North Carolina Governor Roy Cooper (D), has compromised with Republicans on tax cuts for the state’s corporations and individuals in an attempt to avoid the wave of anti-Democratic sentiment that plagued former VA Governor Terry McAuliffe in his race to retake his old position. The problem for Cooper is, it’s probably too little, too late. North Carolinians know Cooper is part of the problem, not part of the solution. They want to live in one of Your Survival Guy’s Super States, just not with him in charge. The Editorial Board of The Wall Street Journal discusses Cooper’s actions, writing:
Democrats in Washington are ignoring the party’s November election defeats, but the impact has been more salutary in the states. The latest example is North Carolina, where last week Democratic Gov. Roy Cooper signed a significant tax cut for individuals and business.
The tax cut is part of a two-year state budget that trades Republican priorities for pay increases for public workers. The GOP controls the Legislature and is aiming for a supermajority next year. Mr. Cooper went along with a bipartisan deal rather than veto and give the GOP the tax issue.
The deal phases out the state’s 2.5% corporate income tax between 2025 and 2031. When fully repealed, that will amount to at least $900 million in annual tax savings. The deal also cuts the state’s flat 5.25% personal income tax rate in stages to 3.99% by July 1, 2027. The deal raises the standard deduction to $25,500 for joint filers and $12,750 for single payers, among other tax tweaks. North Carolina ranks tenth on the Tax Foundation’s 2021 state business tax climate index, and these reforms will make it even more competitive.
States are flush with revenue from strong nominal GDP growth and the deluge of federal largesse. North Carolina has an unreserved cash balance of $8.55 billion, and legislators are wisely returning some of it to taxpayers. Most states are making the mistake of building in new structural spending burdens that will be difficult to shrink in the next recession.
Mr. Cooper had wanted to sign up the Tarheel State for ObamaCare’s Medicaid expansion, which has been a disaster for many state budgets as the rolls have expanded far beyond expectations. In the end he settled on a compromise that extends Medicaid coverage for new mothers for up to 12 months from two. The budget includes no other Medicaid expansion. Republicans gave Mr. Cooper the political cover of a legislative committee that will study healthcare access and present recommendations next year, but with no promises.
Mr. Cooper did win pay hikes for his supporters in public unions. Teachers and state employees will get an average pay raise of at least 5%, retroactive, from July 1 this year to July 1, 2023. All teachers will get bonuses of $2,300, while some will get more. Other public workers will get a bonus of up to $1,500. The bill also provides for a $15 minimum wage for non-certified public-school staffers like custodians and cafeteria workers.
In return, Republicans won an increase in eligibility and funding for Opportunity Scholarship Program grants that will give parents more educational options for their children. The deal increases the maximum scholarship to $5,200 from $4,200, and families that earn 175% above the income threshold to qualify for a free school lunch will be eligible. It had been 150%.
The North Carolina budget is an example of bipartisan compromise that would be possible in Washington if President Biden tried to govern as he campaigned instead of bowing to the left at every turn. But the GOP victories in Virginia and beyond are already paying dividends around the country.
Action Line: North Carolina is currently at 25 on my ranking of Super States. Removing Roy Cooper from the Governor’s mansion and cutting taxes would push NC further up the rankings for sure. Read all about my Super States here.
