Too Much to Ask

I was driving home after a recent Senate debate on changes to the state’s unemployment insurance program and marveling at how two people – or two groups of people – looking at the same problem can reach completely different solutions.

The bill was largely a technical one dealing with how to best use taxpayer dollars to help citizens that, after being productive workers, had lost their job and needed a hand to help them transition back into the workforce.

There was a provision requiring that, to continue receiving that cash from the taxpayers, the person had to, in some fashion, reach out to a potential employer to see if a job was available. That requirement was increased from twice a week to five times in a week.

Not everyone thought that was a good idea.

“I think it is overly burdensome. You are kicking people while they are down,” said one Senator.


I watched closely, to see if there was the slightest hint that this was just another attempt to score political points, by accusing the opposition of being insensitive, or even evil.

But that wasn’t it. It was the latest sign of two different philosophies – the heartfelt belief that requiring someone to seek a job one time in an 8-hour workday is just too much to ask, on one side, and the belief that’s a reasonable request on the other.

That pretty well frames our public debate. Some folks say we are not doing enough to help the poor. Others argue the poor need to do more to help themselves. And, of course, underlying both questions is a third question: How much should we ask those who are working to give up from their labors to help those who are not.

Jesus said, “The poor you will always have with you”. And the context of that statement suggests there are limits. Here we are, 2000 years later, and we still can’t figure out where to draw the line.

I wonder if, and how, we will ever bridge that divide.

Gas Tax and Politics

In the General Assembly, there’re a lot of confusing charges being hurled back and forth about the ‘Gas Tax.’ Let’s try to sort it out.

Let’s start with two facts everyone seems to agree on: First, both Democrats and Republicans agree there are roads we need to build and roads and bridges we need to repair. Second, both sides agree we don’t have the money needed to pay the bills.

The seven-mile, congested bottleneck on Highway 16 between Newton and Lincoln County (in my district) is an example – that bottleneck won’t go away until we can widen the highway. But that costs $148 million.

Right now, under our current system the gas tax is 37.5 cents per gallon. Since the tax goes up and down based on the cost of a gallon of gas, it is projected to drop to around 30 cents in July.

The Senate has just proposed an alternative: It proposes to drop the tax 2.5 cents per gallon now then ‘freeze’ the tax. In other words, the gas tax won’t drop below 35 cents per gallon.

Most of the hollering going on in Raleigh revolves around a single question: Is that a tax cut or tax increase?

It’s true that under the current system the tax would have dropped 7.5 cents, so if you look at just that piece the drop to 2.5 cents is a tax increase.

It’s equally true that the tax is now 37.5 cents and it’s going down 2.5 cents – and while that may not be a 7.5 cents cut, it’s still a cut.

This may be one of those times when the answer is in the eye of the beholder.

But here’s the bottom line: Both sides agree we need more roads and even the Democrats – who are calling this is a Republican tax increase – aren’t saying we should go ahead and cut the gas tax to 30 cents per gallon.

After I was elected to the General Assembly, I started commuting back and forth from Hickory to Raleigh and it didn’t take long to figure driving a gas burning SUV was going to get expensive. So, I decided to drive a car that ran on diesel and cut my fuel cost – and the gas taxes I pay – by nearly half.
It turns out a lot of other NC drivers were making a similar choice. They were switching to automobiles that used less gasoline. That change, combined with the drop in the cost of gas, led to an unexpected development: Gas tax revenues – which we use to build highways – plummeted. Our old way of paying for our highways was no longer working. It had been outdated by a new reality.

Of course, gas taxes are about as popular as a toothache. But there’s no getting around the fact we have a problem. Or the fact we can’t get along without highways.

People can argue over whether a 2.5 cents cut (rather than a 7.5 cents cut) is a tax increase. But the real question remains: Do we need to build more roads – or not? Both the Republicans and the Democrats, including the Democratic leaders in the General Assembly, all agree the answer is we do.

Medicaid and Opioids

North Carolina’s proponents of big government ought to stop and take a deep breath before continuing to push to expand Medicaid – because even the New York Times is raising caution flags.

The Times reported, last Thursday, that President Obama’s Center for Disease Control and Prevention has released a study reporting “an average of 39 percent” of the women of childbearing years on Medicaid filled an opioid prescription in a pharmacy each year from 2008 to 2012”.

Medicaid spends billions on prescription drugs but this goes far beyond a question of cost: “Dr. Thomas R. Frieden, director of the C.D.C., described the numbers as ‘astonishing’ and said they presented a substantial risk for birth defects.”

The article continued: “Exposure to opioid painkillers increases the risks for major defects in the baby’s brain and spine, congenital heart defects and problems with the baby’s abdominal wall.”

And this problem isn’t just affecting the unborn, “Opioids are the single largest cause of overdose fatalities in the nation, with more than 16,000 deaths a year.” The most affected group in the survey is white Southerners.

“These are dangerous drugs that are addictive, and we are substantially overusing them,” Dr. Frieden said.

Now that’s a breathtaking example of broken politics: A government program set up to help poor children and pregnant mothers is actually harming both – while in Raleigh the push is on to expand the program.

Have We Really Peaked?

The headline in the Washington Post was a little unsettling: Most Americans’ best days are behind them.

Below the headline was a map showing the counties in the nation with the year their median household income (adjusted for inflation) reached its zenith.  The majority of NC counties, like the South, peaked in 1999.

I’ve watched that happen first-hand, right here in Hickory and the Catawba Valley. But it was surprising to see communities we thought were booming – like Raleigh and Charlotte- in the same predicament.

The source being the Washington Post, I confess I felt a bit of skepticism- so I asked the legislative staff to verify. They came back and reported, yes, in 2010, the Wake County (Raleigh) inflation-adjusted median household income was 8% below where it was in 2000. In Mecklenburg County (Charlotte) the drop was even greater: 14%.

While the General Assembly debates spending more taxpayer money for business incentives or expanding Medicaid or taking on debt for road projects, a couple of questions come to mind. Should the state continue taking more money from people that have less?

I’ve learned the hard way that “more” is not much of a goal in any endeavor- including both business and government. And I suspect that may be the lesson before us now.  In most things, you reach a point where you have enough. It’s not just a matter of a reduction in the benefits associated with incremental growth.  In fact, there is a point where “more” actually turns what was a positive experience into something negative (like 2 wives or 12 beers).

Secondly, I wonder about the theory of some historians that human society moves through cycles or seasons and that every 80 years or so we find ourselves in something similar to a “winter” season – when it’s not the right time to either plant or harvest. Winter is not a time for action, it’s a time to rest and think and husband resources and, with the approach of spring, be ready- to take action and grow- like our country did in the boom after World War II.

Just to be clear, I don’t buy the Post headline that the good times are over and it’s all downhill from here.  But also, I do not buy the line that we are on the right track and just a little tweaking will fix whatever ails us. Perhaps, unintentionally, the Post was telling us it is time to pause and to size our appetites (and size our government) to our earnings. We can’t be certain cutting government regulations and taxes will turn around what happened to our family incomes during the last decade-  but we can be certain forcing families who are earning less to pay more is just plain wrong.


The Problem with Tax Credits

The ink of the Governor’s signature on North Carolina’s tax reform bill had barely dried when the howls began.

Now the tax bill did something important to help create jobs: By cutting tax rates it raised the state’s standing in the Tax Foundation’s Business Tax Climate from a bottom scraping 44th all the way up to 16th. But like any omelet (or tax reform bill) it broke a few eggs – in this case, the legislature ended 31 different tax credits for special interests.

Why the General Assembly closed the loopholes was straightforward: We made a calculated decision that North Carolina’s tax rates needed to be competitive with our neighboring states which meant we had to cut the top tax rates by 25%.

To do that the legislature curtailed spending and kept plans in place to close $460 million in loopholes. The economics was simple. We closed loopholes for some businesses so we could cut tax rates on all businesses.

But politics is not as simple as economics. A special interest with a tax break will accelerate its political activity when that tax break is threatened, going to work to turn up the political heat. So now we are hearing howls of protest and, as a result, some of the same leaders who supported tax reform are suddenly wavering.

Take the Historic Preservation Tax Credit, a special tax break for people or companies who renovate old buildings. The Governor signed the bill that eliminated the credit but now (with the best of intentions) he’s advocating restoring it which, of course, raises a tough question: If we are going to restore one loophole, why stop there? Why not restore the other 30 loopholes as well?

If we start down that road, before you know it, we will end up right back where we started – with millions in tax loopholes for special interests and high tax rates for all businesses.


Haves and Have-Nots

After thirty years in business, I’ve figured out that (regardless of the ideas of well-meaning but over-ego’ed politicians) economic and demographic trends are more powerful than government. It’s a hard fact but the logic is unbending: No President or Governor has the power to stop trends like an aging population or urbanization.

What’s puzzling – and what I have trouble understanding – is why politicians have such a penchant for making change harder to live with – and more expensive.

Toward the close of the 2013 legislative session there was a hot debate in the General Assembly over House Bill 1224, a bill to broaden NC’s incentives funding – which a lot of our leading politicians felt was a pretty good idea.

Now incentives – or government subsidies to corporations to encourage them to locate in North Carolina – have a long history. Years ago, the General Assembly set up a formula for allocating state incentive grants. They divided North Carolina’s 100 counties into three groups – they put the wealthiest 20 counties (the Haves) in Tier 3, the poorest 40 counties (the Have-Nots) in Tier I and the middle 40 (the also Have-Nots) in Tier 2.

The theory was straightforward: Incentives were structured in a way that the Have-Nots who needed more jobs would be eligible for more incentives. The theory made sense. But it didn’t work out.

When I asked for a breakdown of how state incentives funds have been spent historically – what came back was a shock.

Between 2007 and 2013 the state handed out more than a billion dollars in incentive grants. The 40 poorest counties – who needed the most help – only received 16% of the grants. The 40 middle tier counties (the Also Have Nots) received a dismal 7%. And the rest – 76% of the incentive grants – went to NC’s wealthiest 20 (Have) counties. The Haves, who were doing just fine, gobbled up 3/4ths of the pie.

Now, in Raleigh, a lot of folks would say that’s one more proof big government doesn’t solve problems. And they’ve got a point. On the other hand, a lot of other folks would also say we’ve simply proved, when it comes to grabbing for the loot, the big rich counties have a lot more muscle than the smaller poorer counties.

Either way, we’ve still got a multi-million dollar incentive program. And it’s still broken.

Receiving the League’s Community Champion Award for 2014

League Linc article2

Senator McLaurin, Representative Wells and Legislative Assistant Mary Marchman Receive League Awards

NCLM Greensboro, NC 2014

Senator Gene McLaurin of Rockingham and Representative Andy Wells of Hickory were recognized earlier this week as recipients of the League’s Community Champion Award for 2014. The League presents the award to legislators who make strong efforts to work with municipal officials and ensure that municipal interests are represented during the legislative process. The awards were presented during CityVision 2014, the League’s annual conference held in Greensboro.

The League also presented its inaugural General Assembly Ambassador award to Legislative Assistant Mary Marchman. The award recognizes a legislative staff member for professionalism and selflessness while carrying out his or her duties at the Legislature. Ms. Marchman has been a legislative assistant for the last 11 years, working both the House and Senate. She currently serves as legislative assistant to Senator Kathy Harrington of Gastonia.

“Each of these award recipients is a true champion and true professional. Their service at the Legislature has been invaluable to the state, its cities and towns, and the residents of North Carolina,” said League Executive Director Paul Meyer. League President Ronnie Wall presented the awards to Senator McLaurin, Representative Wells and Ms. Marchman.

In remarks to those attending Monday night’s dinner at the Koury Convention Center, Senator McLaurin noted the relative inexperience of the current legislature and how many legislators do not come to the job with a municipal perspective. He challenged city and town officials to take that perspective to their legislators. Representative Wells discussed his upbringing as the son of a city manager, and noted how issues that are allowed to fester locally can end up before legislators. Ms. Marchman gave a witty speech on how to tactfully approach and discuss issues with lawmakers. The League extends it congratulations and thanks to Senator McLaurin, Representative Wells and Ms. Marchman, and looks forward to working with each in the years to come.

 To view the full LINC’ed in Update,  visit it here.

IMG_3796   NCLM Greensboro, NC 2014   NCLM Greensboro, NC 2014   IMG_3794

Teacher Salary Schedule Comparison

There has been a  lot said about the teacher pay proposal.

Perhaps a picture will make it clearer.

Comparison Graph


This chart shows only the base state salary.

It does not include the NBPTS certification of 12%.

It does not include the Master’s Degree Supplement of 10%.

It does not include the local supplement which in Catawba County in 2013-14 was 7%.

Earned Income Tax Credit

The howls started immediately when, last year, to reform the tax code and create jobs the General Assembly dropped the state’s version of the so-called earned income tax credit.


It became, pretty quickly, a media circus.


Rev. William Barber waded in, suggesting he – by virtuously standing up for the E.I.T.C. – was the epitome of rectitude while those who didn’t agree with him had no empathy for the poor.


It was politics run amuck.


So what exactly is the E.I.T.C.?


Well, first it’s not a tax credit at all. Instead, it works like this: Let’s say, hypothetically, a low income person pays $500 in Social Security and other taxes. At the end of the year, they can file for an E.I.T.C. tax credit and receive a ‘refund’ of, say, $2,000. In effect, they receive a ‘refund’ $1,500 greater than the taxes they paid.


And that’s what the General Assembly ended last year: North Carolina’s local version of Washington’s E.I.T.C.


Now, last week, one of the publications that showcased Rev. Barber’s attacks on conservatives – like me – reported the federal E.I.T.C. is a poster program not just for welfare boondoggles but outright fraud. According to the Government Accountability Office, 24% of all E.I.T.C. refunds ($14.5 billion) were ‘overpayments’ that should never have been made.


How, you might ask, could that happen? The Commissioner of the IRS explained the “improper payments” were caused by parents lying about their number of children or their incomes – and the IRS mailing the checks before bothering to check the claims.


To put that into perspective, $14.5 billion would pay for North Carolina’s entire General Fund budget for eight months.


It never made sense to disguise a welfare payment as a tax credit. It was pure political hoo-doo. North Carolina took a step in the right direction when it ended the E.I.T.C. And Washington could save $14.5 bi8llion in waste by doing the same thing.