House tax cuts more modest, targeted

Posted May 30

— House leaders unveiled a tax cut proposal Tuesday morning that's more modest and more explicitly targeted than the Senate proposal.

House leaders are proposing an increase in the standard deduction of $1,000 for married joint filers and $500 for single filers. The change would take effect in 2018. That's substantially smaller than the $2,500 and $1,200 increases proposed by Senate leaders.

The House plan would not include a reduction in individual or corporate income tax rates. However, it would slightly lower the franchise tax and offer tax relief for specific industries, including a repeal of the mill machinery tax and new sales tax refunds for large distribution centers and small research and development firms, especially those in rural areas of the state.

It would also temporarily redirect revenue raised by the state's 8 percent car rental tax. For the next two years, it would go to the Highway Fund rather than the General Fund and would be targeted toward improvements at airports.

House leaders have not released the full budget yet, so it's still unclear what the cost of the cuts would be.

In his opening remarks, Rep John Szoka, R-Cumberland, acknowledged that the House's plan was quite different from the Senate's but said people shouldn't get too caught up in the details.

"I assure you that the goal of both finance packages is exactly the same, and that is to continue the good work we’ve accomplished since 2011," he said.

Szoka explained that the new refunds and tax breaks are intended to bolster the state's competitiveness with neighbors in manufacturing, research and development and distribution. He said the state had lost nine of 10 bids for a large distribution center in recent years but is currently competing for another one that would meet the tax break's requirement of $100 million investment and 400 jobs.

The package was rolled out in an early morning House Finance Committee meeting, but debate was cut off after 65 minutes because Chairman Bill Brawley, R-Mecklenburg, said the measure had to be voted out before House session in order for the budget schedule to stay on track.

Most of that time was taken by debate over a proposal by Rep. Julia Howard, R-Davie, to redirect revenue from the deed stamp tax on property transfers into trust funds for clean water management, parks, coastal storm mitigation and farmland preservation, beginning in 2019.

The tax currently brings in more than $68 million a year, which would more than double the $32 million the House plan would put into those funds. The tax was increased in 2008 with the agreement of stakeholders, but the revenue from it was redirected into the general fund in 2013.

"It was the purpose originally when the deed stamps were increased that it was a dedicated fund, so this just puts it back as it was," Howard said. "We told the people what this money was going to be for, and it’s not time to go back on our word."

"If we’re going to say we’re going to do something, let’s do it," agreed Rep. Becky Carney, D-Mecklenburg, who was also serving on the Finance Committee when the increase was approved. "We want to go back to what we told the people and these entities that we were going to do with that money."

However, chief budget Chairman Nelson Dollar, R-Wake, advised the committee not to approve the amendment, saying that the recapture of targeted revenue streams was an across-the-board budget reform instituted to strengthen the general fund.

He said removing the $68 million from the general fund in 2019 would be "setting up a hole in the next biennial budget."

"It’s going to have to come from somewhere. It’s going to have to come from other programs. We have the revenues that come in. We can’t create money, and when you dedicate a piece of it, you weaken the general fund, and you will be affecting your priorities in education and elsewhere," Dollar cautioned. "Down the road, you might regret your decision."

The voice vote on the amendment appeared to be close, but Brawley pronounced the amendment defeated, as was another amendment by Rep, Graig Meyer, D-Orange, that would have replaced the mill machinery tax cut with a tax credit for child and dependent care.

Finance chairs were scheduled to hold a news conference on their plan Tuesday morning, but it was canceled. Dollar said a news conference on the entire budget, including the as-yet-unknown raises for teachers and state employees, would likely be held Thursday.

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  • Rod Runner May 30, 1:15 p.m.
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    What's the deal with tax cuts for specific industries? I thought the Republicans argued against doing things like this, especially if it was for movie/TV studios getting tax breaks to film in NC.

    Now they want to give tax breaks for mill machinery and sales tax refunds for distribution centers?

    What about all the other businesses that use other types of machinery or that pay sales tax?