Hours after Sen. Harry Brown rallied rural leaders to support shifting sales tax revenues, Gov. Pat McCrory issued a news release Tuesday vowing to veto the proposal.
Brown’s plan – folded into the Senate budget – would allocate much of the sales tax money based on population, instead of keeping the money where sales occur. That would offer a boost to small, rural counties, while some urban counties could lose millions.
McCrory called the legislation the “Tax Increase, Redistribution and Spending Act.” It’s the first time this session that the governor has promised a veto before a bill passed both the House and Senate. His spokesman also said he plans to veto the entire state budget if the sales tax provision is included.
“This bill will result in a tax increase for millions of hardworking middle-class families and small business owners throughout North Carolina,” the governor said in the release. “Redistribution and hidden tax increases are liberal tax-and-spend principles of the past that simply don’t work. More importantly, this bill will cripple the economic and trade centers of our state that power our economy.”
McCrory has criticized the plan before but issued his formal rebuke on the same day that Brown brought leaders from 40 rural counties Tuesday to the legislature to lobby for the tax change.
Brown says it’s wrong to view his plan as a “redistribution” of sales tax dollars.
“This plan finally corrects that decades-long redistribution of wealth from poor areas to urban areas,” the Senate majority leader said. “It helps ensure all North Carolina counties benefit from tax dollars.”
Brown says that criticism of the change has been overblown. “I think a lot of the attention given to this bill has been focused on the exaggerated and the extreme,” he said. “We’ve heard it called a lot of unfair names like the Robin Hood plan.”
Asked about McCrory’s opposition, Brown called on the governor to propose a different solution to the state’s urban-rural divide.
McCrory said his “N.C. Competes” jobs incentive plan would address the problem. “The best thing the Senate and General Assembly can do for the less populated areas across our state is to pass and allow us to implement the N.C. Competes jobs strategy which will benefit travel and tourism, agriculture, manufacturing and nearly every economic sector in our state,” he said Tuesday.
The N.C. Competes plan passed the House months ago, but the Senate wants to tweak the incentives program to direct a higher percentage of jobs funds to rural counties.
The sharp words highlight a bitter divide between the executive branch and the Senate. Brown issued a response to McCrory’s criticism late Tuesday afternoon.
“I can’t figure out if Pat thinks he is the governor of Charlotte or the mayor of North Carolina,” Brown said. “Today, over 100 local officials from across the state came out in support of sales tax fairness. Sadly, the governor’s tone-deaf response to their overwhelming support is doubling down on a 2007 sales tax policy change that kicked rural North Carolina in the teeth.”
Sen. Tommy Tucker, a Union County Republican, suggested his own renaming of the sales tax distribution bill. “I call this the Tax Reclamation Act,” he said. “We are reclaiming the dollars we’re spending in Charlotte.”
Leaders in urban counties – as well as some tourism counties that would lose money – argue that the point-of-sale approach makes sense because cities and counties must pay for the infrastructure that supports retail and employment centers.
Some of the strongest criticism has come from House Republicans. Brown said he has backing of many House legislators. House Rules Chairman David Lewis of Dunn dropped by Tuesday’s news conference briefly, but most legislators present were senators (the House was in session).
“I don’t think those House members (from rural counties) can not listen to their constituents that are in this room today,” Brown said.
County leaders at the news conference shared stories of inequities in their communities that they hope the Brown plan will address:
Low teacher pay in Hyde: “We’re one of the poorest counties in the state of North Carolina,” Hyde County school superintendent Randolph Latimore said. “We pay the lowest teacher supplement in the area, 1.5 percent. Our teacher salaries are the lowest in the area.” Most Hyde residents do their shopping in other counties, he added.
Mobile classrooms in Robeson: Robeson County Manager Ricky Harris said public schools there have more than 100 mobile classrooms to address overcrowding. “Robeson County hasn’t built a school since 1983,” he said. “You can imagine what we’re working with if our newest school is from 1983.” He said the sales tax plan would bring $3 million to $6 million in additional education funding.
High taxes in Scotland: Impoverished Scotland County has some of the highest property taxes in North Carolina: $1.03 per $100 valuation. The sales tax change, county commissioner Guy McCook said, “means the difference between us being a vibrant, viable community or trying to increase property tax rates one more time.”