The Senate voted 36-12 Monday night to approve an economic development bill that features new money for jobs incentives and a controversial plan that changes how sales taxes are distributed.
The bill softens the impact of earlier proposals on the sales tax revenue plan, which had prompted outcry from some urban and tourism counties that would lose substantial money. The effort in the Senate is aimed at pumping more state money into areas of the state, generally smaller and more rural, that have not seen the same prosperity as in larger counties.
As it is now, the majority of sales tax revenue in each county stays where the sale occurred. Senate Majority Leader Harry Brown had earlier called for distributing 80 percent of revenues based on population and only 20 percent based on the sale location.
The Senate’s new proposal would split revenues, with half staying in the county where the sale took place and half then distributed based on county population. The change would take effect in 2016. Brown says it’s a fair approach.
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“Gosh, guys, don’t be so greedy,” he said of urban counties that have protested the change. “Give these counties some.”
A breakdown of the revenue impacts for each county shows about 80 counties would gain money and 20 counties would lose, compared with revenue projections made under current law.
Wake County would lose $6 million, or 4 percent of its sales tax revenues. While the percentages indicate a softer blow to urban counties under the latest plan, Wake actually fares worse under the new proposal. That’s because the compromise bill doesn’t include any new sales taxes on services initially proposed.
Rural lawmakers said the change is crucial to help funding as jobs and retail shift toward urban areas.
“We have areas of this state that aren’t growing, that are declining in population,” said Sen. Ralph Hise, a Mitchell County Republican. “We have to make sure that our rural areas are sustainable. We’re trying to change a system so that we can become one North Carolina.”
But Senate Minority Leader Dan Blue questioned how much the sales tax change will help rural counties, some of which would get a boost of several hundred thousand dollars – hardly enough to build new schools.
“It’s still not going to provide the services that these counties deserve,” he said.
The economic development bill approved Monday also includes the Senate’s plan to raise the cap on the Job Development Investment Grant, or JDIG – the state’s main jobs incentive tool.
The latest Senate proposal would cap JDIG spending at $20 million per year, with an additional $5 million for the current year. The awards would be more generous in poorer counties and most generous for companies investing at least $750 million while creating at least 2,000 jobs.
The Senate bill has also added tax credits for jet fuel and technology data centers that the House has already approved. And it phases in the single-sales factor for calculating corporate income taxes – effectively an additional corporate tax cut that favors companies with extensive property and payroll taxes in the state.
“It is everything that folks who are looking at economic development have been asking for,” Senate leader Phil Berger said of the bill.
That portion of the bill didn’t get much debate, but it did win praise from Blue. “This bill does an excellent job in dealing with five out of six issues,” he said. “You’ve even convinced me that the single-sales factor is something we needed to look at.”
A final vote is set for Tuesday afternoon.