Senate Republicans want to add spending and income tax caps to the state’s constitution through a referendum next year.
The Senate Finance Committee voted Thursday to move forward with a “Taxpayer Bill of Rights,” or TABOR, constitutional amendment.
If the bill gets a three-fifths majority vote in the House and Senate, voters would face three separate amendments during next year’s presidential primary.
One would cap the state’s personal income tax rate at 5 percent. Another would tie annual state budget spending increases to the rate of population growth and inflation. And a third would create an emergency savings fund that could only be spent after a two-thirds majority vote in the legislature.
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The bill’s sponsors, Republican senators Brent Jackson and Bill Rabon, said the constitutional amendments would control government spending and help shift North Carolina away from income taxes.
“It has been the intent and the desire of this legislature to do our level best to lower the most onerous tax we have – personal income,” Rabon said, adding that legislators could still raise necessary revenue. “We do have at our disposal the ability to expand and increase sales tax. The hands of the legislature are not bound in the ability to raise taxes in an emergency.”
Democrats opposed the plan, saying it hasn’t worked in other states. “States that have had this Taxpayer Bill of Rights have immediately regretted it,” said Sen. Josh Stein, a Raleigh Democrat. He added that it “seems like really bad governance.”
The 5 percent tax rate cap would require the state to reduce the current 5.75 percent rate – which has already been dropped from a maximum rate of 7.75 percent for the wealthiest taxpayers.
The budget limit would match the Senate’s spending preferences. If the cap was in place this year, the House budget would have exceeded the limit by $500 million. Current estimates for population growth and inflation would allow only a 2.7 percent spending increase over the previous fiscal year, explained Barry Boardman, the legislature’s chief economist.
Senate leader Phil Berger this week called for the 2.7 percent figure to be a target in budget talks. The original Senate budget would increase spending 2 percent, while the House had a 5 percent increase in its plan.
Advocacy groups immediately weighed in on the proposed amendment. The conservative Americans For Prosperity issued a statement praising the proposal.
“With the passage of this bill, taxpayers have a shot at determining their own tax rates, and power will truly belong to the people when they have the choice of whether or not to control government spending,” said Donald Bryson, state director for the group.
The liberal N.C. Justice Center urged supporters to lobby against the bill. “The combined impact of these changes would be devastating for our state’s ability to invest in schools, health, economic development and other critical public structures in our state,” the group said in a statement.