New Committee to Review State Tax Structure

Easley's press secretary Fred Hartman said he was pleased with the first meeting of the Commission to Modernize State Funds.

"It was a good meeting," he said. "They spent a couple of hours getting their feet wet, rolling up their sleeves and tossing out ideas."

The commission was formed to examine the 70-year-old N.C. tax structure in light of the recent economic downturn.

Easley announced last month that the state will likely face a $900 million budget shortfall this fiscal year, a budget deficit that is projected to grow into the billions in the 2002-03 fiscal year.

Hartman said the commission plans to fashion a more resilient tax policy that can weather the ups and downs of the state economy and corollary fluctuations in personal income and corporate tax revenue.

He also mentioned that the committee will investigate the potential need for a more stable revenue system. "Nothing is off the table," Hartman said. "We need to have the reserves and the structure to absorb economic downturns."

He said the commission should examine two key points -- the fairness of the tax structure and the adequacy of funds for state and local needs -- but that it has discretionary freedom. "(The commission) has free reign to get in there and tear up the tax structure," he said.

Commission member Sen. David Hoyle, D-Gaston, noted that the first meeting was meant simply to review the state's tax policies. "We're just getting started," he said. "The governor is not even sure if we have a problem. (Easley) just asked us to look into it."

Professor Charles Liner , an economist at UNC's School of Government, attended the meeting and said he does not believe the state's tax policy is outdated.

"On the whole our tax system is sound," he said. "But the fact of the matter is there is a $1 billion shortfall, and you certainly want to look at your shortfall."

Liner said North Carolina's shift from a manufacturing and agricultural economy to one based on services has adversely affected the state's tax structure because North Carolina does not tax services.

The commission hopes to present its initial findings to the N.C. General Assembly in May. Finalized recommendations are due before the long session convenes in January 2003, but Hartman said the commission could produce results within two months. "If we had the answers, we'd be doing it right now."

The State & National Editor can be reached at stntdesk@unc.edu.