As state lawmakers in Raleigh wrestle with how to divide surplus tax revenues among sundry spending priorities, North Carolina voters are raising their hand to ask for some of their money back.
In a survey of 600 likely general election voters, conducted May 4-5, respondents were asked their perspective on projected tax revenue surpluses, and what they would prefer lawmakers do with the extra money when they come into the State’s tax coffers.
More than half (50.5%) of the voters surveyed said their reaction to state government having a revenue surplus is that “The state government is taxing too much.” A little more than a third (36.6%) thought the government should spend more on high priority items” when encountering a surplus in tax funds.
Tax reforms in North Carolina have brought income taxes down significantly over the last decade, while markedly raising the standard deduction. Further tax rate reductions are scheduled to take effect in coming years, but with multiple revenue surpluses over the last decade many taxpayers are wondering if they should keep more of their money now.
When asked what the state government should do when it has a surplus of revenue, a strong plurality (40.7%) said lawmakers should “pass a rule to return the money to taxpayers.”
The taxpayer sentiment isn’t falling on deaf ears. Republican legislative leaders revealed last week they are considering tax rebates as part of the short sessions budget modifications.
“We’re still looking at it, and I don’t think there’d be an interest in doing it unless the amount we could send out would be an amount that would make a difference – more than a half a tank of gas and stuff like that,” Berger told reporters last Thursday.
On Friday, the Office of State Budget and Management (OSMB) revised a previously released report projecting approximately $1.4 billion in surplus of the two year period. While income tax filing revenues fell short of original estimates, the Consensus Forecast Group (CFG) formed by OSBM and the Fiscal research Division of the NC General Assembly are still calling for revenues in excess of spending to the tune of nearly $1 billion.
There are other spending priorities for lawmakers to consider as well.
The Opportunity Scholarship Program exhausted its limited funding amid a surge in applicants for the universal school choice voucher program. Each voucher is worth between $3,360 and $7,468 a year, to go toward helping families with private school tuition, with the low-income and working-class households receiving first priority for funds. The expanded program received more than 72,000 applicants.
There are debt considerations, too. While North Carolina has maintained its AAA credit rating from the big three credit rating agencies, the taxpayers of the Tar Heel State still carry billions in medium and longer term debts. Total debt was much higher when Republicans took control of the General Assembly ($6.5 billion in 2012), but lawmakers have retired of 40% of total state debts in the last decade, and they may think it prudent to retire even more.
When it comes to the voters’ preference, tax rebates and policies to return surplus funds are not without precedent. Colorado amended its state constitution in 1992 to include a Taxpayer Bill of Rights (TABOR), in which the state government is obligated to return excess tax revenues to taxpayers and also must get voter approval before raising taxes. The state has returned more than $2 billion to taxpayers since its adoption.
North Carolina lawmakers already use one of TABOR’s guiding principles in trying to limit spending increases by tying it to the rate of population growth plus the rate of inflation.
Whether or not the push for taxpayer rebates remains viable should become clear in the coming weeks as lawmakers negotiate a balance of priorities within an adjusted budget plan. Examine more results from the latest Carolina Journal poll here.