NC Senate moves to lock in tax cuts

North Carolina could not raise personal or corporate incomes tax rates above 5 percent under a constitutional amendment proposed Thursday. The same measure also calls for constitutional controls on state spending.

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North Carolina Sales Tax
Mark Binker
RALEIGH, N.C. — Republicans in the North Carolina Senate are hoping to write their lower-tax, small-government philosophy into the state constitution.

Senate Bill 607 calls for three constitutional amendments, one of which would cap income taxes on corporations or individuals at 5 percent. North Carolina's corporate income tax is already slated to fall under that level, but the individual income taxes currently sit at 5.75 percent, and most plans that have been floated so far this session don't anticipate going under 5 percent.

All three amendments would be posed to voters during the presidential primary vote in March of next year.

The move could cost the state somewhere between $1.7 billion and $2 billion.

While critics say lowering the current constitutional cap from 10 percent to 5 percent could bind the hands of lawmakers in emergencies and changing circumstances, supporters say it continues GOP efforts to move away from reliance on income taxes.

"We do have at our disposal the ability to expand and increase sales taxes, consumption taxes," Senate Finance Chairman Sen. Bill Rabon, R-Brunswick, said.

In order for an amendment to be added to the constitution, it must pass by a three-fifths majority of both the House and the Senate and then pass a statewide referendum.

Along with the tax-capping measure, Senate Bill 607 also creates a constitutionally controlled rainy day fund. Unlike the rainy day funds currently created by law, this one could be accessed only on a two-thirds vote of the House and the Senate and is designed to be used only in times of crisis, such as a natural disaster. The language in the bill would specifically block the governor from accessing the account without legislative approval.

The third provisions would allow voters to limit the growth of government to a calculation that includes population growth and inflation.

"States that have these 'Taxpayer Bill of Rights' have immediately regretted it," Sen. Josh Stein, D-Wake, said.

Locking down the growth of spending, Stein said, doesn't allow the government to respond during a crisis.

Other critics, including Sen. Terry Van Duyn, D-Buncombe, questioned whether the state would be able to make up for education and mental health spending that was cut during the recession years of the last decade if spending was so curtailed.

"Are we going to take care of business before we start messing with the constitution?" Van Duyn asked.

The measure passed on a voice vote, but its future is far from certain, even if it passes the Senate next week. House lawmakers, including House Speaker Tim Moore said they know little about the measure.

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