Is tax reform starting to unravel?

| March 31, 2015

Patrick Gannonby Patrick Gannon, The Insider, March 30, 2015.

Are the Republican-led tax reform efforts of the past couple of years “unraveling”?

Not yet – at least not in any major way.

But that word is getting used increasingly in debates as the General Assembly mulls tax and economic incentives proposals this legislative session, including the possibility of bringing back certain tax credits, exemptions and deductions removed from the state tax code the past couple of years.

A strong majority of the House showed last week that it had no qualms retreating from a recent decision on taxes and incentives. The Senate might be another story.

The 120-member House overwhelmingly voted to bring back an historic preservation tax credit program – albeit a scaled-back, less expensive one – to give developers and other property owners financial motivation to take on the cost of rehabbing old structures that might otherwise fall into disrepair or get torn down.

Every House Democrat supported the proposal, but 15 of the more conservative House Republicans voted against it. Opponents argued that both the House and Senate agreed that allowing the former historic preservation credit to expire last year was the right choice to save the state money as part of tax reform efforts.

“Were we wrong then, for crying out loud, that we’re ready to undo it?” said Rep. Michael Speciale, a conservative Republican from New Bern, during House debate.

The new program would cost the state about $8 million a year.

Also last week, the House Aging Committee unanimously endorsed the return of a tax deduction for medical expenses for seniors. That deduction was eliminated in 2013, and many older residents are realizing the financial implications as they prepare their taxes this year. Expect the same arguments about the undoing of tax reform if that bill gets heard by the House Finance Committee, its next stop.

Rep. Jason Saine, a Lincoln County Republican, chairs the Finance Committee. He said in a recent interview that tax reform is a marathon, not a sprint.

“It’s always open for change. We see what works. We see what doesn’t work,” he said. “As legislators, regardless of what jersey we’re wearing, we need to be responsible enough to say … we can change some things along the way, so that no one’s married to any bill. No one’s married to any policy.”

The Senate is more stubborn, particularly that chamber’s top Finance chairman, Sen. Bob Rucho of Mecklenburg County. It was Rucho who began spreading the message a couple of years ago about creating a simpler tax code with lower personal and corporate income tax rates for all taxpayers and fewer special perks and incentives for favored industries. Roughly 40 exemptions, credits and breaks have been eliminated since 2013. Rucho doesn’t want to see them come back.

This debate between tax reform purists and not-so-purists won’t end anytime soon. It also is exposing rifts among Republicans on tax policy, mainly in the House so far.

So will majorities in the House and Senate decide to acknowledge mistakes were made during the first round of tax reform and re-enact some of the eliminated programs? Or will they continue to remove tax breaks from state tax laws and push instead for lower rates for all?

The answer may depend on who wins – the House or the Senate – as these decisions come to a head later this session.

Category: NC SPIN Perspectives - Opinions from NC Leaders & Organizations

Comments (2)

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  1. Norm Kelly says:

    Should NOT be much of a debate on any of the tax changes. It’s a simple formula, really. Remove, eliminate special programs for favored groups, industries, or perks for anyone. The best policy, which would be best for everyone in the state, and could go some way in spurring economic activity, would be to have the same tax rate for every one and every thing. No special tax treatment for ANY business. No special tax treatment for ANY personal activity. No special tax treatment for ANY business or individual who chooses to move or expand here.
    If you have income in the state, you should be treated exactly like any other income earner in the state. No one should get any special treatment.
    I know this eliminates the games that pols LOVE to play with other people’s money, but it is the RIGHT thing to do and it’s also right! No one person or business is any more important or less important to the overall economy of the state. And if all special treatment and perks were eliminated, could we all experience less of a tax bite? Could we all notice some extra money in OUR wallets? I truly believe that if I earn it, it BELONGS TO ME! As opposed to every demon/lib/socialist pol out there who believes and governs as if all money belongs to THEM and they ALLOW some of earners to keep some of the money. Purely out of their generosity, of course. But socialism has proven to be a bad economic scheme. Freedom, and the ability to keep more of what I earn, has proven to be a tremendous economic plan. It’s a proven fact that individuals spend money much more efficiently than any government, and spur economic activity where government is incapable of doing so. The less the state spends where it is NOT SUPPOSED to spend, the more we get to keep in our pockets! The more anyone or any business is taxed, the more either is regulated, the less likely they are to be economically active in our state. So, leaving money in OUR pockets is the BEST, most reliable method for taxing and spending. Pols are terrible, God-awful, at picking winners & losers, and staying in touch with advancements in economic activity, technology, and changes in any fashion. So their schemes always, always, without variation, cause more problems than they solve. Rarely does leaving money in people’s pockets cause more problems than it cures! Yet lib media types, socialist pols (think Warren, Billary!), and demons of every stripe insist that it’s government activity that spurs economic activity. Ask one of them sometime to prove their theory. They are incapable of doing so.

  2. Richard L Bunce says:

    The only mistake made in the first round was not going further in lowering rates like they are proposing in the second round.