Raleigh, N.C. — North Carolina Citizens for Progress, a group funded in large part by the Democratic Governor's Association, is out with a new ad in the gubernatorial campaign – and once again the group is trying to raise questions about Republican candidate Pat McCrory's ethics.
It focuses on legislation passed by the General Assembly that gives a tax break to the partners in S corporations, LLCs and sole proprietorship arrangements. Such businesses are formed by professionals such as doctors and lawyers.
The ad correctly states that McCrory works for Moore & Van Allen, a firm whose partners will benefit from the break.
However, a reasonable reading of the ad asks viewers to infer some things that might not be true.
After telling viewers about the tax break, the ad cuts to a shot of the candidate and says "Now here's Pat McCrory. The partners at the law and lobbying firm he works for will get a huge tax break. We don't know how much McCrory is making because he refuses to release his tax returns."
The first thing to note is that McCrory is not a partner at Moore & Van Allen, so he does not directly participate in the tax break. There's an inference he might somehow benefit, but the commercial does not say how.
The ad also repeats a charge that McCrory won't release his tax returns. That's true enough. McCrory has said that his state-required Statement of Economic Interest should be sufficient. But because McCrory wouldn't benefit from the tax credit in question, it's unclear how his tax returns might shed light on this issue.
Update: It has been pointed out that McCrory lists McCrory & Company, a management consulting firm run by his brother. His listed as a "partner" on the company's website, so it's possible he could benefit from the tax break. However, on his SEI, McCrory lists "consulting fee" as the income he derives from that company. And it's worth point out that it is Moore and Van Allen -- "the law and lobbying firm" -- this commercial references, not McCrory & Co.
Left completely unsaid is how McCrory might be responsible for the tax break's existence. N.C. Citizens for Progress and Democratic candidate Walter Dalton have been arguing throughout the campaign season that McCrory is closely tied to legislative Republicans who passed the tax breaks. And it's true that McCrory has generally been supportive of the GOP-authored budgets. But this ad doesn't even go that far.
While there is the suggestion McCrory somehow helped bring about the tax break – maybe by lobbying – the ad doesn't say directly and viewers are left to speculate. As for the tag line – "Tax breaks for lobbyists and corporations, while teachers get laid off. That's what you get with Pat McCrory" – it doesn't appear to be supported by the ad's content. To date, there's no hard evidence that McCrory lobbied his GOP allies for that or anything else.
Is it truthful? The ad puts a lot of things that are true on their own side-by-side and asks viewers to make some leaps of logic that may or may not be entirely accurate. At best, it rates an "incomplete."
Update: Gerrick Brenner, who works with a separate nonprofit that often serves as spokesman for N.C. Citizens for Progress, says the ad will air through most of the state. "My understanding is it's a $326,000 ad buy in all N.C.-based TV markets except Charlotte," Brenner wrote in an e-mail.
Update: The N.C. Bar Association provided this short explanation of the tax break:
"Under new N.C.G.S. 105-134.6(b)(22), there is a new personal income tax deduction of up to $50,000 of business income attributable to sole proprietorships, S corporations, partnerships and LLCs (but not for C corporations). If both spouses receive business income during the year, the maximum dollar amounts apply separately, so a married couple can deduct up to $100,000 of net business income for North Carolina tax purposes. The term “business income” does not include “passive” income under the federal tax code. This change is effective for the 2012 tax year."