NC Spin recently tweeted a video called “What are your suggestions for further tax reform?” The question was posed to John Locke Foundation scholar Becki Gray, but I’ve decided to be shamelessly presumptuous and provide my own answer.
Focused on other issues, state-level Democrats for too long conceded tax reform to the Republicans. It was a huge mistake. Tax reform is to domestic policy what Physics is to science: The core around which everything else is built.
So when Republicans set about redrawing our tax system, all Democrats really had was a set of left-liberal platitudes on fairness and adequacy. We by and large didn’t offer detailed alternatives. And judging from Roy Cooper’s “Issues” site, we still aren’t. What follows doesn’t come close to constituting an actual tax plan, but I do hope these ideas may prove worthy of discussion.
First and foremost, we need to restore the progressive rate structure. Progressivity has distributional and economic benefits. By giving families an automatic tax cut when their incomes fall, a progressive tax code helps stabilize the economy without discretionary fiscal stimulus. Even as we scrap the flat tax, we shouldn’t try to go back to pre-existing rates, or chase the progressive dream of a New York/New Jersey-style “millionaire’s tax.” We live in a purple state that competes with red ones. Our tax rates should reflect those realities.
Sales tax expansion has been a red-hot issue, and we shouldn’t duck it. About a quarter of our revenue comes from sales taxes, and given the economy’s steady shift toward consumption there is an argument that they should account for more. But expansion of the sales tax cannot be used as a weapon to punish the “lucky duckies” whom Bob Rucho so resents. New sales taxes should be levied on affluent-preferred services like financial advice and–I’m not joking–water skiing lessons, and the rate must be lowered by a percentage point or two. That way, we’ll get a more balanced revenue stream and give much-needed relief to the poor.
Now we get to business taxes. The GOP’s radical corporate tax-changes must be frozen–now. Because the business lobby has already gotten its desired rate cuts, we can and should raise more corporate revenue by closing loopholes. Requiring “combined reporting” should be at the top of the list. We should also lift the ban on local privilege taxes, thus allowing cities to raise revenue without punishing the poor and/or seniors.
I’ll end with a somewhat outside-the-box proposal. We should significantly raise our alcohol taxes. An NIH study found that, when Illinois raised its liquor tax by 50% and its beer tax by 25%, alcohol-related fatalities fell by 26%. Illinois’ tax increase spared an even larger number of young lives–a 37% fatality-rate reduction. Urban progressives may disdain the aesthetics of this proposal, but higher booze taxes would raise revenue and save lives.
Alexander Jones is an original contributor to PoliticsNC.