Are the Republican-led tax-reform efforts of the past two years “unraveling”?
Not yet – at least not in any major way.
But that word is getting used increasingly in debates as the General Assembly mulls tax and economic-incentive proposals this legislative session. Those proposals include the possibility of bringing back certain tax credits, exemptions and deductions removed from the state tax code the past couple of years.
A strong majority of the House showed recently that it had no qualms retreating from a recent decision on taxes and incentives. The Senate might be another story.
The 120-member House overwhelmingly voted to bring back a tax credit for historic preservation – albeit a scaled-back, less expensive one – to give developers financial motivation to take on the cost of rehabbing old buildings that might otherwise fall into disrepair or get torn down.
Every House Democrat supported the proposal, but 15 of the more conservative House Republicans voted against it. Opponents argued that both the House and Senate agreed that allowing the former historic-preservation credit to expire last year was the right choice to save the state money as part of tax-reform efforts.
The new program would cost the state about $8 million a year.
Also recently, the House Aging Committee unanimously endorsed the return of a tax deduction for medical expenses for seniors. Lawmakers eliminated that deduction in 2013, and many older residents are realizing the financial implications as they prepare their taxes this year. Expect the same arguments about the undoing of tax reform if that bill gets heard by the House Finance Committee, its next stop.
Rep. Jason Saine, a Lincoln County Republican, chairs the Finance Committee. He said in a recent interview that tax reform is a marathon, not a sprint.
“It’s always open for change. We see what works. We see what doesn’t work,” he said. “As legislators, regardless of what jersey we’re wearing, we need to be responsible enough to say … we can change some things along the way, so that no one’s married to any bill. No one’s married to any policy.”
The Senate is more stubborn, particularly that chamber’s top Finance Committee chairman, Sen. Bob Rucho of Mecklenburg County. It was Rucho who began spreading the message a couple of years ago about creating a simpler tax code with lower personal and corporate income-tax rates for all taxpayers and fewer special perks and incentives for favored industries. Roughly 40 exemptions, credits and breaks have been eliminated since 2013. Rucho doesn’t want to see them come back.
This debate between tax-reform purists and not-so-purists won’t end anytime soon. It also is exposing rifts among Republicans on tax policy, mainly in the House so far.
So will majorities in the House and Senate decide to re-enact some of the eliminated programs? Or will they continue to remove tax breaks from state tax law and push instead for lower rates for all?
The answer might depend on who wins – the House or the Senate – as these decisions come to a head later this session.
Patrick Gannon writes about state government and politics.