Competing Tax Plans Bring Out Differences Among Republicans | Eastern North Carolina Now

    Publisher's note: The author of this post is Barry Smith, who is an associate editor to the Carolina Journal, John Hood Publisher.

McCrory considers Senate GOP proposal least attractive of three offerings

    RALEIGH     Sen. Bob Rucho began his presentation of a proposed tax overhaul by asking the lobbyists in attendance at Thursday's Senate Finance Committee meeting to raise their hands.

    Dozens of lobbyists packed into a crowded committee room obliged, bringing chuckles throughout the room.

    Pointing out the number of outstretched hands, Rucho, a Mecklenburg County Republican, said, "Members of the committee, I just want you to remember, those are the folks that are in the process of trying to be sure that this tax system stays complicated and loopholes are maintained.

    After a collective groan spread across the committee room, Rucho said, "That's their job."

    Rucho wasn't the only legislator given a forum to explain tax modification proposals on Thursday.

    Rep. David Lewis, R-Harnett, presented a version backed by House leaders earlier that morning to the House Finance Committee. And just before Rucho spoke, Sens. Dan Clodfelter, D-Mecklenburg, and Fletcher Hartsell, R-Cabarrus, briefly discussed what Hartsell called "a consensus effort to look at tax reform."

    Republican Gov. Pat McCrory even chimed in.

    "After more than five months of serious dialogue with community, business, and legislative leaders, we are on the cusp of tax reform," McCrory said, though he added that he was not comfortable with the broad expansion of sales tax collections included in Rucho's plan.

    All three proposals would eliminate the graduated income tax rate in favor of a flat income tax rate. Currently, the rate varies from 6 percent to 7.5 percent, depending on income.

    Lewis' plan would lower the rate to 5.9 percent, effective Jan. 1, 2014. The Clodfelter-Hartsell plan would implement a 5.95 percent rate effective Jan. 1, 2015. The Rucho plan would bring the individual income rate down to 5.5 percent on Jan. 1, 2014, to 5 percent on Jan. 1, 2015, and to 4.5 percent on Jan. 1, 2016.

    "Our goal is to go to zero on the personal income tax at some endpoint," Rucho said at a meeting with reporters Thursday afternoon.

    Democrats and progressive advocacy groups attacked all three proposals, saying they would aid wealthy North Carolinians disproportionately while placing new tax burdens on the poor and middle class.

    The Rucho plan would reduce the corporate income tax rate -- which currently stands at 6.9 percent -- in steps to 6 percent by Jan. 1, 2016. The Clodfelter-Hartsell plan would reduce it to 5.95 percent. The Lewis plan would reduce it to 5.4 percent over five years, a change from an earlier version that reduced the rate to 6.75 percent.

    In addition, a previous version of the Lewis plan would have extended and made permanent certain tax credits -- the low-income housing credit, research and development credits, and film incentive credits and grants. The current Lewis proposal would allow those credits to expire on schedule. Most of that would occur over the next few years.

    Rucho said special tax incentives to lure businesses would be honored.

    "We are going to live up to all of the sunsetted incentives. I think a good many of them end in 2014, some in '15," Rucho said. "What we're saying is that government should not be picking winners and losers."

    The Rucho plan would broaden the sales tax to cover most services. It also would tax food and prescription drugs. The other two plans would have more modest expansions of the sales tax, primarily extending sales tax collections to services from providers that now charge sales tax on retail merchandise, such as barbers who sell hair care products.

    McCrory said that Lewis' House plan or the Clodfelter-Hartsell plan were more in line with his position.

    "We all share the goals of reducing personal and corporate income taxes," McCrory said in a statement. "But I cannot support a plan which turns too many North Carolinians into first-time tax collectors."

    McCrory also said he opposed taxing food and medicine.

    "Our ultimate goal is to reduce tax rates for North Carolina families and businesses," McCrory said. "The final tax plan must make North Carolina more competitive in order to create jobs and put our people back to work. This in turn will increase state revenue, allowing future tax relief without cutting public services."

    Rucho responded brusquely to McCrory's comments, saying the proposals from Clodfelter-Hartsell and House Republicans were insufficient. In an email to The Associated Press, the retired dentist wrote, "Merely sugar-coating a complex, antiquated, unfair and failing system will not revitalize our private sector and bring new jobs to North Carolina. ... [I]f Pat had real business experience, he would not make such a poor policy decision."

    Kim Genardo, McCrory's communications director, said the governor "respectfully disagreed" with Rucho's statement.

    The AP noted that McCrory worked for Duke Energy for nearly 30 years and, after leaving Duke, became a business consultant.
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For whom will the bell toll? Statewide, Government, State and Federal, Governing Beaufort County Beaufort County Government's General Meeting Agenda: Monday, July 1, 2013


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