Rucho resigns as finance chairman over tax disagreement

A leading proponent of tax reform in North Carolina has resigned a key Senate chairmanship, saying "special interests" have forced other leaders to back off needed reforms. Senate leader Phil Berger refused to accept the resignation.

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Phil Berger and Bob Rucho
RALEIGH, N.C. — The Senate's leading proponent of rewriting the state's tax code has resigned a key chairmanship in protest over the tax reform plan his chamber is pursuing, saying that special interests have cowed other political leaders.

"When you stand on a certain principle and see how things are going another way...you have to say it's time to do something else," Rucho told WRAL News.

In his letter, Rucho told Berger that they had "a fundamental disagreement on the most effective model of tax reform and management of that legislation."

Berger replied to Rucho via his own letter Thursday, saying only that he refused to accept Rucho's resignation. A spokeswoman for Berger said the Senate's top leader had no other comment.

Rucho has spent much of the year rallying support for rewriting the state's antiquated tax code. Key to the plan he put forward are big cuts to corporate and personal income taxes paid for by relying more heavily on sales taxes. Rucho's plan would have expanded sales taxes to between and 130 and 160 services. His plan also advocated for treating manufacturers more favorably under the tax code. 

Basing state revenue on "consumption taxes" levied when people buy things rather than when they earned money would spark economic growth, he said. 

"There seems to be resistance from the Governor's Office and the Speaker's Office" to that idea, Rucho said. 

For Rucho's plan to work, the state needed to close a number of tax breaks for specific industries. In total, there are $9 billion in "tax expenditures" that represent favorable tax treatment of specific individuals and industries. In December, Rucho warned that the effort could "turn into the Lobbyist Full-Employment Act."

Rucho said Thursday that prediction had apparently come true.

"It seems like the special interests got in the way, and that's a shame because they're causing everybody's taxes to go up," he said. In his letter, Rucho placed that blame squarely at the feet of House Speaker Thom Tillis and Gov. Pat McCrory.

"It is a huge disappointment that the Governor and the Speaker of the House did not provide the leadership or have the political backbone to fight the special-interest groups, who favor loopholes over a fair tax system," Rucho wrote. 

Tillis said that Rucho appeared to be speaking out of frustration. 

“This simply appears to be frustration that adequate support could not be generated for this particular tax plan in the Senate. The House, meanwhile, passed a tax reform plan last week. We’ll continue to work with the Governor and the Senate toward the common goal of tax reform," Tillis said.

The House tax reform plan shares some aspects in common with the Rucho bill. It expands sales taxes to certain services and pares back income taxes, but it is far less sweeping than the Rucho bill. Earlier this week, Berger rolled out his own tax bill, which contains no expansion of the sales tax base and closes only a handful of loopholes.

The Senate Finance Committee passed Berger's proposal Wednesday, and it was expected to be debated on the Senate floor Thursday.

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