Republicans who run the NC General Assembly are following the same sober and mature approach toward spending North Carolinians’ tax money as our 30th president, Calvin Coolidge, did in Washington from 1923-1928.
We should be grateful.
North Carolina currently has close to $4.13 billion in so-called “over-collections” coming into state coffers which are surplus tax revenues expected due to stronger than expected economic growth during the COVID pandemic. When the state budget was vetoed, budgets reverted to prior year’s levels which contributed to the buildup of unrestricted reserve funds as well.
When combined with over $1 billion in the “rainy day fund,” North Carolina is in far better economic and fiscal health than many other states that have not been run as efficiently, despite the economic dislocations caused by the COVID pandemic.
The formula for success in North Carolina led by Republicans who have controlled the NCGA since 2011 closely follows the blueprint laid out by President Coolidge, who was elevated to the presidency when Warren G. Harding died of a heart attack. He followed his flinty New England inclinations and implemented traditional Republican principles that have been sadly forgotten in Washington and in big blue states around the nation.
Coolidge’s formula for success was simple: cut out wasteful and redundant spending first and then cut taxes second, which no Republican has done in Washington since 2001. His parsimonious approach to government is not even in the same planetary system as the Biden/Socialist Democrat plan to exponentially increase spending, raise taxes and debt at the same time, which is the biggest crapshoot America has ever seen under any president, including President Obama.
Once Coolidge and Republicans constrained government spending, the economy grew on its own accord due to the tax cuts and generated more tax revenue than anticipated. Coolidge’s formula included further budget-cutting each subsequent year which allowed more money to be spent in the private sector which generated more economic growth and subsequent surplus tax revenue to flow to Washington. Coolidge and the Republican Congress passed annual tax cuts to continue the upward cycle of more tax revenue due to economic growth, more budget-cutting and more tax cuts in each subsequent year.
Under Coolidge’s leadership, the federal budget was in surplus every year from 1924 to 1928. The top income tax rate was halved to 25%, and federal spending was cut more than 40%. Federal debt was retired by over 30%. Unemployment for all Americans hit a record low of 1.8% under Coolidge.
Since 2011, Republicans who have controlled the North Carolina General Assembly have followed similar traditional Republican policies. They established a flat income tax rate, now down to 5.25%, on individuals, and slashed corporate income tax rates by close to 70%, which resulted in over $2 billion staying with its rightful owners, North Carolina taxpayers.
With increased economic growth, they paid back $3 billion in unemployment insurance loans to the federal government, which had been accumulated under former Gov. Beverly Perdue, in less than two years. Over $1.4 billion in direct disaster relief assistance has been paid out of the reserve funds directly to victims for losses sustained from Hurricanes Florence and Dorian.
With over $4 billion in reserve, the N.C. General Assembly could continue the lather, rinse, repeat budget reduction and tax cuts cycle that President Coolidge enacted from 1924 to 1928 to bring North Carolina rapid economic growth and prosperity for decades to come.
Republican leaders in the NCGA should use this cushion in the reserve fund to continue to lower income tax rates and eventually eliminate both personal and corporate income tax rates. North Carolina would become an economic nuclear reactor for the 21st century, as Texas and Florida are poised already to become as zero income tax states.
Treasury Secretary Janet Yellen is calling for nations around the globe to raise corporate taxes to match the higher rates President Biden wants to install and avoid “the race to the bottom,” as she called lower rates.
Silent Cal would argue precisely the opposite. North Carolina should continue to follow his lead.
