The state Senate on Monday tweaked a proposed constitutional amendment to limit state spending increases and cap personal income taxes, but Republican leaders postponed a vote until Tuesday.
The bill would let voters decide next March on adding a “Taxpayer Bill of Rights,” or TABOR, to the state constitution.
The constitutional amendment would cap the state’s personal income tax rate at 5 percent. It would tie annual state budget spending increases to the rate of population growth and inflation. And it would create an emergency savings fund that could only be spent after a two-thirds majority vote in the legislature.
Each of those three elements would have gone before voters as separate questions under the original bill. But the bill’s sponsor, Sen. Brent Jackson of Sampson County, changed it to combine the issues into a single ballot question.
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“We felt like these three went together like a glove,” Jackson said. “We felt like it would be simpler to ask the voters one question.”
But Sen. Josh Stein, a Raleigh Democrat, said voters should be able to decide on all three changes separately. Some might support a “rainy day” fund but oppose a cap on spending or taxes, he argued. “I think it’s wrong to deny the voters that choice,” he said.
Jackson’s amendment – approved in a 33-15 vote along party lines – also clarified how the emergency savings fund would work. State budgets would be required to put 2 percent of the prior year’s spending into the fund, until the account balance totals 12.5 percent of the prior year’s budget.
“That would give us a rainy day reserve of 45 days (of government operations), which is about $2.7 billion,” Jackson said.
Democrats complained that the bill is being rushed through the Senate. It was first heard in a committee meeting last week; full votes are set for Tuesday and Wednesday. Stein said that Jackson’s changes should wait until Tuesday because senators didn’t see them until Monday night.
“I don’t think we should be amending the state constitution on the fly,” Stein said.
Senate Rules Chairman Tom Apodaca said the timeline for the bill allows for plenty of debate. “(Stein) is going to have two days in which to study and vote on this bill starting tomorrow,” he said. “He’s got all night to come up with the reasons he’s going to vote against it.”
Because the bill involves a constitutional amendment, it will need a three-fifths majority vote in the House and Senate to set a referendum for next year’s presidential primary.
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 with its 5 percent spending increase. Current estimates for population growth and inflation would allow only a 2.7 percent spending increase over the previous fiscal year.
Sen. Jerry Tillman, an Archdale Republican, praised the constitutional amendment. “This is one of the best things you can do to protect the taxpayers’ money,” he said.