News: Quick Takes

Tax cap amendment clears key House committee

A proposed state constitutional amendment which would reduce the cap on the income tax rate to 5.5 percent moved closer to a statewide referendum Wednesday, despite the protests of Democratic lawmakers.

The House Finance Committee approved Senate Bill 75 by a voice vote along party lines. Democrats asked for a roll call vote, but didn’t follow procedure, and the bill passed. It then moved to the House Rules Committee.

The N.C. Constitution now caps the state income tax rate at 10 percent. The personal income tax stands at 5.499 percent. The rate will fall to 5.25 percent for the 2019 tax year, when the proposed cap would go into effect.

Collegiality between Democratic and Republican members was strained after their two-hour meeting cut into lunchtime and was filled with arguments over the seriousness and intent of legislators’ rhetoric.

The bill’s sponsor, Sen. Tommy Tucker, R-Union, got pushback from Democrats over the potential damage the tax cap could have on the state’s AAA bond rating. Tucker said he thought the bond rating was safe.

John Locke Foundation analyst Joe Coletti, who studies fiscal matters, says responsible budgeting is most important.

“What ratings agencies care about is that you live within your means,” Coletti said. “North Carolina has proven that it can live within its means. If we keep spending under control, everything takes care of itself.”

Rep. Graig Meyer, D-Orange, echoed the left-leaning N.C. Justice Center, which claimed the amendment may cause local governments to raise sales or property taxes to make up for revenue potentially lost from state funds.

Meyer said if the state’s economy worsened in the future, tax increases would hit working people hardest.

Tucker disagreed. He said lawmakers have a duty to set aside money for tough economic times, and could consider increasing revenue from other sources instead of raising the income tax.

Rep. Robert Reives, D-Lee, closed the debate by summarizing the Democratic opposition to an amendment, He said he supported the idea of potentially lowering the tax burden, but “adding things to the constitution gives you the type of inflexibility that it does cause problems in the future.”

A SurveyUSA poll sponsored by the conservative nonprofit Civitas Institute found that 66 percent of registered voters polled would be in favor of an income tax cap amendment. Eighteen percent of voters said they would be opposed to the amendment, while 21 percent said they were unsure.

Coletti said that ideally, there would be comprehensive limitations on all taxes. According to the Civitas poll, though, 34 percent of voters were unsure if they would support limiting budget growth to the sum of annual inflation and the population growth rate. It was the only potential amendment of the five surveyed which didn’t get the backing of a majority of respondents.

Civitas Action, the political advocacy arm of Civitas Institute, announced Wednesday it would grade and publicize legislators’ votes on the bill.

“Civitas Action believes in strongly protecting North Carolina taxpayers against future legislatures’ desires to raise taxes to fuel their spending habits,” the group said in a statement.

On ballots this fall, voters would mark that they’re for or against the statement, “Constitutional amendment providing that the rate of tax on incomes shall not exceed five and one-half percent (5.5 percent).” The amendment is one of 18 introduced during the 2017-2018 legislative sessions.