N.C. modernization effort again meets resistance, falls short

Editorial from the Charlotte Observer: This is getting to be a bad habit: A high-profile study commission given the job of studying the state's tax system and recommending ways to meet North Carolina's 21st-century needs has all but folded its tents. Again. Too bad.

The State and Local Fiscal Modernization Study Commission, which counts among its members some of the state's brightest lights, has no plans to meet any time soon -- and no specific recommendations for the upcoming General Assembly. A new way to tax businesses may be on the table, but it's not clear it will even be debated.

When this current tax modernization effort began several years ago, it was with the support of the Institute for Emerging Issues at N.C. State University. The institute developed a helpful computer program so that interested citizens could tinker with both the revenue and spending sides of the state budget. The theory was that gauging how changes in tax policy would affect available revenue to support state services -- or how trimming those services could free up revenue for other uses or for tax cuts -- would promote public support for a tax modernization.

North Carolina needs a revenue system that provides adequate support for state services when the economy retracts as well as when it expands. The state is in a boom-or-bust cycle. The old tax system built on a manufacturing economy that depended on textiles, tobacco and furniture is no longer adequate to fund all the services a still-growing state provides.

Last year the study commission recognized that if sales and income tax bases were broadened, the increased revenue would allow policymakers to cut tax rates sharply. One way might be extending the sales tax model to services. And it concluded that the state must find a way to help pay the share of Medicaid now paid by counties.

The legislature ignored the commission's specific recommendation for how to do that and came up with a complicated swap: in exchange for the state's gradually taking over paying for all the non-federal share of Medicaid, counties would give up a half-cent of the local sales tax that counties and cities share. Counties would get the option of asking voters to approve either a transfer tax on real estate or another quarter-cent on the sales tax.

That was significant. But that was pretty much it for tax reform and fiscal modernization. Other pressing fiscal questions were left for another time, perhaps 2008.

Or not. The commission met in Raleigh last week for a couple of hours before its chairman, Sen. David Hoyle, said he didn't expect the group to reconvene until after the general election Nov. 4. There was not a peep of protest.

Nor was there any surprise. It is, after all, an election year, and legislators have no stomach for a bruising fight over taxes. Every major effort at tax reform in North Carolina for the past decade has ended much this same way: with a lack of enthusiasm and a lack of leadership.

WASHINGTON

President Bush paid tribute to America's armed forces Saturday, calling Independence Day a time to thank the men and women who defend freedom.

"For more than two centuries, from the camps of Valley Forge to the mountains of Afghanistan, Americans have served and sacrificed for the principles of our founding," Bush said in his weekly radio address. "Today, a new generation of American patriots is defending our freedom against determined and ruthless enemies."

He said he believed that officials from Dole are waiting for Gov. Mike Easley to sign the bill that extends the William S. Lee Act, which provides tax credits for job creation in North Carolina. That act includes provisions that would apply to Dole if it locates in North Carolina.

Word of the probable decision comes after Dole owner David Murdock toured farms and blueberry and blackberry processing centers in eastern North Carolina on Monday with state Agriculture Commissioner Steve Troxler. Those businesses could end up as suppliers for a Dole plant, Troxler said.

"If you land something like this (plant), that actually starts at the farm level, the pyramid is actually very big in terms of what you do for the state," Troxler said. "It goes all the way through the economy to the consumer."

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"Democrats reach into the pockets of
North Carolina families to pay
for another reckless spending binge"