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Senate weighs dueling tax reform plans

Posted May 30, 2013

— State Senate leaders are weighing two very different proposals to reform the state's tax system.

Both bills were introduced in a Senate Finance Committee meeting Thursday, but neither was discussed in much detail. For now, sponsors said, they simply wanted to make the bills public for information and input.  

Hartsell/Clodfelter plan 

One package, Senate Bill 394, is backed by Sens. Fletcher Hartsell, R-Cabarrus, and Dan Clodfelter, D-Mecklenburg.

"This is not a Republican plan. It is not a Democrat plan. It is not a Senate plan. It is not a House plan," Hartsell told the committee. "It is a consensus effort to look at tax reform. It is an attempt to fix an antiquated, outdated tax code.

"It does not seek to increase taxes. It does not seek to decrease taxes," he said.

Hartsell said the bill would cut the state's personal and corporate tax rates to a flat 5.95 percent. It would also cut the state portion of the sales tax from 4.75 to 4.5 percent. 

Social Security benefits would not be taxed, Hartsell said. 

"In the first two years, we actually came up with more money than we needed to make it a flat situation," he told the committee. "We applied the extra funds into a reserve to pay down the UI [unemployment insurance] debt."

Rucho/Rabon plan

The other reform package, Senate Bill 677, has been the topic of publicity campaigns and the target of negative ads for weeks. Thursday marked the first time details of the plan were made available to the public in writing.

Sponsor Sen. Bob Rucho, R-Mecklenburg, offered few of those details in his initial presentation.

NC Sales Tax Lawmakers divided on how to overhaul NC tax system

Rucho said his plan would "put our people back to work" and would make the state "a great place to do business."

Most exemptions, credits and carve-outs would be eliminated from the system, he said. 

"This is our opportunity to put the people first and not the special interests,” Rucho told the committee. "Everybody’s going to be treated fairer. There aren’t special groups given special treatment at the expense of the people.

"Each of you will be inundated by our lobbyist friends trying to preserve their tax loopholes," he added. 

The plan would also eliminate current tax exemptions for nonprofits and charities.

"If we treat everybody the same," he said, "it puts more money in people’s pockets, so they will have a chance to choose a charity of their choice. Government should not be picking winners and losers."

Rucho also criticized the North Carolina Hospital Association and the North Carolina Realtors Association for "confusing the public" with television ads against his reform plan. 

He said the ads are "less than truthful" and contain "falsehoods" but did not specify which claims in the ads are untrue.

"They are apparently more concerned about maintaining their own financial well-being," he said. "This is a time for everybody to look at what’s in the best interest of the state of North Carolina."

Either or both of the reform proposals could come up for more extensive discussion in Senate Finance next week. 

71 Comments

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  • irnmaidnfan May 30, 2013

    and if you (or anybody) has a good idea on how to reduce fraud in any of those programs (or any other) I'm more than willing to hear it. Junkmail

    I wish I had an answer. Who knows it may even cost more to police then what could be saved? Those who are takers of the system ruin it ( the positive attitudes of the payers) for many.

  • junkmail5 May 30, 2013

    Junkmail- I hate to say it but I do kind of see your point of the 35 percent. I could see it better and feel it better if their was a way to successfully do something about those who falsified documents in order to receive some sort of govt funding. I defiantly don't mind helping others out but to those that take.....
    irnmaidnfan

    and if you (or anybody) has a good idea on how to reduce fraud in any of those programs (or any other) I'm more than willing to hear it.

    But instead you only ever get claims that it's all fraud... or really TERRIBLE ideas to address it... (like the drug testing idea- which ended up losing Florida a pile of money when they tried it, but still didn't stop the GOP here from suggesting it anyway).

  • josephlawrence43 May 30, 2013

    Just like to ask two questions: 1: For those of us unfamiliar with the english language, please define "fair share", and "equal". 2: Please specifically tell us what would constitute YOUR "fair share" of someone elses work??

  • irnmaidnfan May 30, 2013

    Junkmail- I hate to say it but I do kind of see your point of the 35 percent. I could see it better and feel it better if their was a way to successfully do something about those who falsified documents in order to receive some sort of govt funding. I defiantly don't mind helping others out but to those that take.....

  • junkmail5 May 30, 2013

    Again- here's some simply math.

    Let's say it costs $10,000 to "live", that is pay basic food, shelter, transport, etc.

    Now take a guy making $10,000 a year. And another making $100,000 a year.

    In ncouterbanks69 world- both 'fairly' get taxed at the same rate... say 10%.

    Except the $100,000 guy is still doing fine. Even if he wants nicer food and shelter and transport he STILL has money left over after paying for that AND his taxes.

    The $15,000 guy now has a choice- don't eat, or become homeless.

    Somehow ncouterbanks69 thinks those 2 situations are exactly the same, and it's perfectly fair and reasonable to make the poor guy decide if he wants to give up eating or having a roof over his head.

    All because he has no understanding whatsoever of basic economics. Or math.

  • junkmail5 May 30, 2013

    Just because someone "only" earned $20K doesn't mean they should be exempt from income tax.- ncouterbanks

    It does actually... because if you take 35% of his money he can't is gonna have trouble affording to even feed his family.

    But take 35% from a guy with 1 million in income, he's still living in a mansion and eating steak every night.

    Your utter inability to grasp this basic difference is one of the many, many, problems you appear to have understanding any basic economic concept.

    You can not apply the same tax to someone who is barely feeding himself as to someone who is a millionare, unless you set that rate so INCREDIBLY low that you won't take in enough to operate a government.

    Because the poor guy CAN NOT PAY any significant rate. Because he's poor.

    Holy cow how can you possibly not get this?

  • ncouterbanks69 May 30, 2013

    "Nobody is "exempt" from income tax.
    The first X dollars, not the person, are exempt from income tax."

    Nice contradiction. $1 earned should be taxed just like $1,000,000 earned should be taxed. It's called income tax for a reason. Just because someone "only" earned $20K doesn't mean they should be exempt from income tax. It really is not that hard but yet some seem to make it that way.

  • irnmaidnfan May 30, 2013

    Sorry ebt card

  • ncouterbanks69 May 30, 2013

    "This is mathmatically impossible, apart from being a horrible idea."

    You seriously must not understand math at all to think it is impossible. Bad idea? To you...but to those that understand fairness and equal participation it certainly is not. Percentages are really not that hard.

  • Ears to the Ground May 30, 2013

    Reply to ncouterbanks69:

    "Even if you pay no income tax, you still pay sales tax, car tax, gas tax, property tax, and social security tax."

    So since I pay all of those I should be exempt from income taxes? Sweet

    You do not get it. If those non-income taxes = say $2000/year that is 10% of a 20,000/year salary. But that same $2000/year is only 1% of a 200,000/year salary.

    During the economic prosperous 1950's and 1960's the top federal income tax rate was 70%. Today I believe it is around 35% even less if your income comes through investments.

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