Senate weighs dueling tax reform plans

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 It is an attempt to fix an antiquated, outdated tax code.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.

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.