NCGA Week in Review – May 27 – May 31

May 31, 2013

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Three Tax Plans Heard in Committee Thursday

Lawmakers provided new details for three competing tax plans that were heard in the House and Senate Finance committee meetings Thursday. Two of the plans started in the Senate, one sponsored by Sen. Robert Rucho, and the other sponsored by Senators Fletcher Hartsell and Daniel Clodfelter. The third plan, started in the House, is sponsored by Rep. David Lewis. The House plan would move to a flat personal income tax of 5.9 percent for all taxpayers, starting in 2014. It would double the standard deduction and cap itemized deductions at $25,000. The sales tax would also be expanded to cover new services, including businesses involved in the repair, alteration, or installation of tangible goods, such as auto repair shops. Sales taxes would also be charged on movie and other entertainment tickets, as well as service contracts. The sales tax rate would be lowered to 6.65 percent. The house plan would also reduce the state franchise tax slightly, beginning in 2015, but would not expand the base. The corporate income tax rate would be lowered from 6.9 percent to 5.4 percent incrementally over several years. The plan is expected to decrease revenues by $1.4 billion over five years. House Bill 998 is scheduled for further debate in the House Finance Committee on Tuesday, with a vote expected on Wednesday.
Senate Bill 394, a bipartisan tax plan sponsored by Senators Daniel Clodfelter and Fletcher Hartsell, was introduced to the Senate Finance Committee on Thursday. Similar to the House plan, the plan calls for a flat personal income tax rate at 5.95 percent. The plan would also expand the franchise tax base while reducing the rate. The state sales tax would fall from 4.75 to 4.5 percent by 2016, while expanding the base to include more services. The corporate tax rate would fall to 5.95 percent in 2014.
The third tax plan, sponsored by Senator Robert Rucho, would reduce the personal income tax to 4.5 percent by 2016, while including special exemptions for lower-income taxpayers. The bill would also expand the sales tax base to dozens of services not currently taxed, while decreasing the overall rate from 6.75 to 6.5 percent by 2015. Senate Bill 677 would also reduce the corporate income tax over three years to 6 percent in 2016, while slightly reducing the franchise tax starting in 2015. The bill also sunsets many special tax breaks and exemptions in 2014 and 2015.
NC Commerce Protection Act Comes to Life in Senate
Senate Bill 648 would make undercover investigations by reporters or activists illegal in North Carolina. The bill would prohibit outside undercover investigations by anyone other than law enforcement at any business. Although the bill is broad, it is similar to legislation in other states that has its roots in protecting the livestock industry. Known as “ag-gag” bills, they are meant to bring a halt to investigations of animal cruelty or food safety by animal welfare groups and news media. The NC Chamber, a main supporter of the bill, argued that the bill is not meant to stop whistleblowers, but to stop people from lying on their job applications. The bill would create two new offenses. The first would prohibit lying or failing to disclose information on a job application to gain access to a business for the purpose of taking photographs, video or audio, or to remove records from a business. The second offense would require someone who obtains those records under a guise to give them to police within 24 hours. First time violators could be punished with a fine up to $10,000. Supporters of the legislation argue that the bill will bring transparency to employment. Opponents of the bill claim that it limits their constitutional right to freedom of speech and freedom of the press.
Racial Justice Act Repeal Heads to House Floor
A proposed repeal of the Racial Justice Act will be heard on the House floor next week after it passed through a House judiciary committee on Wednesday. The Racial Justice Act allows death-row inmates to seek to have their sentences commuted to life without parole if they can prove to a judge that racism played a role in their sentencing. By 2010, 152 of North Carolina’s 156 death row inmates had filed for relief under the act, including white convicts who killed white victims. Those who support the repeal argue that the law is unjust and slows down the judicial process. Meanwhile, opponents of the legislation claim that the repeal would bring racism back into the court system.
House Approves Dix Compromise
The House approved a compromise measure to renegotiate Raleigh’s lease on the Dorothea Dix property on Wednesday. By passing the compromise, the House set up a showdown with Senate leaders who oppose the deal between Raleigh leaders and Governor Pat McCrory. The bill would allow a year to renegotiate the December agreement that leased the Dix property for the park. A new agreement could be a lease or sale of the land. Under the compromise, Raleigh would get a chance to buy the 40-acre Governor Morehead School, which would connect the Dix property with Pullen Park. The state would keep 30 acres for the Department of Health and Human Services. Raleigh leaders are on board with the compromise, claiming that the additional year allows for proper surveys and studies to be conducted on the land. The compromise will face fierce opposition in the Senate, and the bill will likely head to conference committee after concurrence fails. Senate leaders argue that the bill cedes more ground to Raleigh, instead of revoking a lease they believe is invalid.

Please contact the Raleigh McGuireWoods Consulting team if you have any questions or comments:

Harry Kaplan, Senior Vice-President
Jeff Barnhart, Senior Vice-President
Franklin Freeman, Senior Vice-President
John Merritt, Senior Vice-President
Johnny Tillett, Senior Vice-President
Rita Harris, Vice-President
Bo Heath, Vice-President
Kerri Burke, Assistant Vice-President
Sarah Wolfe, Research Assistant
Katy Feinberg, Strategic Communications