Is a state income tax cap sensible?

Constitutional Amendments on November Ballot, part 1

SB 1080:  State Income Tax Cap

Voters will be asked to approve a constitutional amendment during midterm voting in November that will cap the individual income tax rate a 3.5%.  Doesn’t that sound like a sensible tax change?  What are the repercussions?

A Perspective on this Tax Proposal

If the legislature continues to shrink tax collection revenues by lowering rates, how does North Carolina generate the revenue necessary to fund maintenance and expansion of critical services?  (Roads, fire and related emergency services, police and other public safety organizations, schools, hospitals, airports are just a few of many examples.)

Voter approval of this constitutional amendment will make the 3.5% cap difficult to repeal.  The Governor cannot veto a constitutional amendment.

North Carolina has a flat income tax rate.  Every resident, regardless of income, pays the same rate.  High income individuals would receive the biggest tax savings if the rate is capped at 3.5%.

Future legislatures would not be able to raise the tax rate.  It will  be extremely difficult to increase revenue from income taxes in the future.  Investments in education, law enforcement infrastructure, for example, will be challenging in the future without the ability to adjust the income tax structure.

Sales and consumption taxes are the most likely way to raise tax revenue to offset revenue lost from a cap on the income tax rate.  Sales and consumption taxes will fall most heavily on lower-income residents.

Conclusion

Simply put, this is yet another attempt to shift even more wealth from the middle class to the top 1%.  

The Republican legislators are concerned that their nominee for the senatorial seat is not generating much enthusiasm.  The war in Iran and the economy are also causing Republican voter angst.  So, these tax measures are the Republicans’ bait to lure reluctant voters to the polls in November.  (They, in their arrogance, seem to ignore the impact of these tax policies on their own voter base.  Again, they focus on their largest donors to the detriment of the bulk of their voters.) 

Action Plan

As always, we have our voice and our vote.  We can share our understanding of the real impact of further reducing  the flat income tax basis to 3.5% with neighbors and friends, regardless of political affiliation.  As we canvas and phone bank, please share these new additions to our November ballot with a strong recommendation to vote “NO”. 

Joe Elliott, ejoe2397@gmail.com