At around $4 billion, the state's budget deficit is about 20 percent of the total budget, but I was told this week that rumors circulating in Raleigh say the deficit could surge to $6 billion. There seems to be no end in sight. If the deficit grows to $6 billion, about 30 percent, the pain will be unbearable.
It should come as no surprise that tax increases are being proposed to close at least some of the budget gap. You might even wonder whether the severity of the budget cuts in human services were intended to pave the way for tax hikes. It wouldn't be the first time: In Washington, it's called the Washington Monument syndrome. If cuts are suggested to the federal budget, someone says, well, we'll just have to shut down the Washington Monument. Oh no! We can't do that! We'll raise taxes instead.
A $4 billion spending cut would reduce the state's budget to its size four years ago. And while some cuts would be painful, they should not be unbearable, if they are spread evenly throughout the budget (no sacred cows, not even prisons or public schools). North Carolina's spending has grown out of control over the past couple of decades. A pause would do the state good.
Some cuts would be relatively painless. The N&O today highlights a costly state policy that requires the state to pay for expensive drugs when cheaper generics are available. When you're trying to close a $4 billion (or $6 billion) gap, it takes a lot of cuts like that.
If more revenue is necessary to avoid unconscionable cuts, legislators should look toward expanding the sales tax to such untaxed services as lawn care, accounting, legal fees, advertising, etc. and cutting the sales tax rate. "Modernizing" the tax system has been bandied about for years without any action. Maybe now is the time. And beware "temporary" tax increases. As we've seen before, these "temporary" taxes have nine lives.
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