The Senate’s sweeping $1 billion tax cut plan passed its first vote Tuesday along party lines. But even bigger news — and a larger tax cut — might emerge from the House.
Rep. David Lewis, R-Harnett, a vice chairman of the House Appropriations Committee, said after the Senate and House tax plans are reconciled, “We might even have a larger than $1 billion tax cut.”
Lewis spoke to Carolina Journal minutes before the Senate opened a 45-minute floor debate on its plan. Not only did he express optimism that the General Assembly might return more money to state taxpayers when the final General Fund budget is complete, he also suggested that the budget negotiating process could move more smoothly than usual.
“While I can’t speak to the Senate’s timetable, I feel very comfortable that we’ll be able to get a budget passed and to the governor in mid-June,” he said. The fiscal year ends June 30.
Just last week, in response to a reporter’s question about the budget timetable, Senate leader Phil Berger, R-Rockingham, joked, “It’s not even April yet.”
Senate Bill 325 passed on a strictly party-line vote, 35-14. Assuming it passes a third required usually pro forma vote on Wednesday, the bill would move to the House. As Rules Committee chairman, Lewis would control timing and committee assignments of the Senate bill.
The bill is a mix of reduced personal and corporate tax cuts, a per-child tax deduction, greater mortgage interest deduction, and a higher amount of personal income exempted from taxes.
Tuesday’s debate mirrored the same arguments and talking points from two earlier committee hearings on the bill.
“How much lower do we need to go,” Sen. Floyd McKissick, D-Durham, said in opposing the bill because of the tax cuts. He said cities, towns, counties, and the state had “a laundry list” of projects that need to be funded, ranging from new highways and schools, to employee pay raises, building maintenance, and water and sewer infrastructure.
“Stop playing to the headlines,” he scolded his Republican colleagues.
“I’ve heard it now I don’t know how many times,” shot back Sen. Jerry Tillman, R-Randolph, a Senate Finance Committee co-chairman and one of three primary sponsors on the bill. He chastened McKissick for what he characterized as the Democrats’ irresponsible tax-and-spend policies, while Republicans want to give surplus money back to the people it came from.
“If you think the government can spend it better, I’ve got news for you,” Tillman said. “It can’t.”
Sen. Dan Blue, D-Wake, said rather than returning somewhere between $50 and $100 per taxpayer in the form of cuts, the money should be used to build new schools “so we don’t lose a generation of kids.”
While Republicans talked about low-income, rural counties benefiting from the legislation, “The bulk of this tax cut is coming from the major urban counties, and there are critical needs in the urban counties,” Blue said.
“Some of us think that people ought to hold on to as much of their own money [as possible], and make their own decisions on how to spend it,” Berger said, echoing Tillman’s argument that individuals make better decisions with their own money than the government can.
Tax cuts, spending restraint, eliminating regulations, and building savings reserves is the GOP model, Berger said.
“Look what’s happened. We have seen money left in the pockets of people all across this state work in the economy” to enable business and job growth, Berger said. “Hundreds of thousands of North Carolinians now have jobs that didn’t have jobs a few years ago.”
Lewis said he foresees no great pushback against the Senate bill from House Republicans.
“I think there’s a substantial appetite in the House to perhaps add provisions of our own tax cut package that weren’t in the Senate tax cut provision, and try to put those together. I’m excited,” Lewis said.
“Both chambers had a priority to raise the zero percent income bracket [standard deduction] where you could earn more money in the state before you had to pay any taxes,” Lewis said. “That’s one of the best things you can do to help people in the lower-economic income scale. That’s in both packages, and you’ve got to assume that’s going to stay.”
The House contemplated items such as expanding the mortgage interest deduction. The Senate proposes to grow that deduction, he said. “I think that’s a nice compromise.”
A tax cut package could pass on its own merits.
“I think you’ll probably see the tax cut added to the budget anyway, so I don’t think it’s going to be that big of an issue of which chamber proposed it,” Lewis said.
The House plan does not include the Senate’s market-based sourcing provision. That plan would tax only revenue generated in the state, not business profits in other states. The goal is not to punish growing companies that invest capital and create jobs in North Carolina.
“I don’t know that we’re opposed to it. I just don’t know that we fully discussed it in committee and understood it as well as we should before we vote on it,” Lewis said. “I just don’t think it’s been a priority thus far for the House chairs.”