@NCCapitol

Fact Check: Ad points out Dalton's tax-hike votes

Posted May 29, 2012 11:52 a.m. EDT
Updated May 30, 2012 5:10 a.m. EDT

The Republican Governors Association has updated its on-air attack on Democrat Lt. Gov. Walter Dalton in the race for North Carolina governor against Republican Pat McCrory. The new ad, part of an $850,000-plus, three-week ad purchase, again closely links Dalton with outgoing Democratic governor Bev Perdue.

This ad repeats one claim made in the first ad, that a proposed 15 percent sales tax increase would kill 8,000 jobs. WRAL found that claim to be unfounded.

There are two new claims are worth checking:

  • North Carolina has the worst business taxes in the South.
  • Dalton has consistently voted to increase taxes.

It’s worth noting that the preface of the ad sets a premise – “Let’s examine Walter Dalton’s and Bev Perdue’s high-tax agenda and a devastated North Carolina economy” – using a fair amount of hyperbole. Because Dalton and Perdue haven’t really been working that closely together, saying they have pursued a single agenda is stretch.

As for whether North Carolina’s economy is “devastated” or not, that’s a colorful word but not one that lends itself to being measured. Suffice it to say there are economic measures, including the unemployment rate and labor force, which can argue either way on the point.

The claim: Dalton has consistently voted for higher taxes

The ad claims Dalton has voted for higher taxes as calendar pages flip showing the year 2001, 2002, 2003, 2005, and – a bit oddly – “2012?”

It’s first worth noting that Dalton, as lieutenant governor, will not have a vote or veto on the 2012 budget except in the unlikely circumstance that the Senate is deadlocked. So if the question is whether Dalton will vote to increase sales taxes in 2012, the answer is probably no. However, the "2012?" is probably more of a stand-in for the fact that Dalton is advocating for a sales tax increase this year, even though it is one that it's unlikely to pass a Republican-dominated General Assembly. 

What about those other years?

One helpful guide is the N.C. Department of Revenue’s annual summary of tax law changes

Taking a look at 2001, it’s clear that the General Assembly voted to impose a “temporary” one half of one percentage point sales tax increase and added a new top marginal tax rate in that same year. Those “temporary taxes" were continued in 2003 and 2005. Those facts alone lend validity to the 2001, 2003 and 2005 claims.

It's also worth noting that lawmakers voted to make parts of those "temporary taxes" permanent in 2007. 

It’s harder to support the idea that lawmakers in general, or Dalton specifically, raised taxes in 2002. Most of the tax changes made during that particular year were in the mode of technical adjustments and clarifications.

Is this claim true? Still, is it accurate to say that Walter Dalton, as a state Senator, voted to increase taxes? Yes it is. 

In his response to this ad, Dalton pointed to instances in which he voted to lower taxes. For example, he did vote in the late 1990s to eliminate the state sales tax on food and did vote to cap the gas tax in 2006 and 2007.

However, the tax decreases that Dalton cites are relatively small, targeted types of relief. The ad points to broad-based sales and income tax increases.

As for whether those Dalton-backed tax increases would have been higher for “working families” and “small businesses,” the answer in both cases is yes.

A sales tax hike hits virtually everyone, but as liberal groups like the N.C. Budget and Tax Center and conservative economists note, it is regressive. That means the sales tax soaks up a higher proportion of a low-income family’s wealth than it does for high-income earners.

And many of the state’s small businesses pay individual income tax rates due to how they’re organized, so raising the top individual income tax rate will raises taxes on some businesses.

What the ad doesn't talk about, of course, is what the state got in return for those tax increases and whether or not that spending was worthwhile. That said, the claims about the tax increases themselves are valid. 

The claim: North Carolina has the worst business taxes in the South

For this claim, the ad cites “The Tax Foundation,” which describes itself as a “nonpartisan educational organization.” However, it’s fair to say that the foundation argues consistently for lower taxes and finds itself philosophically aligned much of the time with conservative politicians and groups like ALEC, which are seen as having a definite philosophical and political bent.

In the group’s 2012 State Business Tax Climate Index North Carolina ranks 44th out of 50 states, ahead of only Minnesota, Rhode Island, Vermont, California, New York and New Jersey.

Since none of the states that rank below North Carolina are in the South, it’s fair to say that on this particular measure, North Carolina is the lowest ranking state in the south.

The foundation ranks states on corporate tax rate, individual income tax, sales tax, unemployment insurance tax and property tax. It also comes up with an overall rank, but it’s not simply an average of the other tax categories.

“The Index deals with such questions by comparing the states on 118 different variables in the five important areas of taxation (major business taxes, individual income taxes, sales taxes, unemployment insurance taxes, and property taxes) and then adding the results up to a final, overall ranking,” reads the report.

While this claim is accurate as far as it goes, there’s an important caveat: the Tax Foundation’s is only one ranking. There are other rankings that show North Carolina as a good performer when it comes to business climate. For example, in November Forbes ranked North Carolina as having the third-best business climate in the nation.

The fact that there’s such a contrast among these competing rankings should at least give one pause in accepting the assertion without question. But as far as the Tax Foundation study goes, the claim is accurate.

So is the ad factual?

With the exception of its set-up and an already debunked claim about jobs lost as a result of raising the sales tax, this attack on Dalton can claim ample backup for the claims that it makes. While partisans can – and do – quibble with how those facts are framed, neither of the new claims are false or unfounded.