WSJ: Republicans Have the Right Ideas on Taxes

Winston-Salem Journal
Editorial
December 11, 2009

Legislative Republicans have some ideas about state tax reform that warrant serious consideration.

A legislative commission is studying how to align state taxes with the 21st-century economy. The current system is based on the pre-World War II economy, with adjustments made in intervening decades.

The central reform would be a broadening of the sales-tax base. Today, sales tax is charged almost entirely on goods. Much of today’s economy, however, involves the sale of services — services as diverse as legal advice or a home-cleaning visit. To tax the entire economy, therefore, the state would have to expand into the taxing of services.

Republican legislative leaders say they support modernization. But they fear that “reform” will become another word for “tax increase.” Over the past decade, the Democrats who have urged reform have repeatedly promised to make it revenue neutral. By broadening the taxable base of economic transactions, the state should also be able to reduce the sales-tax rate. The current combined local and state sales tax is 7.75 percent in 91 counties and higher elsewhere.

The Republicans suggest two major options.

They propose a constitutional amendment to limit the state sales tax to 3 percent and local sales taxes to another 3 percent.

Or they want the constitution to require a two-thirds legislative vote to raise taxes. …

The state constitution already says quite a bit about taxes and tax legislation. So, putting a limit on the total rate does not break new ground. …

Republican legislators have a good ancillary idea, too. They want tax bills stripped from the budget and voted on separately. This should make it politically more difficult to both raise taxes and pass tax breaks for special interests.

Legislative Democrats rarely heed the ideas of their political opponents, but in this case they should. There are two good ideas in this package.

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