• 45°

John Hood: We were never in Kansas

Hood

John Locke Foundation chairman John Hood is the author of “Catalyst: Jim Martin and the Rise of North Carolina Republicans.”

John Locke Foundation chairman John Hood is the author of “Catalyst: Jim Martin and the Rise of North Carolina Republicans.”

RALEIGH — As the general election campaign begins in North Carolina, you can expect to hear a lot about Kansas.

Several years ago, Kansas and North Carolina each began a series of tax reforms and reductions. Because both sets of policies were championed by many conservatives and savaged by many liberals, they came to be associated with each other by national reporters and policy analysts. In reality, however, the two states made markedly different choices.

A couple of months ago, the Kansas legislature was forced to fill a large hole in its state budget by delaying a contribution to its pension fund as well as cutting its school, university, and road budgets across the board.

Here in North Carolina, the latest estimates (through May 31) show our state’s General Fund budget running an operating surplus for the current fiscal year of $1.2 billion.

This hefty surplus for the first 11 months of the fiscal year, combined with leftover money from last year and healthy revenue projections for next year, should explain why Gov. Pat McCrory and the legislature will soon enact a state budget that raises teacher pay substantially, boosts pay for some state employees, funds other services, saves money for a rainy day, and provides another round of tax relief.

How did Kansas and North Carolina end up in such different conditions? For one thing, while the two states both enacted major tax cuts, they weren’t structured the same way. Kansas punched a large hole in its income-tax base by excluding self-employment income. North Carolina briefly created a version of this exclusion in the immediate aftermath of the Great Recession, but then wisely eliminated it.

In Kansas, lawmakers also allowed themselves to be bamboozled by some out-of-state tax “experts” claiming that cutting income taxes would generate so much new investment, entrepreneurship, and population growth that the revenue loss to the state would be substantially offset. This can actually be true in the very long run, counted in decades. In the short run of state budgeting, however, policymakers are better off making far more conservative assumptions.

North Carolina policymakers didn’t just reduce and reform taxes. They also controlled expenditures. Since the enactment of the 2013 tax changes, their authorized budgets have never pushed spending growth above the combined rates of inflation and population growth. Actual spending, in fact, has often come in below even these budgeted amounts. Look at the first 11 months of this year. Most of the operating surplus comes from lower-than-expected spending ($1 billion), not higher-than-expected revenues ($224 million).

The real difference here was one of strategy. It’s clearly better to set conservative goals and then be pleasantly surprised, rather than let rosy scenarios lead to unpleasant shocks.

Liberals in our state can (and will) say that North Carolina should have kept taxes higher to fund more government spending. Conservatives obviously disagree. But what liberals can’t say now — even though they predicted it in 2013 — is that North Carolina’s tax reforms have created a fiscal crisis. Our operating budget and savings reserve are both in good shape.

“I’ve a feeling we’re not in Kansas anymore,” Dorothy told Toto. When it comes to state fiscal policy, North Carolina never was.

John Hood is the author of “Catalyst: Jim Martin and the Rise of North Carolina Republicans.”

Comments

Crime

Two more charged for operating illegal gambling businesses

Education

A.L. Brown celebrates seniors with signing day

Business

Rebounding, but not recovered: Rowan County tourism begins challenging path toward normalcy

High School

High school baseball: Padgett leads Mustangs; 100th win for West coach Graham

Coronavirus

RSS superintendent, Board of Health discuss strategies for increasing student vaccination rates

Nation/World

Gas stations report shortages as pipeline shutdown drags on

News

Lawyers: Black man didn’t drive into deputies who shot him

Nation/World

Liz Cheney says Trump and GOP backers threaten democracy

Coronavirus

Rowan Health Department clarifies county’s COVID-19 death total is 301

Landis

Landis approves new land development ordinance, zoning map

Landis

Landis approves body camera, stun gun purchase for public safety officers

Crime

One charged, another dead on sheriff’s most wanted list

Crime

No injuries after car shot eight times on Old Concord Road

Education

RSS talks first steps for new federal relief totaling $66 million

China Grove

Gary’s Barbecue staff, customers look back at 50 years

News

Salisbury Lions Club names Person of the Year, Lion of the Year at 78th annual banquet

Education

Student COVID-19 numbers show first decline since plan A

High School

High school golf: Fowler competes in state tournament

News

Amazon announces new distribution center for North Carolina

News

House passes bill to bar Cooper from mandating COVID shot

Coronavirus

Rowan County sees death 302 from COVID-19; Health Department to host final mass vaccine clinic

Ask Us

Ask Us: What happened to work on South Fulton Street home?

Crime

Blotter: Woman says she was shot in hand on Lincolnton Road

Crime

Rowan Sheriff’s Office charges Salisbury man with operating illegal gambling business