senior citizens.
McCrory said the idea remains on the table, though, as he and lawmakers work through plans to reform the state's tax code.
"We're looking at many different plans at this point in time, and then, after reviewing all the different plans, I'm going to try to make the best decision possible," he said. "At a minimum, I want to be competitive with my neighboring states, but I've also got to be realistic about what we can and cannot implement."
A study released Wednesday by the left-leaning NC Budget and Tax Center said the plan would mean lower taxes for the wealthiest taxpayers and an increase for low-income people.
"It's not reform. It really is a huge tax shift, asking more from 60 percent of taxpayers while we provide the top 20 percent with a tax cut," said Alexandra Sirota, director of the Budget and Tax Center.
Ironically, the Senate leaders are basing their plan on a study paid for by conservative think tank Civitas Institute, which is backed by money from Pope's family foundation. The study was authored by economist Arthur Laffer, who was the architect of Reaganomics in the 1980s.
A report from the nonpartisan Institute on Taxation and Economic Policy says Laffer’s study relies on an economic analysis that is too methodologically flawed to even be useful, and Sirota said most mainstream economists now agree that the trickle-down theory doesn't work in real life.
"It would be a serious concern if we make policies based on theories that in practice aren't working," she said.