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Tax cap proposal stirs up simmering legislative tensions

June 14th, 2018

— The resurrection Wednesday of a proposal to cap the state’s income tax rate also revived tensions at the General Assembly over policy and political rhetoric.

The Senate last year approved putting a proposed constitutional amendment before voters to prevent the individual income tax rate from rising above 5.5 percent. The current limit in the state constitution is 10 percent.

Current tax rates are 5.499 percent for individuals and 3 percent for corporations, although both are set to slide lower next year.

Rep. Graig Meyer, D-Orange, expressed concern that the cap would force the state to raise sales taxes and user fees on people to generate revenue in a future economic downturn, which he said would disproportionately affect lower-income families.

Sen. Tommy Tucker, R-Union, noted that income tax collections decline during a bad economy as people lose their jobs. He contrasted a Democratic decision to enact a temporary one-cent increase to the sales tax rate in 2009 during the depths of the recession with Republican efforts to cut taxes in recent years, which he said have left the state with a booming economy and a healthy “rainy day” fund.

“History has taught us – and facts do matter – that the previous tax policy of raising income tax would not be beneficial,” Tucker said.

Noting that corporate or excise taxes could be raised, if needed, he added, “There are many, many options if the legislature chooses to go on this spend-everything-we-have mode again.”

Rep. Jeff Collins, R-Nash, agreed with Tucker that lawmakers would have options other than resorting to income tax increases to address budget problems.

“When things are going well, you set aside and save for times when things are going to be a little more difficult,” Collins said. “It’s also possible to cut your expenses. … That’s something government, especially on the left, doesn’t seem to recognize the existence of. You can get to the point where you just do services that government should be involved in and don’t try to solve everybody’s problem for them.”

“I find all the soapbox conversation sort of inflammatory and not helpful to the bill at hand,” Rep. Deb Butler, D-New Hanover, said before asking a question about any impact the tax cap might have on the state’s AAA bond rating.

An irritated Tucker shot back, “I would assure you they are facts and not soapbox and not just frivolous statements. If facts don’t matter, then that can be your position.”

“Facts matter entirely, which is why I asked the question about whether or not you considered the bond rating issue. Apparently, you have not,” Butler said.

The proposed amendment passed the House Finance Committee on a voice vote and heads next to the House Rules Committee before going to the floor.

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