Policy Reports | 2008 Archive

North Carolina’s government-controlled auto insurance system is unfair to good drivers because it overcharges them in order to subsidize some of the state’s more risky and dangerous drivers. Every auto insurance policy written in the state has a hidden tax – which averages 6 percent – that goes to the government-mandated, privately run insurance pool. This pool uses the tax to subsidize the policies of risky drivers who should, but don’t, pay higher rates because of a legal cap. Current regulations place a maximum on auto insurance rates. Insurance companies are allowed to dump into a risk pool anyone whose risk factors are such that a rate below the maximum would be unprofitable. Even though these people are placed in the high-risk pool, the rates that they pay are still subject to the cap. The tax money is used to make up the difference between the capped rate and the amount that the high-risk driver should pay. Some private insurance companies like the system because it guarantees them a profit by allowing them to dump risky drivers into the government-mandated tax-subsidized pool. In fact, 25 percent of N.C. policyholders are in the pool compared to less than 2 percent nationally. Not only is the tax hidden, the pool is hidden because risky drivers in the pool continue to receive bills from their private insurance company. This allows the private company to sell these customers other types of insurance, such as life and home insurance. Who are these risky drivers who receive unfair subsidies from good drivers? Nobody knows for certain since companies can cede any risky driver they want into the pool. But it’s highly likely that many are teenage males who may have clean driving records, but as a group are more prone to tickets and accidents. Since the government-controlled rate setting process does not allow insurance companies to use age as a factor, the 18-year-old who drives a red sports car pays a rate that does not reflect his risk of an accident. (Drivers with multiple tickets or serious accidents regardless of age also end up in the government-mandated pool, but, on balance, they do pay rates that reflect their risks.) While average rates in North Carolina are in line with other states in the Southeast, good drivers are still paying more than they should. The reforms suggested in this report would simplify the current bureaucratic system and lower rates for many, if not most, drivers in the state. Download PDF file: North Carolina’s Unfair Auto Insurance System (544 kb)

The Tennessee Valley Authority (TVA) operates 11 coal-fired power plants in the southeastern United States. These plants emit nitrogen oxides (NOx) and sulfur dioxide (SO2), which contribute to particulate matter (PM) and ozone in the eastern U.S., including North Carolina. In an effort to force the TVA to reduce its contribution to air pollution in North Carolina, state Attorney General Roy Cooper filed suit against the TVA in January 2006, arguing that the TVA plants constitute a public nuisance. To bolster his case, Cooper commissioned reports from experts in air pollution modeling, control methods, health effects, and cost-benefit analysis. These experts estimated that reducing NOx and SO2 emissions from TVA sources by about 370,000 tons per year (a 65 percent reduction) would have substantial health benefits, preventing more than 1,400 cases per year of premature mortality, more than 1,000 hospital visits, and hundreds of thousands of asthma exacerbations each year. By placing dollar values on these health benefits using standard cost-benefit analysis techniques, one expert report concluded that the health benefits would total $10.9 billion per year, or about 18 times greater than the annual cost of the emission reductions. In reality, the actual benefits of the TVA power plant emission reductions will at best be only a tiny fraction of the amount claimed by the Attorney General’s experts.

North Carolina local government policymakers face many important challenges. This issue guide offers solutions to problems faced by the citizens of the state. The common thread in these recommendations is freedom. By increasing individual freedom, local governments can foster the prosperity of all North Carolinians. The John Locke Foundation Research Staff and the Center for Local Innovation offer the following policy analyses and recommendations. Please feel free to contact the policy expert associated with each recommendation for further information, or visit www.JohnLocke.org and click on "Spotlights" and "Policy Reports" for more detailed research on these and other issues that face local governments in North Carolina. To reach the City & County Issue Guide home page, click here.

This report on sustainable growth is the third in a series of annual research papers from the John Locke Foundation devoted to explaining the principles of free markets and applying them to current controversies in North Carolina. The standard view of sustainable development is not rooted in any coherent set of philosophical principles. As such it is internally inconsistent and impossible to pursue as a rigorous approach to policy espousal. Instead, it is best seen as a collection of policies that have been advocated by the generally anti-free market environmental movement prior to the concept of sustainable development being promulgated by the United Nations. Indeed, there is nothing that is promoted in the name of sustainability that contradicts or is even different from the political agenda that has been pursued by major environmental advocacy groups since the 1970s. The orthodox approach to sustainable development is inconsistent with traditional American values of private property, limited government, and individual freedom of choice. Indeed, most sustainable development advocates envision a role for government in people’s lives that embraces a central planning model for economies at every level. On the other hand, the alternative model of economic sustainability offered here is not only consistent with principles of individual liberty and a free market economy, it flows directly from these principles and reinforces them. Liberty, personal responsibility, and equality before the law do not have to be sacrificed on the altar of sustainable development. The Nathaniel Macon Research Series was created with the generous financial support of David R.Carr Jr. of Durham, in memory of his friend and business partner George W. Brumley III, who was a strong believer in the crucial role that robust, unfettered markets play in advancing human progress and promoting a free society.

The Beacon Hill Institute at Suffolk University in Boston, Mass., reviews policies under consideration in North Carolina to cut carbon dioxide (CO2) emissions. Supporters contend those policies would help North Carolina respond to climate change. Supporters also contend the policies would produce positive economic benefits. This report rebuts the advocates’ economic arguments. Beacon Hill Institute researchers find “serious methodological flaws” in the documents used to justify the climate change policies. “We find that the proposals would exert significant negative effects on the state economy. By 2011, the state would shed more than 33,000 jobs. Annual investment would drop by about $502.4 million, real disposable income by more than $2.2 billion and real state Gross Domestic Product (GDP) by about $4.5 billion. The energy Cap and Trade system causes most of the harm. The negative economic effects would spill over into state and local tax collections. We estimate a loss of $184.6 million in revenues in 2011. The proposals’ negative economic and fiscal effects stem from the price and tax increases they would impose on the energy and transportation sectors. Our results contrast with the positive results produced by [the Climate Action Plan Advisory Group] and [Appalachian State University], which suffer from the previously-described deficiencies.”

Many North Carolina cities use affordable-housing policies to provide housing to low-income citizens. No doubt started with the best intentions, those policies ignore fundamental economic realities and produce the opposite effect than was intended.

The Tyrrell County commissioners are asking county residents to triple the land-transfer tax rate on May 6 (from 0.2 to 0.6 percent). This report identifies nearly $2.3 million in revenue and savings the county could use to meet its needs — more than four times the amount that the proposed tax increase would produce.

The Rockingham County commissioners are asking voters to approve a sales-tax increase on May 6. This report identifies nearly $28 million in revenue and savings the county could use to meet its needs — more than 16 times the amount that the proposed tax increase would produce.

The Hertford County commissioners are asking voters to approve a sales-tax increase on May 6. This report identifies nearly $6.2 million in revenue and savings the county could use to meet its needs — more than 11 times the amount that the proposed tax increase would produce.

The Greene County commissioners are asking voters to approve a sales-tax increase on May 6. This report identifies $3.3 million in revenue and savings the county could use to meet its needs — more than 19 times the amount that the proposed tax increase would produce.

The Wilson County commissioners are asking voters to approve a sales-tax increase on May 6. This report identifies $23.2 million in revenue and savings the county could use to meet its needs — more than 11 times the amount that the proposed tax increase would produce.

The Wilkes County commissioners are asking voters to approve a sales-tax increase on May 6. This report identifies over $16.7 million in revenue and savings the county could use to meet its needs — more than 11 times the amount that the proposed tax increase would produce.

The Onslow County commissioners are asking voters to approve a sales-tax increase on May 6. This report identifies $34.8 million in revenue and savings the county could use to meet its needs — more than eight times the amount that the proposed tax increase would produce.

The Guilford County commissioners are asking voters to approve a sales-tax increase on May 6. This report identifies nearly $83.4 million in revenue and savings the county could use to meet its needs — over five times the amount that the proposed tax increase would produce.

The Wayne County commissioners are asking voters to approve a sales-tax increase on May 6. This report identifies $39.1 million in revenue and savings the county could use to meet its needs — almost 15 times the amount that the proposed tax increase would produce.

The Nash County commissioners are asking voters to approve a sales-tax increase on May 6. This report identifies $18 million in revenue and savings the county could use to meet its needs — six times the amount that the proposed tax increase would produce.

The Lincoln County commissioners are asking voters to approve a sales-tax increase on May 6. This report identifies $26.3 million in revenue and savings the county could use to meet its needs — over 17 times the amount that the proposed tax increase would produce.

The Haywood County commissioners are asking voters to approve a sales-tax increase on May 6. This report identifies $16.2 million in revenue and savings the county could use to meet its needs — over 10 times the amount that the proposed tax increase would produce.

The Gaston County commissioners are asking voters to approve a sales-tax increase on May 6. This report identifies $54.4 million in revenue and savings the county could use to meet its needs — almost 12 times the amount that the proposed tax increase would produce.

The Ashe County commissioners are asking county residents to triple the land-transfer tax rate on May 6 (from 0.2 to 0.6 percent). This report identifies $9.4 million in revenue and savings the county could use to meet its needs — nearly 10 times the amount that the proposed tax increase would produce.

The Stanly County commissioners are asking voters to approve a sales-tax increase on May 6. This report identifies $23 million in revenue and savings the county could use to meet its needs — over 16.7 times the amount that the proposed tax increase would produce.

The Randolph County commissioners are asking voters to approve a sales-tax increase on May 6. This report identifies $33.5 million in revenue and savings the county could use to meet its needs — more than 13 times the amount that the proposed tax increase would produce.

The Lee County commissioners are asking voters to approve a sales-tax increase on May 6. This report identifies almost $10.3 million in revenue and savings the county could use to meet its needs — over 6.6 times the amount that the proposed tax increase would produce.

The Duplin County commissioners are asking voters to approve a sales-tax increase on May 6. This report identifies about $17.7 million in revenue and savings the county could use to meet its needs — more than 21 times the amount that the proposed tax increase would produce.

As one of the oldest forms of school choice in the United States, education tax credits empower low- and middle-income parents to choose schools that best meet their children’s needs. Cost-effective, constitutional, and consistent with federal and state tax policy, tax credits enjoy bipartisan support among education reformers and parents; in fact, the number of states with education tax credits has tripled over the past 10 years. Tax credits create a vibrant education marketplace by making private schooling affordable for low- and middle-income families seeking a fresh start for their children.

Key facts:

• Greenways are linear parks that benefit users with opportunities for exercise and enjoying nature.
• Raleigh is constructing the Neuse River Greenway from Falls Lake Dam to the Johnston County line.
• Since greenways are commonly owned public property, they are more susceptible to crime, litter, and degradation than privately owned property.
• Public-opinion surveys about greenways do not ask the opinions of residents who will live with a greenway essentially in their own backyards.
• The John Locke Foundation’s Neuse River Greenway survey asked homeowners who live directly adjacent to the proposed Neuse River Greenway for their views about this new greenway.
• The survey found that most of these homeowners believed that the new greenway would not be an asset to their neighborhoods, would increase crime, and would lower their property values. A large majority was unwilling to pay higher property taxes to pay for the greenway.
• These negative consequences (costs) would be forced on homeowners by the City of Raleigh without any countervailing compensation. Users of the greenway, on the other hand, would receive benefits without incurring costs commensurate with the benefits received.

In 2006, North Carolina’s Department of Environment and Natural Resources (DENR) formed an advisory group called the Climate Action Plan Advisory Group (CAPAG). This group’s task was to “develop recommendations for specific actions to help reduce or prevent climate change.” On October 16, 2007, CAPAG released a “final draft” of its 56 recommendations. One week later, these recommendations were presented to the Legislative Commission on Global Climate Change, a legislative body that will develop a final report with findings and recommendations by April 15, 2008. This report translates each CAPAG recommendation into plain English so that the public and policymakers can understand what really is being proposed. The recommendations often are vague, overbroad, or even contain multiple options within one recommendation. The goal is to cut through the fog and identify the essence of each recommendation.

County and municipal governments provide many key services while taking in billions of dollars in revenue. Their roles grow ever greater as state government shifts more taxing power to localities to make up for money kept by the state. Still, finding comparative data is hard. That's why this report provides information of how much local government costs in every city and county in North Carolina.

A report prepared for the John Locke Foundation by the Center for Long-Term Care Reform Long-term care in nursing homes, assisted living facilities, or an individual’s own home, is the largest portion of North Carolina’s Medicaid budget. It is also the fastest growing portion of that budget. As the state’s population ages, it will drive even more demand for these services. Medicaid was not meant to be inheritance insurance for baby boomers, but current policy in North Carolina allows it to be exactly this. Encouraging more people to rely on private payment options, such as reverse mortgages or long-term care insurance, will mean lower state costs for care and better results for individuals. This paper examines the state of long-term care in North Carolina, current abuses of the system, and private payment options.