Senate gives tentative nod to tax changes

A final Senate vote is scheduled for Thursday. That would send it back to the House, where lawmakers say they have no major problems with changes wrought by the Senate. 

"We will vote to concur," said House Finance Committee Chairwoman Julia Howard, R-Davie.

If the measure gains final Senate approval early enough in the day Thursday, the House could hold a vote on concurrence that afternoon. 

Debate on the Senate floor Wednesday mainly revolved around how various provisions might affect the revenue collected by state and local governments.

One change that deals with the tax imposed on work performed by contractors that work through home improvement stores such as Lowe's or Home Depot carries with it some uncertainty. Tax analysts working for the legislature say they're not sure how a somewhat lower rate would affect state revenues.

"We have no idea what this is going to cost us," said Sen. Josh Stein, D-Wake.

While the change might be a good idea, Stein said, lawmakers should know what they're trading off. "There's a price at which this is a bad idea," he said.

But Republicans said the changes, even if they raise less money in the short term, could spur long-term economic growth.

"Some of us seem to be worried about how much revenue the state is going to lose," said Sen. Jerry Tillman, R-Randolph. "Some us are worried about how much it's costing taxpayers." 

Still top of mind for many Democrats were changes that will affect how cities and counties levy taxes on businesses. Those privilege license changes could cost cities $6.2 million for the year beginning July 1. The year after, privilege licenses would be eliminated if no further changes are made. 

Republican leaders, including Finance Committee Chairman Bill Rabon, R-Brunswick, committed to replacing that revenue for cities next year.

"We realize we are under the gun to fix this," Rabon said.

That said, he and other Republicans rejected an amendment offered by Sen. Joel Ford, D-Mecklenburg, that would have created a new privilege license system that would begin July 1, 2015. 

Absent some fix, Sen. Floyd McKissick, D-Durham, said that some small towns would be forced to institute double-digit property tax increases. 

"The only place these communities can go to is to increase their property taxes," McKissick said. 

But Sen. Tommy Tucker, R-Union, said that wasn't true. City governments, he said, had another choice even if they did lose the privilege license tax.

"If there is a loss of revenue, you have another choice beside raising taxes," Tucker said. "You could reduce your budget accordingly or not offer incentives to hotels or whatever else they do in Durham."