New take on tax reform.

• Author: Mooneyham, Scott
• Position: CAPITALGOODS

Bob Rucho calls his plan "fluid." Actually, he doesn't call it a plan. Rather, it is a "concept." It is a concept that could change how everyone pays taxes in North Carolina. The Matthews Republican is co-chairman of the Senate Finance Committee and likely key architect of any tax reform coming out of the General Assembly this year.

That he declines to call his ideas a plan isn't surprising. Plans get shot down, and this one has a way to go even before becoming draft legislation. But Rucho has made it clear his goes beyond the previous notions of anyone who has ever had the political power to make this kind of thing happen. His concept involves doing away with the state personal--and corporate-income and business-franchise taxes. In their place, he would expand sales taxes to cover services, create a new license fee applied to all businesses and establish a 1% real-estate conveyance tax.

He doesn't want to take just a bite out of the tax-retorm apple. He wants to replace the apple with an orange. But does he stand a better chance than the Democrats did when they controlled all the levers of power in Raleigh? That depends on with whom you're talking. Now that the Republicans are in charge of any rewriting of the tax code, conservative think tanks in Raleigh are loudly beating the drum for change. The North Carolina Chamber is chewing on the subject, calling tax policy "de facto economic development policy." New Gov. Pat McCrory ruminated on it throughout his campaign, saying that the state needs a modern tax code that will create certainty and spur job growth. There's a lot of wind in the sails of the tax-reform proponents. But it could turn into hot air for a number of reasons.

For one, the numbers may not work. North Carolina's general operating budget requires about $20 billion. No one wants tax reform to result in an overall increase in taxes, but making the numbers "revenue neutral" means no substantial cuts in revenue. Eliminating the income and franchise taxes would drain more than $12 billion from the revenue stream. Even a recent study by the conservative Civitas Institute noted that a slight bump in the sales tax might be needed to produce the same amount of money.

Supporters of eliminating income taxes in favor of expanded sales taxes often point to Florida and Texas as...