The Real Truth on Tax Hikes: Liberals Imposed Massive Tax Hikes for Decades, Conservatives Are Cutting Taxes at Historical Rates

• Radical leftists are manufacturing fake concern over the tax burden facing some North Carolinians
• This is laughable given the fact that taxes have been significantly cut over the last five years
• These same liberals expressed no concern while Democrats dramatically hiked taxes for three decades

Desperation can cause people to do odd things. Take, for example, left-wing groups such as Progress North Carolina now pretending to be concerned about the tax burden on North Carolinians.

For decades, while North Carolina imposed among the highest income tax rates in the nation, liberal progressives never made a peep of concern about state taxes taking a bite out of household budgets. Indeed, dozens of tax hikes were passed by Democrat majorities to fund the massive expansion of state government that liberals demanded.

And make no mistake, these weren’t tax hikes on “the rich,” but ranged from tax increases on everything from general retail sales, to cigarettes, to gas, to alcohol, to movie admissions, to insurance and to your phone bill.

In this context, the radical left-wing group Progress North Carolina just kicked off its “Tax Hike Truth Tour” in Raleigh. Is the group finally going to educate people on the decades of actual tax hikes approved under Democratic leadership these last few decades? Of course not.

The events focus on recent tax reforms that actually reduced tax rates on all levels of income, along with corporate income taxes, that have resulted in huge net tax cuts for North Carolina’s economy.

Amazingly, in the upside down world of Progress NC, it is in the wake of some of the largest tax cuts in state history they decide to show faux concern over “average folks” who are “feeling the pain from tax hikes on the middle class.”

Progress NC also now pretends to be concerned about people paying more in sales taxes, and suddenly feels the urge to “stand with average North Carolinians who are paying more thanks to the decisions by the legislature in Raleigh.”

Timing is everything, the saying goes, and this Tax Tour seems to be coming about 30 years too late to be taken seriously.

The real truth on taxes is that the last handful of years have seen historic tax cuts, which have spurred job growth and improved economic opportunity for the most-needy North Carolinians.

The beginning of this recent spate of historic tax relief can be traced back to 2011, when the Republican-led legislature successfully fought against then-Governor Bev Perdue’s plan to extend ¾ of a temporary 1-cent statewide sales tax hike. Preventing this tax hike saved North Carolinians upward of $800 million per year.

Of course, liberals at the time sided with Perdue and fully supported forcing North Carolina families to pay nearly a billion dollars more every year in sales tax. So much for their fake concern over the impact of the “regressive” sales tax.

Then in 2013, North Carolina passed arguably the largest tax cut in the state’s history. Income taxes on all income levels were reduced, and corporate tax rates were also cut in order to attract more jobs and investment. The reforms were projected to amount to a net tax cut of $2.4 billion over their first five years of implementation alone.

Add to that the unemployment insurance reforms passed in 2013, which enabled North Carolina to pay back roughly $2.5 billion in debt to the federal government far earlier than the original payback plan. The early repayment has resulted in major tax relief for employers, and some estimates say this relief will generate a total of $2.5 billion in tax savings for job creators over four years, including $240 million in 2016 alone.

The results of all this tax cutting have been impressive. Since mid-2013, job growth in North Carolina has outpaced national job growth by a wide margin (6.2% to 5.1%). The Tar Heel State’s job creation has also outperformed our regional neighbors during that time. Moreover, our state’s economy has grown more rapidly than the national and regional averages, climbing by 3.2 percent compared to the national average of 2.5 percent and regional 2.4 percent rate.

And the state legislature delivered more tax cuts last year; dropping the income tax rate further while raising the standard deduction for all taxpayers, and ensuring the corporate tax rate continues to fall. The sales tax base was broadened slightly to include some services in order to better reflect the modern economy. On net, these tax changes are projected to save taxpayers nearly another $400 million over the biennium.

The irony and hypocrisy of left-wing groups manufacturing fake outrage about non-existent tax hikes during a time of unprecedented tax cutting is thick.

Compare the record of tax reforms over the last five years with the litany of actual tax hikes over the previous few decades, and the contrast is incredibly stark.

For instance, between 1991 and 2009, the state sales tax nearly doubled from 3 percent to a high of 5.75 percent. Adding on local sales taxes, most North Carolina families were paying a 7.75 percent sales tax on purchases.

Liberals condemn the sales tax as “regressive” and harmful to low-income households disproportionately. So why no left-wing “tax hike truth” tours  in 1991, 2001, 2003, 2005, 2007 or 2009; all years in which the sales tax was increased?

And that’s not all. Below is just a partial list of tax hikes enacted by liberal state leaders from 1985 to 2010 that garnered nary an objection from the “tax hike truth” crowd:

• Authorized local governments to add another 0.5% to sales tax – 1986
• Increased state gas tax by 2 cents per gallon plus a new 3% sales tax on wholesale price of gas – 1986
• Increased corporate tax rate from 6% to 7% – 1987
• Raised excise tax on liquor from 22.5% to 28% – 1987
• Increased state sales tax rate from 3% to 4% – 1991
• Raised tax on insurance premiums from 1.75% to 1.9% – 1991
• Increased corporate tax rate from 7% to 7.75% and levied an additional surtax from ’91 to ’94 – 1991
• Added a 7.75% personal income tax rate for income above $100,000 – 1991
• Motor fuels tax increased by ½ cent – 1991
• Increased cigarette tax from 2 cents per pack to 5 cents, levied a 2% tax on wholesale price of other tobacco products – 1991
• Imposed a 1% gross receipts tax on movie admissions – 1998
• Increased state sales tax rate from 4% to 4.5% (supposed to expire in 2003) – 2001
• Created an 8.25% personal income tax bracket for highest income households (supposed to expire in 2003) – 2001
• Imposed 5% sales tax on satellite television service – 2001
• Renewed the “temporary” 4.5% state sales tax rate – 2003
• Renewed the “temporary” 8.25% income tax rate – 2003
• Increased tax on telecommunications from 6% to 7% – 2005
• Increased sales tax on liquor from 6% to 7% – 2005
• Increased cigarette tax from 5 cents per pack to 35 cents – 2005
• Extended the 8.25% income tax rate for another 2 years – 2005
• Increased tax on home satellite services from 5% to 7% – 2005
• Renewed (again) the “temporary” 4.5% state sales tax rate – 2005
• Made permanent ¼ penny of the 2001 “temporary” state sales tax increase – 2007
• Increased state sales tax rate from 4.75% to 5.75% (also in 2009 as part of the “Medicaid swap,” 0.5% of the local sales tax was shifted to the state) – 2009
• Changed the state gas tax cap to a floor, ensuring higher gas tax – 2009
• New sales tax on online click-through sales and digital products – 2009
• Increased taxes on beer, wine and liquor – 2009
• Increased tax on cigarettes and tobacco products – 2009
• Created a “temporary” 3% surcharge on tax bill for corporate income taxes – 2009
• Created a “temporary” surcharge beginning at 2% for personal incomes over $60K – 2009

 

For a comprehensive overview of North Carolina budget & tax issues over the past 30 years, check out “Unlocking the State Budget,” a part of the Civitas Institute’s public policy guide series.