Monday, April 09, 2007

What exactly is a 'temporary tax'?

Democrats are going to do a fast burn over the latest Tax Foundation Special Report showing that the state and local tax burden is at a 25-year high nationally.
What’s going to toast them in North Carolina is not just the ranking and rate – the foundation says the N.C. local-state tax burden is 11 percent and the ranking is 19th – but also how North Carolina has moved up in the past 37 years. In 1970, the N.C. burden was 8.9 percent and the state ranked 37th. It was still 36 in 2000 with a 10 percent state-local tax burden, but has since zoomed up the ladder to 19th.
What happened?
The foundation – based in Washington – noted: “North Carolina’s jump of 17 places in several years is especially startling. The likely culprit is the ‘temporary’ increase in both its individual income and sales taxes. Expiration dates have long passed since enactment in 2001, and both taxes raise large amounts of revenue. Despairing of expiration, the state has now scheduled smaller decreases in both taxes for 2007 and 2008.”
Actually, North Carolina last year cut half of its “temporary” half-cent sales tax to expire, so the combined local-state rate is now 6.75 percent instead of 7 percent. And the state cut its top income tax rate for the highest earners from 8.25 percent to 8 percent. Both were raised a half-percent in 2001 when the state faced a fiscal shortfall, but were sold to the legislature as temporary taxes. They were extended twice before the legislature, at Gov. Easley’s urging, cut them in half last year.
They were scheduled for another cut – completing elimination – on July 1, but late in the year the governor began thinking about extending the remaining “temporary” taxes and recommended keeping them in his budget proposal earlier this year. Last week House Speaker Joe Hackney said he also supported keeping the remaining quarter-cent temporary tax increases on top income rates and sales taxes.
I think these temporary taxes are radioactive. They seem to have a half-life of a thousand years.
Addendum: Dan Gerlach, Gov. Easley's senior fiscal policy advisors, says the Census Bureau's rankings of state and local taxes and state tax burden tell a different story -- and North Carolina fares much better. Follow this link to the tax burden ranking and this one to state and local tax collections.

2 comments:

Anonymous said...

so long as goverment is controlled by the democrats there are no "temporary" taxes. They need the money to buy votes.

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