Rep. Faison's Expensive and Impractical JOBS Plan | Eastern North Carolina Now

   Publisher's note: This post, by Clark Riemer, was originally published in the Budget & Taxes section of Civitas's online edition.

    In the wake of Governor Perdue's surprise announcement that she will not run for re-election, Representative Bill Faison (D-Orange) announced his intention to run for governor January 28th in Greensboro, NC.

    Rep. Faison has recently been touring the state and calling into question Gov. Perdue's leadership, causing many to speculate he had interest in the Governor's mansion long before Perdue backed out of the race. Perhaps the central tenet of Rep. Faison's campaign will be his JOBS plan for North Carolina, which he has spent the last several months promoting at his events.
Governor Beverly Perdue visits Beaufort County in aftermath of Hurricane Irene.     photo by Stan Deatherage
    Rep. Faison's much publicized JOBS plan is riddled with questionable math, overly optimistic assumptions, and lacks critical details. Rather than a serious plan to get North Carolina back to work, the plan is a purely opportunistic political ploy designed to give the appearance of leadership by an ambitious back-bencher. Despite the questionable nature of the plan, it has been endorsed by several county Democratic parties and 35 other Democratic legislators.

    The first part of the plan is a 0.7 cent sales tax increase, which Faison calls the "power of the painless penny." Rep. Faison plans to use this tax increase to rehire public employees. This is no mere penny however; rather it is a penny on every dollar of most of the retail sales made in North Carolina. According to Rep. Faison himself, that little penny would actually cost each household in North Carolina on average more than $200 a year, and cost North Carolinians as a whole $1.1 billion dollars.

    Rather than a painless penny, the Faison plan amounts to a new tax increase of over a billion dollars on the people of this state.

    The other segment of his plan is a $35,000 tax exemption for small businesses with 20 or fewer employees. Faison claims the credit will create "up to" 155,784 jobs. Where did he come up with this number? 155,784 is the number of small businesses in North Carolina with 20 or fewer employees, so he simply assumed that every small business in North Carolina would use the tax credit to create one new job. This assumption is stunningly arbitrary and oversimplified.

    From the information released so far, there is no reason to believe that any business has to actually hire a new worker to receive the exemption. The fact that many businesses will use this money to pay off debts, invest in capital improvements and new equipment, or even for profits for the owners, is a possibility that seems to have escaped the eagle-eyes of Rep. Faison's office. The argument could just as easily be made that the plan will create zero jobs.

    Rep. Faison claims that his tax exemption plan would decrease state revenue by about $2.29 billion. However, from his public discussions thus far, it is unclear whether Faison's tax exemption is actually an exemption or a tax credit. Moreover, it is highly unclear how he arrives at the $2.29 billion figure. The only way we can ever have a clean estimate of the cost of the Faison JOBs plan is for the Representative to produce an actual bill that can be scored by the professionals in the Legislature's Fiscal Research Division. Until he does so, any estimates given for the cost of the JOBs plan are simply illusory.

    To offset the decreased revenue in his proposed tax exemption, Rep. Faison proposes eliminating 40 percent of existing tax exemptions in North Carolina. In his public statements, Rep. Faison has slammed these exemptions as giveaways to "big business." Which exemptions would the Representative get rid of? He hasn't bothered to say.

    Indeed, two-thirds of these exemptions include items such as the standard deduction and personal exemption for income taxes, the exemption for food and medicine from the state sales tax, exemptions for government retirement and social security income, and sales tax exemptions on purchases made by charitable organizations. Hardly seems like a list of giveaways to "big business." Rather, these tax exemptions disproportionately protect low-income and working-class citizens. Is Faison saying he wants to finance his plan by raising these taxes by billions of dollars?

    The Faison tax increase plan is nothing more than political theatre. The job growth predictions and cost projections are sloppy and shamelessly careless. The plan overall appears to not have received much critical thought before being released.

    The end result would be a massive billion dollar sales tax increase, along with many other tax hikes on exemptions low-income North Carolinians have come to rely on.

    Faison's JOBS plan was never meant to be serious public policy. It was simply an attempt to drum up publicity and media air time for his run for governor. While the details of the plan itself are still in question, it certainly has provided Rep. Faison airtime. That the plan, and Rep. Faison, have been treated so seriously, given their lack of serious preparation is unfortunate.