Flexibility – not fixed formulas – key to healthy state budgeting

Any family on a fixed budget understands the tradeoffs when balancing a checking account each month. An unexpected home repair may mean cutting the cable or dining in instead of out. It may also mean renting a Red Box instead of a trip to the Cineplex. So when it comes to responsible state budgeting, lawmakers also need some flexibility.

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But there is a tax “gimmick” that is quickly moving through the North Carolina legislature with little thought and even less public debate. The so-called “Taxpayer Bill of Rights” (TABOR) would permanently cap state income tax tying the hands of state lawmakers greatly impacting the state’s ability to pay its bills and borrow money when needed.

According to the North Carolina Budget and Tax Center, a TABOR formula would likely cause an additional expansion in the sales tax and may force local governments to increase property taxes.

State revenues constantly rise and fall. But as North Carolina’s population grows, the need for quality education, investing in roads, bridges and infrastructure, or paying public safety officials who keep our highways and communities safe will only grow.

So what happens to communities when there are state budget shortfalls? In Illinois, a proposed city of Joliet budget would hike property taxes, borrow money from reserves to cover a deficit, close a fire station, and not include enough money to pay for rusting police cars.

Being in the red in the Bluegrass state this year has forced Kentucky to propose cuts in spending on universities, regulatory agencies, parks, public television, workplace safety, public health, environmental quality and economic development.

South Dakota was forced to consider a sales tax increase to cover their revenue shortfall. Louisiana’s deficit is calling for the elimination of important federal tax deductions. The list goes on and on.

According to Institute on Taxation and Economic Policy, what we are seeing are “tax shifts in all shapes and sizes.” But when it comes to older adults who rely on stability of family budgeting, these shifts can crack the foundation of their retirement security.

One only has to talk to someone who relocated here from New Jersey about the impact of increased property taxes. Stability of home ownership was a nest egg that cracked when skyrocketing property taxes made staying in their communities unsustainable.

For the majority of retirees, earning days are over. Older adults in the states that are forced to shift taxes to sales, services, gasoline, utilities and other sources, are pinched much harder.

When it comes to taxes and economic policy, we need flexibility in both good times and bad. Let’s carefully deliberate the merits of tax proposals by inviting public input and learning the important lessons that other states can teach us to strike a balance between what is fair and what is responsible to sustain the state’s solid economic growth.

TELL YOUR ELECTED STATE LEADERS THAT TABOR IS A TAX SHIFT THAT OLDER ADULTS SIMPLY CAN'T AFFORD