Legislators' vote blurs line between self interest and state policy
Published May 11, 2021
By WRAL TV
The question is not whether at least 30 members – 25% of the of the state House of Representatives – who have ties to entities that received federal Payroll Protection Program loans have a conflict of interest when voting to give those entities a state tax break.
The questions are:
* Whether those legislators should have publicly announced the conflict before voting?
* Whether the existence of the conflict impaired the independent judgement of those legislators to the point where they should have requested an excuse from voting on the issue?
The forgivable PPP loans are part of the federal program to provide COVID-19 pandemic-related economic relief to businesses with fewer than 500 employees – so would not be considered income for federal tax purposes.
In North Carolina, PPP loans have gone to about 113,000 businesses. That may seem like a lot, but it represents 14% of all the businesses in the state. For example, individuals who are self-employed or businesses that have more than 500 employees (such as Capitol Broadcasting Company) were not eligible for the assistance.
The state law, expected to drain $600 million from the state budget if it becomes law, would tie state tax law to the federal tax rules.
There are a couple of key considerations for legislators when voting on such legislation. First -- is the legislation good or bad policy? That’s not our subject.
But at least as significant if not more so, is whether legislators or entities they are tied to stand to directly benefit from their votes on the matter.
This is significant. House Speaker Tim Moore, R-Cleveland County, got $25,000 in PPP loans at his law firm. Rep. Brian Turner, D-Buncombe, owns part of a business that got more than $800,000 in PPP loans.
Moore, who voted for the bill which passed with a single dissenting vote, sought an opinion from the Legislative Ethics Committee as to whether it would be appropriate for a legislator who received PPP loans to “vote on legislation that would align North Carolina tax treatment with federal tax law.”
The opinion, signed by the Republican co-chairs of the committee, said those legislators receiving the loans were free to vote on the bill because “the financial benefit or detriment that accrues to the legislator from changes in the law is no greater than the financial benefit or detriment that could reasonably be foreseen to accrue to all persons or businesses that accepted a PPP loan.” The opinion went on to note if a legislator “determines that his or her independence of judgment is impaired, the legislator may request to be excused from voting.”
Good judgement would have mandated BEFORE voting, that legislators receiving significant, direct benefits should have at a minimum, declared their interest. Even better judgement would have been for them to declare their conflict and excused themselves from voting on the issue.
Only a single legislator benefitting from PPP loans, Rep. Deb Butler, D-New Hanover County, recused herself from voting because her law firm received an $8,400 loan. While she said she favored the bill, voting on it would have been inappropriate. “Right is right, and that is what felt right to me.” Another legislator, Rep. Allison Dahle, D-Wake County, excused herself from voting because she filled out loan paperwork for the law firm where she works – even though she doesn’t own the business.
It took an investigation by WRAL News to identify the 10 Democrats and 19 Republicans who have direct ties to PPP loans and voted for the bill. These legislators, at the least, should have publicly and clearly disclosed their direct interest in the PPP loans before a vote was taken.
The point here is not the good or bad of a policy to provide a tax break.
It is whether constituents are confident their legislators are, beyond any shadow of a doubt, acting on what is best for North Carolina and not their own financial benefit.
These 29 state representatives should have followed Butler’s course and made their top priority on transparency and excused themselves from voting. If and when the bill, or anything similar, comes before the state Senate, those in that chamber who have direct connections to PPP loans should make it clearly known and better yet, excuse themselves from voting on the legislation.
Having permission from the Legislative Ethics Committee to do something doesn’t make the action any more correct.