Tax hike not in beholder’s eye

First Posted: 4/7/2015

RALEIGH — Yes, the Republican-led General Assembly has voted for and Gov. Pat McCrory has signed into law an effective increase in North Carolina’s gasoline tax. Let’s not pretend otherwise.

A real 1.5-cent cut in the tax rate on April 1 will lead to cost savings for consumers at North Carolina gas pumps between now and the end of June. GOP lawmakers are correct when they say they have cut the gas tax.

But the 36-cents-per-gallon tax rate that will be in effect July 1 is more than 6 cents higher than the tax rate that would have been in place on that date if lawmakers and the governor had done nothing.

That’s a tax increase.

One could devote the rest of this column to ranting about Republicans. It might prove more productive, though, to focus on one piece of the recent gas tax debate that has attracted less attention than the focus on whether the new tax rate represents a “cut” or a “hike.”

While the Republicans who run the General Assembly have attracted most of the attention, some legislative Democrats deserve recognition. They’ve undergone a conversion that could be compared to Saul’s famous vision while traveling on the road to Damascus.

For instance, Rep. Paul Luebke, D-Durham, repeatedly chided Republicans during the gas tax debate. “Once again House Republicans are determined to raise taxes on hardworking, middle-class families,” Luebke wrote in an email quoted by The Asheville Citizen-Times. “Shockingly, Republicans think consumers should pay more at the pump.”

It’s clear from other media reports that Luebke understood the significance of the gas tax changes. “Those consumers will pay 6 cents more a gallon for gasoline than they would otherwise without this bill,” Luebke told House Finance Committee members during a debate. “There’s a 6-cent tax increase for the consumer at the pump.”

The importance of this statement from a leading Democratic legislator should not fade away as the General Assembly moves on to other rhetorical battles.

Luebke, who chaired the powerful Finance Committee when Democrats last controlled the N.C. House, admits now that taxpayers face a rate increase when legislators vote to put in place a new tax rate that’s higher than the rate that would take effect without any legislative action at all.

It’s an interesting admission given Luebke’s role, along with other Democrats, in trying to pull off the exact same type of maneuver with the state sales tax in 2011.

For those who don’t remember, then-Gov. Beverly Perdue, a Democrat, faced that year a new General Assembly controlled by Republicans. She also faced the prospect of losing state revenue tied to temporary income and sales taxes that were set to expire.

While Perdue was willing to let the income tax expire as scheduled, she wanted to preserve 0.75 cents of the 1-cent temporary sales tax. She even pitched the plan as a tax “cut,” since the sales tax rate would have dropped on July 1, 2011, by one-quarter of a cent. Had the idea won favor, it would have generated an estimated $826 million for the state government’s General Fund.

At the time, Republicans weren’t buying Perdue’s tax “cut” story. “The governor would take $800 million out of the pockets of North Carolinians in order to balance this budget,” Senate leader Phil Berger, R-Rockingham, said in response to the release of Perdue’s initial budget plan.

Where were legislative Democrats during this debate? Did they recognize, along with Berger and his Republican colleagues, that government imposes a tax hike when it adopts a rate that’s higher than the rate that would have been in place with no legislative action? Did Luebke say, “Shockingly, Bev Perdue thinks consumers should pay more every time they purchase an item that’s subject to the sales tax”?

No. As the News & Observer reported at the time, “Democratic legislators and public-interest groups praised Perdue,” citing her proposals to spend more money on mental health and public school teachers.

While a handful of House Democrats, Luebke not included, broke from their caucus to support a Republican alternative to Perdue’s budget plan, most stood with the governor and criticized Republicans for being unwilling to accept the higher sales tax rate.

By refusing to accept that argument, Republicans moved forward with a sales tax cut that will generate this year an estimated $202 million in annual savings for North Carolina households earning less than $50,000 a year, and nearly $400 million for those earning up to $100,000. That cut moved forward despite legislative Democrats’ determination to raise taxes on “hardworking, middle-class families.”

One could devote another column to the merits or demerits of the Republicans’ gas tax plan. But at this point, it’s nice to be able to praise some of their Democratic colleagues for seeing the light. A tax hike is a tax hike — even when those in charge pretend that it’s not.

Mitch Kokai is an associate editor of Carolina Journal.