RALEIGH — It’s usually negotiations over the state budget that have legislators sweating in June, but this year big decisions on both taxing and spending are testing their juggling skills.
Lawmakers are working on a major overhaul of the tax code that will determine how much money the state can spend in the new budget year starting July 1 and in future years.
The House and Senate’s budget and tax plans conflict, but legislative leaders said they can come to agreements on both in three weeks.
House Speaker Thom Tillis said Monday that tax and budget negotiations will run at the same time, but there’ll have to be an agreement on the tax plan first.
The House presented details of its budget to committees on Friday and released the full $20.57 billion budget late Sunday night.
Still, it expects to send the proposal to the Senate this week. Budget votes are scheduled for Wednesday and Thursday.
On Monday night, the House voted 75-37 to approve a new tax code that would cut personal income tax next year to a flat 5.9 percent and gradually reduce the corporate tax rate from 6.9 percent to 5.4 percent by 2018. The bill raises the sales tax on electricity and extends a 6.65 percent sales tax to maintenance, repair and installation services.
Republicans argued that the changes will foster business growth and allow taxpayers to keep more of their money.
“This is a plan of action that respects all of our citizens,” said Rep. John Szoka, a Fayetteville Republican.
Democrats decried the changes for giving bigger breaks to the wealthy.
“Most North Carolinians would call this tax proposal yet another Republican tax cut for millionaires,” said Rep. Nathan Baskerville, a Henderson Democrat.
The Senate has proposed but not voted on a farther-reaching rewrite of the tax code that aims to extend the sales tax to more services and products, including food and medicine.
Senate leader Phil Berger said the House and Senate can resolve their differences by the July 1 deadline.
The House budget assumes a tax plan that would cost the state $38.5 million next year, along with the repeal of the estate tax, which would cost $52 million. The Senate budget assumes tax changes that cost $217.1 million next year, a figure that includes the estate tax repeal.
Both the House and Senate have budget proposals that come in at about $20.6 billion, but their priorities are very different. Neither budget has raises for state employees or teachers, but the House budget would give them five extra vacation days.
The House proposes tuition increases for out-of-state students at UNC system schools, paying for more teacher assistants than the Senate or Gov. McCrory, and revives the Teaching Fellows teacher recruitment program. The Senate has no tuition increases and would continue to phase out Teaching Fellows.
Finance bill headed to McCrory
The Senate on Monday agreed with the House on a measure that raises interest rates for most consumer finance loans.
The bill calls for a 30 percent interest rate on loans of up to $4,000. For larger loans, the 30 percent interest applies to the first $4,000 and drops to 24 percent for the next $4,000 and to 18 percent for the next $2,000.
The Senate passed the bill 40-8 without debate. It now goes to Gov. Pat McCrory.