Research Reports: Transportation

North Carolina has now joined many other states and the federal government in debating solutions to the problem of rising costs in medical malpractice insurance. Evidence suggests that flaws in our tort laws and procedures are a major part of the problem. Proposed state legislation to cap “pain and suffering” awards and implement other reforms represents a good starting point, but state lawmakers should also look at a “loser pays” rule and judicial oversight of expert testimony to reduce the impact of junk science and quack medicine on jury deliberations.

North Carolina's approach to economic development policy has failed, with the state’s high tax burden, lack of industrial diversity, and hostility to entrepreneurial effort contributing to a painful decline in employment and competitiveness. Public policymakers should rethink their reliance on central-planning models and schemes to subsidize specific businesses or regions. Instead, the state should lower taxes and avoid costly regulatory mistakes like the "Clean Smokestacks" bill.

The ghastly terrorist attacks in New York City and Washington will have overwhelmingly negative consequences for the nation’s economy, despite the foolish suggestions of some that it will result in a net stimulus. North Carolina’s economy promises to be particularly hard-hit by troop deployments and faltering investor and consumer confidence. Now is the time for state leaders to dedicate themselves to strengthening the economy, not weakening it through massive tax hikes.

Gov. Mike Easley and other proponents are reportedly preparing to resurrect the idea of a state lottery for North Carolina. The case for this regressive and unpredictable source of revenue has, if anything, weakened in recent months, as other states with lotteries have experienced significant revenue shortfalls. The fact remains that Easley is overestimating the lottery’s potential revenue, thus creating the risk of additional tax increases in the future to make up the difference.

Despite hype to the contrary from state officials, the just-released 1997-98 ABC test results showed once again how poor the level of public education in North Carolina remains. Rating schools on the basis of student achievement, the Locke Foundation found that only 1 percent of public schools deserved an "A" for imparting grade-level skills to at least 90 percent of students. Fully half the schools received a "D" or "F."On average, only 66 percent of public school students tested at grade level — with far worse results on more rigorous national tests.

North Carolina's Unemployment Insurance trust funds continue to be bloated due to overcharging workers and employers. A series of tax cuts during the 1990s has failed to bring the system under control. A new bill would cut the UI tax by 20 percent but impose a new tax of the same amount to fund unneeded administrative costs and community college items that, in some cases, constitute corporate welfare. A better answer would be to cut UI taxes and draw down the state's separate $200 million reserve for any needed college improvements.

The N.C. Senate is debating its budget proposal for FY 2001-03. For all the furor about "severe cuts" in the plan, it would increase total General Fund spending next year at nearly the same rate (4.7%) as Gov. Mike Easley's budget (5.2%), including a 15% increase in health and human services spending vs. Easley's 16.2% hike. Both offer a stark contrast to the Changing Course budget prepared by Locke analysts, which would essentially hold spending constant while cutting taxes.

The need for fundamental tax reform in North Carolina has never been more obvious. Unfortunately, Gov. Mike Easley's "tax loophole" commission is incapable of fashioning a sound reform plan. It lacks guiding principles, is using a faulty definition of "loophole," and is more interested in raising tax revenue than reducing tax biases. Policymakers should pursue simplicity, neutrality, and equity through a consumed-income tax and other ways to flatten and reduce tax rates.

Co-authors Michael Lowrey and Jonathan C. Jordan examine North Carolina transportation policy and recommend ways of improving it without resorting to more taxation, regulation, and government control. (38 pages-not available online.)

This comprehensive briefing on 21 issues facing the state, as well as statistics on government expenditures and outcomes, provides ideas and recommendations on taxes, state spending, education, health care, welfare, and more. Please consult Agenda 2002 for the latest information.