Hertzberg’s Tax Proposal Lacks Transparency

PERSPECTIVE-State Senator Bob Hertzberg didn’t wait long after taking his oath of office to make a splash in the state’s  political scene. 

He introduced SB8 – the Upward Mobility Act.  The name is more of a euphemism than a meaningful title.   

Purportedly, his proposal is designed to stabilize the state’s tax revenue, a highly desirable goal. However, one would expect a somewhat revenue neutral effect from a plan marketed as a means to provide more steady and predictable income for the state. But Bob’s plan is designed to increase revenue by $10 billion per year. In other words, it is less a stabilization plan and more of a tax increase. 

It begs the question: what segments would be hit by the tax and for how much? 

Since it is a mixture of regressive sales taxes on most services and a general reduction in personal income tax rates, there will be a mixed bag of results.  Bob further muddied the water by saying the bill “examines the corporate tax structure to incentivize both business investment and the payment of a decent and reasonable minimum wage.” 

Examines? What meaning can one draw from a weasel word like that in the context of the subject? In this case, it implies a plug which will enable the state to increase revenue to $10 billion, or whatever level is ultimately targeted. 

In other words, SB8 is a very open-ended and unpredictable proposal from the taxpayers’ standpoint.

I hoped to get some answers from watching Conan Nolan’s interview of Hertzberg last Sunday on NBC. None were provided. Bob did not offer any explanation, but Nolan did not even bother to ask what groups would bear the brunt of the $10 billion increase.  

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Certainly, Bob must have the information at hand.  After all, when you toss out a number – especially a large amount – there is usually some math and logical assumptions behind it – maybe even a financial model in an Excel spreadsheet! 

The only thing our Senator has disclosed is how he would apply the money, which leads me to believe he has not got a clue as to how the tax increase will be apportioned, only that the tax structure will be manipulated in a manner to produce the desired revenue. 

Bob said a new structure is necessary to power a 21st Century economy. 

All well and good, but he defines that economy as based on the information and services sectors. They are very important drivers of future growth, but his dismissal of manufacturing’s importance is extremely shortsighted. Too bad, because although it has diminished, manufacturing accounts for 25% of the state’s economic activity while employing only 8% of the population. It would appear there is room to grow this very productive sector. And believe me, productivity equates to more taxable income.   

We need diversification to help create stabilization. Our dependence on the service sector is one of the problems we face today.  Many service jobs do not pay well and lack career paths.  

Manufacturing jobs are ideal for middle-class workers who lack advanced technical skills needed in the information sector, but who are adept at mastering production processes. No tax strategy should be formed without diversification in mind. 

Hertzberg wants input, but it would help if he were more transparent about the cost of SB8 to the taxpayers. He also needs to come clean and refer to it as a tax increase.

 

(Paul Hatfield is a CPA and former NC Valley Village board member and treasurer.  He blogs at Village to Village and contributes to CityWatch. He can be reached at: [email protected])

–cw

 

 

 

 

CityWatch

Vol 13 Issue 9

Pub: Jan 30, 2015