RALEIGH – With a budget already weeks overdue, Republican Governor Pat McCrory and GOP leaders in the State House and Senate have brokered a compromise over tax reform that could pave the way for finalizing a spending plan and ending the legislative session.
McCrory, Senate President Pro Tempore Phil Berger (R-Rockingham) and House Speaker Thom Tillis (R-Mecklenburg) announced late Monday they have reached what is being called “a historic agreement on tax reform. “
In a press release, McCrory continued to cite that North Carolina has the fifth-highest unemployment rate in the country and needs tax reform to compete with neighboring states for job creation.
“All of us were elected to change the status quo here in Raleigh and address problems head on,” said Governor Pat McCrory. “One of the biggest challenges we faced coming into office was working to help create jobs in the existing environment. This tax reform plan is a major step in restoring confidence in the economy so that employers start hiring again, and it will help us continue to attract new employers. Just as important, this tax reform will allow North Carolinians to put more money in their pocketbooks so that they can spend and invest in North Carolina.”
“Reforming a state’s tax code is no easy task in the face of a barrage of special interests fighting to preserve the special treatment they receive at the expense of all taxpayers,” said Senator Phil Berger. “We’ve seen several other states – Kansas, Louisiana and Nebraska – give it their best shot but miss the mark. I’m proud of what we’re achieving here in North Carolina – we are truly a positive model for the rest of the nation.”
The tax reform proposal is fiscally responsible and provides reasonable revenue growth every year to meet the state’s budget needs. Since tax reform is expected to grow the state’s economy and bolster the tax base, further rate reductions could be triggered by revenue growth in 2016 and 2017. However, if for whatever reasons the tax revenue does not grow, the further reductions will not be triggered, ensuring that state revenue is preserved for public services.
“This plan will provide tax relief for working families throughout North Carolina and will enable businesses to create jobs for our citizens,” said Speaker Thom Tillis. “Our state will become more competitive because of this tax reform legislation, and North Carolinians will have more dollars in their pockets. I congratulate everyone who had a role in this historic agreement, especially Representatives David Lewis and Julia Howard, who led this effort in the House.”
“This plan reducing both personal and corporate income taxes combined with the General Assembly’s successful efforts last session to repeal the temporary sales tax accomplishes broad based tax relief that is unmatched in North Carolina’s history,” said Governor McCrory. “No other state has accomplished this level of tax reform this year and I would like to commend Speaker Tillis and Senator Berger for their hard work and congratulate them on reaching this agreement.”
While the large Republican majorities in each chamber are expected to approve the plan, there is criticism of he proposal.
“This is a bad deal for North Carolinians. What the Governor and Legislature agreed on won’t support job creation and it will drain resources needed to bolster our economy..” said Alexandra Sirota, Budget and Tax Center Director.
It puts at risk the ability to educate our children, care for our elders, keep our communities safe and support businesses, while failing to fix the problems with the state’s tax code. And, it gets rid of policies that work such as the Earned Income Tax Credit.”
“It is very likely that as a result of this failure to pursue real, comprehensive tax reform, state sales taxes and local property taxes will go up in the future. That’s what happened in every other Southern state that has personal and corporate income taxes that can’t keep up with growing public needs.”
More pointed criticism came from Gerrick Brenner, Executive Director of Progress N, who linked the tax issue to another issue debated last week.
"Gov. McCrory promised in his State of the State address that tax reform must be 'revenue neutral.' But today's budget deal is far from revenue neutral. The plan gives away huge tax breaks to the wealthy, while jeopardizing the investments that have made North Carolina such as wonderful place to live, work and raise a family-in particular, our public school system from Pre-K through the universities.," said Brenner in a statement issued late Monday.
"This makes two broken promises for Gov. McCrory in less than a week. Last week, McCrory shattered a campaign promise to women. Today he's caved on his own State of the State commitment to revenue neutral tax reform. By breaking his promises and failing to moderate a right-wing legislature, Gov. McCrory shows he is clearly refusing or incapable of real leadership."