Civitas ReviewThe Blog of the Civitas Institute

Jun

07

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The Tax Foundation puts out an outstanding annual ranking of state’s business tax climate – essentially an index comparing how economically competitive each state’s tax code is. As many of you already know, North Carolina ranks a dismal 7th worst in the current Tax Foundation Index – which helps explain our unemployment rate being stuck at fifth highest in the nation for several months now.

Today, the Tax Foundation writes a detailed summary and comparison of the NC Senate and House tax reform plans. If you aren’t already familiar with the bills, I highly recommend reading the article.

Of particular interest, however, is what impact the respective tax plans would have on North Carolina’s ranking in the business tax climate index. According to the article’s authors, both plans would improve North Carolina’s ranking by 25 slots or more, with the Senate plan boosting NC’s ranking to 13th best and the House plan to 19th best.

The article concludes with some further recommendations:

Ideally, the final piece of legislation will flatten and lower the individual income tax, lower the corporate income tax and franchise tax rates, significantly broaden income tax bases by closing costly tax expenditure programs, broaden the franchise tax base to include all companies with limited liability, and expand the sales tax to include services without causing tax pyramiding.

 

 

Jun

06

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One of the oft-cited criticisms of the NC Senate’s tax reform plan is that it would extend the state sales tax to groceries. Observers may be interested, however, in learning more about North Carolina’s history with taxing food purchases.

North Carolina first enacted a sales tax in 1933, it was promised to be “temporary.”  The rate was 3%. Food for consumption was exempted.

In 1961, the food exemption was repealed, subjecting groceries to the 3% state sales tax.

In 1971, the state authorized an additional 1 cent local sales tax for counties, adding to the total sales tax paid by consumers, including groceries.

The state authorized an additional one-half cent local sales tax in both 1983 and 1985, bringing total local sales taxes to 2%, and combined state/local sales tax to be paid by consumers to 5%, including groceries.

In 1985, North Carolina passed a law exempting the purchase of food with food stamps from the sales tax, this exemption would also apply to the local sales tax on groceries.

In 1991, North Carolina increased the state sales tax rate from 3% to 4%.

In 1996, the state passed a law to reduce the state sales tax rate on food from the standard rate of 4% down to 3%, effective Jan. 1, 1997.

The following year, state lawmakers passed another law lowering the state sales tax on food to 2%.

In the next year (1999), legislators eliminated the remaining state sales tax on food.

In sum, North Carolina has applied a sales tax on food since 1961.

• From 1961 to 1971, the rate was 3%, and it crept up to 5% by 1985. Remained at 5% until 1991.
• The rate topped out at a combined state/local rate of 6% from 1991 to 1996.
• From 1996 to 1999, the state sales tax on food was phased out.
• From 1999, the state no longer applied the state sales tax rate on food; however the local rate of 2% remained.
• Food purchased with food stamps was liable for the sales tax up until 1985.

Currently, food consumers pay the local 2% sales tax on most groceries, and the full 6.75% combined state/local rate on certain items including candy, soda, “prepared foods”* and dietary supplements. Food purchased with food stamps is exempt from both the state and local sales tax. North Carolina has 1.7 million food stamp recipients.

*Prepared food is defined as follows: Food that meets at least one of the conditions of this subdivision. Prepared food does not include food the retailer sliced, repackaged, or pasteurized but did not heat, mix, or sell with eating utensils.

a.         It is sold in a heated state or it is heated by the retailer.

b.         It consists of two or more foods mixed or combined by the retailer for sale as a single item. This sub‑subdivision does not include foods containing raw eggs, fish, meat, or poultry that require cooking by the consumer as recommended by the Food and Drug Administration to prevent food borne illnesses.

c.         It is sold with eating utensils provided by the retailer, such as plates, knives, forks, spoons, glasses, cups, napkins, and straws.

Jun

05

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 In expressing her dismay over the growing public opposition to Common Core Standards, State Superintendent of Public Instruction June Atkinson said some people want to believe myths about Common Core Standards.  “How can people argue against teaching North Carolina students to read, write, speak and listen?” Atkinson said. “How could that be of the devil?

I like you June, but were Common Core only about “teaching students to read, write speak and listen”  you wouldn’t be reading this. The growing rebellion against Common Core was started by critics who dispute the claim that they are academically superior to existing standards. Some academics, contend the standards are actually worse.  Understandably, parents are concerned as to why we continue to implement Common Core Standards when there are so many unanswered question and so much evidence that Common Core Standards are indeed not an improvement over existing standards.

Atkinson also claims Common Core is not a federal takeover of public schools in North Carolina. According to Atkinson, people who say so are “lying”. It s hard to ignore the massive federal footprint on Common Core. Does the Superintendent know that the federal government has doled out millions in Race-to-the-Top and Stimulus funds. It has also provided millions in support to the National Governor’s Association, the Council of Chief State School Officers;the two groups that helped to develop Common Core Standards?  Does the Superintendent know the federal government is spending $360 million to develop assessments for two consortia to ensure that national tests align to Common Core Standards?

Common Core proponents say states “voluntarily” adopted standards. In reality, they did so to be eligible to compete for  federal Race-to- the-Top funding. To have a chance at the money, cash-starved states had to agree to adopt Common Core Standards and the aligned tests, without ever having seen them. The Obama administration also tied No Child Left Behind waivers to the adoption of Common Core Standards by the states.

Proponents of Common Core say states –  not the feds — will control standards and will choose their own curriculum.  Let’s step back and remember: the point of standards is to drive curriculum.  If you have the same standards, the curriculum will pretty much be the same. The testing consortia funded by the feds admitted in the grant application that they would use grant money to develop curriculum models.

Does anyone believe the feds are going to invest millions to develop standards, assessments and data collection and then somehow magically give over control of those efforts to the states? Someone isn’t telling the whole story.

Jun

05

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Yesterday the House Finance Committee approved the House’s version of tax reform, the legislation may move to a vote of the full House as early as tomorrow.

The N&O provides the details of the House tax plan in this article.

Of interest are three amendments that were proposed during the committee meeting, two of which were rejected and one that was approved. The approved amendment was one to remove a $25,000 cap on itemized deductions for mortgage interest, charitable deductions and property taxes paid. Removing the cap and allowing for the larger itemized deductions is estimated to reduce tax revenue by roughly $500 million – presumably over the next five years.

The two amendments that were defeated include one that would keep the top marginal personal income tax rate of 7.75% to kick in on income above $1 million; along with an amendment to end the state’s controversial film tax credit this year rather than the already-scheduled sunset date of 2014.

Overall, the House’s tax plan is projected to reduce the state’s tax burden by about $1.5 billion over the next five years compared to what the current tax code is projected to collect over that time.

Click here for a detailed summary of the House tax plan.

Click here for a chart detailing the fiscal impact of the House plan’s provisions, less the impact of the approved amendment.

1

Jun

04

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Today Lieutenant Governor Dan Forest,  released the following video on why he is against Common Core.  His remarks raise important questions and hopefully spur other public officials to look closely at the many problems associated with Common Core. Congrats to the Lt. Gov. for his leadership on a very important issue.

Want to know more about why we oppose Common Core Standards?