As you may have heard by now, Governor Pat McCrory announced this morning that North Carolina will see a $400 million budget surplus this year.
That’s because, in addition to reducing personal and corporate income taxes across-the-board, Republicans restructured the tax code itself — replacing the old progressive tax system with just one flat tax. They also eliminated a whole host of carve-outs and tax breaks for special interests in order to make the whole thing simpler and more fair for everyone.
This was the first year that these new changes went into effect and, by all accounts, the General Assembly’s conservative reforms are exceeding all expectations (despite the doom and gloom predictions from the Debbie Downers on the left).
Don Bryson, state director of Americans for Prosperity, put it nicely: “Today’s state revenue figures are a testament to the hard work of conservative lawmakers who tackled budget and tax reform in the 2011 and 2013 legislative sessions,” he said. “By first trimming fat out of the state budget, and then offering tax relief to struggling families and businesses while simplifying the revenue code to streamline commerce, Governor McCrory and state legislators removed barriers to prosperity for millions of citizens. By maintaining this proven approach to budget and tax reform, North Carolina’s leaders can forge a new era in state government where tax dollars belong to taxpayers and are reserved for the most essential public services.”
It’s big news — and it comes on the heels of yesterday’s announcement that our state has finally paid off its $2.75 billion debt to the federal government (rung up by the Democrats a few years back). And, we think that it’s even more remarkable given the fact that in 2011, Republicans inherited a $2.7 billion deficit on top of that — but which they also managed to completely eliminate by cutting wasteful spending and holding the line on taxes. And did we mention that North Carolina’s unemployment rate this year is at its lowest level since April 2008?
“The surplus this fiscal year is predominately the result of strong growth in business income,” —Dr. Barry Boardman, Chief Economist, North Carolina General Assembly
Not bad if you ask us — but let’s not forget about those old tax-and-spend Debbie Downers. Big-government liberals (many of the same ones who managed to dig us into the $6 billion hole in the first place and also the very same ones who liked to raise taxes on food, clothing, and other essentials) naturally blasted today’s news. They’ve been carping all morning with the same tired old class warfare canards — how all this good news somehow came at the expense of the poor and unemployed. But the non-partisan Fiscal Research staff begged to differ. “The surplus this fiscal year is predominately the result of strong growth in business income,” said Dr. Barry Boardman, the General Assembly’s chief economist.
Hundreds of thousands of new jobs, dramatically lower unemployment, reduced taxes, no deficit, no outstanding debt, and now a $400 million budget surplus. Even the weather is gorgeous. Conservative, common-sense reforms are working — and that’s good news for all of us. Unless you’re one of those Debbie Downers.
WWNC’s Pete Kaliner has a fun take over on his blog today:
NC budget surplus: Leftists hardest hit
Two announcements in the last 24 hours have done serious damage to the narrative being spun by the North Carolina progressive attack machine and its allies in the media.
First, the state has repaid its nearly $3 billion debt to the federal government. Governor Pat McCrory said NC businesses will save more than a quarter of a billion dollars in penalties this year alone. From the WTVD report:
“In February 2009, North Carolina started borrowing from the federal government to extend unemployment insurance benefits.”
The governor went on to sum up how the state found itself saddled with nearly $3 billion in debt and why paying it off matters. For starters, because each year the state didn’t pay off the debt, North Carolina businesses would end up paying incrementally more in taxes.
“What we were seeing in essence,” said Senate President Pro-Tem Phil Berger (R-Rockingham), “was that the debt to the federal government was a tax on jobs, pure and simple. It was a tax on jobs.”
Today, NC leftists are not too concerned about saving businesses money. This is in contrast to last month when progressives were touring the state lamenting the tax burden on businesses.
“Sure, you slash benefits dramatically, you’re going to pay the debt off faster,” said Rob Schofield with the liberal N.C. Justice Center. “If you don’t pay for your kid’s food and medicine, you could pay off your mortgage a little earlier.”
But research shows the richer and longer the unemployment benefits, the greater and longer unemployment will be.
They found that states that extended unemployment benefits experienced a drop in employment. Quantifiably, this means that a 1% rise in benefit duration for one quarter increases the unemployment rate exponentially, by e0.06, or 1.06%. Over the long run, this effect strengthens. If benefits are extended from 26 to 99 weeks, the long run average unemployment rate rises from 5% to 10.5%.
From the paper:
“Our estimates imply that most of the persistent increase in unemployment during the Great Recession can be accounted for by the unprecedented extensions of unemployment benefit eligibility.”
But perhaps worse for leftists, is the report out today showing the state with a $400 million surplus. It is due to the GOP’s tax reform plan that was fully implemented in 2014. The same plan that progressives predicted would lead to massive deficits.
The General Assembly Fiscal Research Division credits the surplus to “higher income tax payments and lower refunds from the 2014 tax year. The revised forecast envisions that solid employment gains will continue, improving the prospects for better income growth over the biennium.”
Leftists toured the state and performed faux news conferences, highlighting individuals who claimed their taxes went up under the GOP plan. Democratic lawmakers beat this drum, too.
I have addressed the economic illiteracy that this cynical campaign is relying upon and promulgating.
But look at this passage from the report:
Refunds declined an estimated fifty-seven percent: Tax law changes allowed for more accurate withholding tables, which reduced the refunds claimed by taxpayers. The 57 percent drop this year was much larger than the anticipated 35 percent reduction and resulted in an additional $375 million in Personal Income tax collections than projected in February. Looking over the last twenty-five years the drop-off in refunds was more than double the biggest year-over-year decline.
In other words, the state withheld less of our money throughout the year. Many people who usually get refunds did not and so they claimed they got hit with a tax increase. Democrats used this erroneous assessment to accuse the GOP of raising taxes. The media dutifully regurgitated it.
Senate President Pro Tem Phil Berger released the following statement:
Two years ago, when the Republican legislature passed the largest tax cut in state history, Chicken Littles on the left loudly cried North Carolina would lose so much tax revenue that students wouldn’t have teachers, roads wouldn’t be built and our universities might have to close.
“But far from starving state government, tax cuts and tax reform have spurred economic growth and job creation – a turnaround that has provided our state with a surplus that will allow us to continue cutting taxes while investing in core priorities like education, infrastructure and public safety.”
So how are Democrats taking all this news?
From the NCGOP:
This budget surplus is a sign of two things:
- The GOP-led tax reform package with the largest income tax cut in state history is working.
- The economy is improving because people are spending more money because they have more money in their pockets.
Only Democrats could try to spin a tax surplus from tax cuts is a result of a tax hike.
Because of this surplus, Democrats have to admit that the budget surplus is a sign that tax reform is working, AND the economy is improving. Even if they try to argue that tax reform is not working, (which is clearly not the case), they still have to admit that surplus is a sign that the economy is improving under GOP policies.
Don’t hold your breath.
Pete Kaliner is the cheeky and often hilarious host of The Pete Kaliner Show, which airs (pretty much) every weekday at 3pm on News Radio 570 WWNC from Asheville, North Carolina. You can also listen to his program online through iHeartRadio at this link. And be sure to follow Pete Kaliner on Twitter @PeteKaliner.