North Carolina is leading by example with conservative budgeting

​At $6 trillion, President Joe Biden’s first budget calls for an unprecedented level of federal spending. Republican members of Congress who criticize the president’s plan are understandably reminded by Democrats that the GOP did not do much to resist—and even contributed to—excessive government spending during President Donald Trump’s time in office. During those four years, rampant spending led to nearly $8 trillion in more federal debt, though this included pandemic-related funding approved with bipartisan support. Still, this represents a 40% jump in mortgaging the future of ourselves, our kids, and our grandkids. It’s time for responsible budgeting at every level of government.

Republicans in Washington don’t have much of a leg to stand on when it comes to criticizing the profligacy of congressional Democrats and the Biden administration. But Republicans in many state capitals across the country, however, do. That’s because Republican governors and lawmakers in several states are getting government spending under control by passing conservative budgets which remain below population growth plus inflation. North Carolina is among the most prominent examples of this phenomenon—but is not the only one.

Since Republicans took control of the North Carolina General Assembly for the first time in a century a decade ago, they have kept growth in state spending on a conservative budget trajectory that keeps government growth within the average taxpayer’s ability to fund it. Since 2013, North Carolina state spending has grown by an average of 2.24% annually, which is below the population growth plus inflation rate of 2.58%.

By keeping the rise in state spending below a conservative budget limit for so many years, North Carolina lawmakers have been able to return billions of dollars to taxpayers over the past decade while realizing repeated budget surpluses. The income tax rate reduction approved nearly a decade ago continues to pay dividends for taxpayers and it may soon be improved upon. North Carolina lawmakers — led by Republican Senators Paul Newton, Bill Rabon, and Warren Daniel — proposed new legislation in April, which was approved with bipartisan support in the North Carolina Senate on June 9, that would enact the next round of income tax rate reduction.

“We have large cash reserves and we have yet another budget surplus for the sixth and seventh years,” Senator Paul Newton, Finance Committee Co-Chairman, said at a May 25 press conference. “The Republican philosophy, when government takes too much money from the people, is to give it back in the form of tax relief. In our view, it’s never, never the government’s money, it’s the people’s money. So we are proposing yet another tax cut because we believe people spend their money better than government does.”

By continuing to pass conservative budgets, North Carolina lawmakers have made the Tar Heel State one where lawmakers are leading by example, demonstrating for federal lawmakers that government spending restraint is both achievable and politically advantageous. Other states where lawmakers are also passing conservative budgets include Tennessee, Texas, Florida, Montana, and Iowa.

In neighboring Tennessee, lawmakers needed to make sure their new budget, enacted earlier this spring, stayed below $42.8 billion so as to pass a conservative budget. The new state budget signed into law by Governor Bill Lee (R) spends a total of $42.6 billion. By only increasing the state budget by 2.08% year over year, Tennessee lawmakers, like their counterparts in North Carolina and other states, have made sure that state spending does not exceed the average taxpayer’s ability to pay for it, thereby mitigating the threat of future tax increases or budget adjustments.

Tennessee isn’t the only no-income-tax state where lawmakers are doing of good job of keeping government spending in check. Texas is also leading by example. Not only have Texas lawmakers once again approved a new conservative budget, they used the 2021 session to approve legislation, Senate Bill 1336, that will strengthen the state’s spending cap, ensuring fiscal responsibility for years to come. Likewise, a constitutional amendment introduced by North Carolina legislators in April, referred to as the Taxpayer Bill of Rights, if enacted, would implement a similar state spending limit in North Carolina.

North Carolina lawmakers are now working to enact a new conservative budget that provides further tax relief. Those who want to continue the sustainable budgeting of recent years received good news in early June as legislative leaders from both chambers of the General Assembly announced a consensus spending figure that, if the new budget does not exceed it, would have state spending continue to grow slower than the combined rate of population growth plus inflation. More recently, the North Carolina Senate unveiled its version of the budget, which, in addition to spending less than the figure agreed to with the House in early June, cuts the personal income tax rate from 5.25% to 3.99% while phasing out the corporate income tax by 2028. That budget was approved with a bipartisan, veto-proof majority in the North Carolina Senate on June 24.

“We are pleased to see that the fiscal restraint the General Assembly has shown over the last ten years will continue,” said Brian Balfour, senior vice president of research at the John Locke Foundation, a Raleigh-based think tank. “It’s a strategy we would like to see added to the state constitution in the Taxpayer Bill of Rights.”

Based on federal spending trends and the new proposals coming out of Congress, it may seem like no one in Washington is interested in reining in the growth of government spending and ballooning federal debt. Yet lawmakers in states across the country, including North Carolina, Tennessee, and Texas, the world’s ninth-largest economy, are showing that government spending can be brought under control. There needs to be more lawmakers willing to do so.

North Carolinians are fortunate to have leadership in the General Assembly with such courage and will, who are showing the nation what conservative budgeting looks like. In doing so, they are benefitting North Carolina taxpayers while providing a model for lawmakers in other states and in Washington to emulate.

Patrick Gleason is vice president of Americans for Tax Reform, a taxpayer advocacy organization founded in 1985 at the request of President Ronald Reagan, and is a senior fellow at the Beacon Center of Tennessee, a Nashville-based think tank. Vance Ginn, Ph.D., is chief economist at the Texas Public Policy Foundation based in Austin, Texas, and he is the former chief economist of the White House’s Office of Management and Budget during the Trump administration.

https://www.texaspolicy.com/north-carolina-is-leading-by-example-with-conservative-budgeting/