Tax Time, Election and NC in the Courts

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Hayek's Road to Serfdom Warns Against Govt. Plans

Recently I attended a very interesting meeting in Raleigh. It reminded me that no matter how broke the big spenders claim to be when calling for tax increases, they can always find money for a favorite cause.

The gentleman leading the meeting began by stating that he worked for Franklin Street Partners and had no financial interest in the biotech firms he would be describing. He then proceeded to describe several firms and paint a glowing picture of how biotech could provide good high-paying jobs for North Carolinians. It sounded good.

He was concerned that NC would lose out on those jobs because many firms that wanted to come to NC could not borrow to construct their facilities because lenders didn't think they were creditworthy. He proposed that Franklin Street Partners sell securities to raise funds to create a lending pool to loan money to new biotech firms.

Of course, people would be no more willing to buy those securities than banks were to lend money unless something could be done about the risk. He thought if the state would put up 50 to 150 million to fund a debt reserve to make payments if the borrowers defaulted, he could probably raise several hundred million dollars for loans. It was suggested that this was a great project for Golden Leaf.

Encouraging economic growth and providing jobs is certainly desirable. But is it desirable for government to favor one industry over another? Is it desirable to take money from the many to reduce the risk and increase the gain for a few? Is “equal justice” important or irrelevant?

Hayek warned, “Under central planning, the government cannot be impartial.” Clearly, picking one industry to favor is hardly impartial. Some say “The road to Hell is paved with good intentions.” Hayek said the same thing about the Road to Serfdom. Few plan to go there, but state planning that interferes with competition leads there.

Unfortunately, as Hayek observed, “We shall never prevent the abuse of power if we are not prepared to limit power in a way which occasionally may prevent its use for desirable purposes.” Will we heed his warning?

Tax Hike Time Again – And Again and Again and Again

Anyone paying attention to last year's budget could easily predict there would be pressure to raise taxes again this year. I predicted a two billion dollar deficit several months ago, and it is beginning to look pretty accurate.

What is new is the approach being taken this year. Usually the spenders start with protests that they don't want to raise taxes. They then produce a budget that cuts muscle rather than fat so that public outcry paves the way for the desired tax hikes. Only then do they advocate tax hikes.

Instead of following the usual script, Governor Easley has already announced that he wants legislation to halt the tax cuts that were promised and passed as partial offsets to last year's tax increases. If he gets his way, the state will grab roughly half a billion dollars more than would be the case without his requested changes.

I'll give the Governor credit for being more forthright than most of the tax hike crowd. I'll even admit he is between a rock and a hard place, because if he doesn't raise taxes he is going to have to address the level of spending. But an in-depth review of government spending is overdue.

For far too long, we've thrown money at problems rather than studying them and solving them. Average state employees can tell you horror story after horror story of inefficiency, redundancy and favoritism. Political friends do real well while the average worker fears for his pension.

Raising taxes may permit the continuation of this business as usual for a while, but the long-term effect of becoming noncompetitive is pretty predictable. As NC has raised taxes, we've lost jobs and lost tax revenues. The response has been to raise taxes. Not a good move.

Imagine a restaurant that is closed for some time due to flooding or some other disaster. When it reopens it can raise its prices to recover the lost revenue, but if it does it will lose customers to its competitors. If the owners aren't too smart and try to make up that revenue loss by raising prices again, they'll lose more customers and more revenue. Taxes are the prices a state charges.

Our current leaders would bankrupt a hotdog stand.

My Election As Whip - Anne Coulter's Explanation

As you probably know, rumors of my political demise were somewhat premature. When some of the media reported that I lost the general election to the long time sheriff of Union County by a two to one margin, they got the margin right but the winner wrong. When informed of their error they were quick to correct it, but I think they confused a few people on election night.

Of course, it was an entertaining election from day one. When I filed to run against Senator Plyler, who had chaired the Senate appropriations committee for years, many people thought I was crazy. But he didn't even run because (he told the Raleigh press) a poll showed he would lose even if he spent half a million dollars. In fact, he said no Democrat could beat me in District 35.

That may be part of the reason Democrats in Union County started a campaign to encourage Democrats to reregister as independents so they could vote in the Republican primary. Since there were four other strong candidates in the primary (two current county commissioners, one former commissioner, and an excellent candidate who strongly challenged Senator Plyler in the prior election), some thought they might eliminate me in the primary.

Fortunately the Charlotte Observer weighed in when they endorsed an opponent, called me ineffective, and cited as support a poll so biased that Republican legislators were told to boycott it, without (of course) mentioning its anti-Republican bias. Fortunately, most of the voters seemed to be aware of Anne Coulter's suggestion that “liberals are not the best source of information on the Republicans' strongest candidate,” and I pulled roughly as many votes as the other four candidates combined. In Union County, where all five were well known, I received over 5100 votes while the closest challenger received less than 1500.

Best of all, after being repeatedly attacked as “ineffective” both before the primary and again before the general election, the Senate Republican Caucus elected me Whip and named me co-chair of the caucus communications committee.

One of the reporters observed after the election that I was the only member of the Mecklenburg delegation elected to a leadership position that day in the House or Senate and they probably ought to report it. They did. They gave it one sentence, the very last sentence in a long story, buried well back in the paper. Oh well, at least it was positive.

NC's Losing Streak In Court Likely to Continue

Have you heard that lost court cases (intangibles, pensions, etc.) are one reason for our budget shortfall? Are you aware that the state just lost ten expensive redistricting cases in a row? Based on recent history, it looks like the chances of the legislative basketball team winning the Final Four might be just as good as the chances of NC winning a major lawsuit anytime soon.

You might think my comment ridiculous, but you need to realize I've been reading about the state's position on the Leandro case. Nothing could be as ridiculous as the state's claim that it has no responsibility for its failure to meet the constitutional mandate to provide a sound basic education for NC students.

In an unrelated case, local governments are suing the state because the governor seized funds that the legislature had promised local governments. The local governments claim that since the law said they were entitled to the funds, the governor had no right to them.

“Defending the state's use of local dollars to balance the state budget, Attorney Gen. Roy Cooper has argued that counties are merely creatures of the state and thus have no standing to sue.” I'm not sure he's right about their rights, but I do find it interesting that he considers them mere creatures of the state and completely subservient to it.

Because if those local governments are all mere branches of the state, how can the state avoid all responsibility for their action or inaction when it comes to education? North Carolina's Department of Public Instruction mandates a standard course of study, sets the standards for hiring teachers and controls their training, and runs the state testing program, yet they don't want to be held responsible for the predictable results of their actions. Nonsense.

Is there an attorney interested in filing an amicus brief pro bono? The state is headed down the wrong legal road again.


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