Archives: Joseph Coletti

Gov. Mike Easley’s proposed $18.9 billion budget does not provide enough relief to taxpayers who made it possible. The governor could have returned the $1.1 billion in overcollections to taxpayers without jeopardizing future fiscal health. This would include ending the half-cent sales tax and 8.25 percent income tax rate set to expire in 2007, and providing a temporary quarter-cent sales tax refund. Removing the county burden for Medicaid would also ease the fiscal pressure local governments face to raise taxes to pay for schools and roads.

Health care is again a top priority for most Americans. Health savings accounts offer promise and are growing in popularity among companies and individuals. Three states will soon begin consumer-directed Medicaid pilot programs. These are more realistic approaches than proposals by the NC Institute of Medicine and others to expand Medicaid or to force employers to provide health insurance. Individuals, not companies or the state, are best equipped to manage their own health care. Health care reform should start from this premise.

New Hanover County’s waste-to-energy incinerator (WASTEC) was built in 1984 to extend the life of the county landfill and also to make money from selling the energy it generated. The incinerator was never able to make money, relying instead on subsidies from the landfill and a higher tipping fee. New technologies and competition have made this costly option obsolete.

State tax revenues grow in strong economies. Politicians use the new revenue to create or expand government programs. In recessions, revenues fall and tax rates rise to pay for the higher level of spending. Spending and taxes in the last ten years illustrate this pattern. As North Carolina enters another period of expanding revenues, Gov. Mike Easley and the General Assembly must avoid the temptation to increase spending so they do not have to increase taxes in the next recession.

State leaders claim that capping the gas tax at 27.1 cents per gallon would cost the state up to $135 million a year in road construction. They are wrong. The state will be just $5.3 million behind projections planned for in this year’s budget if it freezes the gas tax. Furthermore, nearly $400 million in gas tax revenues goes toward spending that has nothing to do with road construction. The General Fund, public transportation, railroads, and airlines all receive gas-tax revenues. There is no need to take money from road construction so long as gas-tax revenues are diverted to unrelated programs.

North Carolina’s tax code distorts economic activity. It penalizes the investment, savings, and entrepreneurship needed for economic growth. But the latest report on taxes from the Department of Revenue only looks at ways the tax code does not bring in as much money as it could.

North Carolina is the only state in which counties pay a fixed percentage of Medicaid costs. Counties have no control over how they spend up to 15 percent of their general fund budget and 39 percent of their property tax revenues. Six counties spend more on Medicaid than on education. Program expansions and higher medical costs have pushed Medicaid’s share of county budgets up an average of 18 percent in five years. The General Assembly should act on the recommendation of its own Blue Ribbon Commission on Medicaid Reform to cap and reduce what counties must contribute to Medicaid.

City and county government cost on average $3,804 per capita in Charlotte during fiscal year 2004, from July 2003 to July 2004. This was 28.1 percent higher than the $2,969 (constant 2004 dollars) per capita spent in fiscal year 1994. For comparison, real per capita personal income increased just 13 percent over the same period, from $24,926 to $28,235. Most of the increased expenditures were for operations, which climbed 23.2 percent to $2,766 in fiscal 2004. Char-Meck’s high capital spending climbed 43 percent over the decade, to $1,038 in fiscal 2004.

City and county government cost on average $2,863 per capita in Wilmington during fiscal year 2004. This cost was 42 percent higher than Wilmington's per-capita spending in 1994. As real per-capita personal income increased just 13 percent over the 10-year study period, operations costs climbed 35 percent and capital spending nearly doubled over the decade. No large city in North Carolina had faster spending growth than Wilmington did.

Six weeks into fiscal year 2005-06, the General Assembly has a budget proposal from the conference committee. It includes $17.2 billion in spending (up 7.9 percent from 2004-05), over $700 million in higher taxes and fees, and $681 million in extra collections. This spending is well above the governor's spending cap. A constitutional tax and expenditure limit would provide the best insurance against permanent tax increases from reckless spending.