Tax cuts, plus raises for teachers and state employees are in NC House budget proposal
The proposed House budget has an average of 5.5% raises for North Carolina teachers and raises for other state employees that are higher than those in the Senate version of the state budget. Raises and tax cuts were announced by the House on Monday ahead of the full budget being made publicly available.
The $25.7 billion budget will also include money for broadband expansion, infrastructure, capital projects and other plans, Republican lawmakers said during a news conference Monday.
Legislative budget summer is in the House phase now, and the chamber doesn’t want to cut taxes as much as the Senate does. But House budget writers said Monday during a news conference they have the same priority as the Senate, just not on the same timeline for lowering taxes.
The House also wants to give bigger raises to teachers and other state employees than the Senate. Both chambers are Republican-controlled.
The Senate passed its proposed state budget in June, and now the budget is in the House’s camp.
Gov. Roy Cooper, a Democrat, gave a more favorable response to the House budget than the Senate in an emailed statement to The News & Observer on Tuesday morning.
“The House budget is better than the bad Senate budget, but that doesn’t make it good. Although there are positives, among the many changes we need is to expand Medicaid, invest significantly more in education and quality child care, stop sweeping corporate tax breaks and eliminate sneaky, damaging policy changes to public education, women’s health choices, environmental safeguards, and emergency authority to fight the pandemic,” Cooper said.
“Now that we have seen the priorities of the legislature, I look forward to negotiating a compromise that is fair to the entire state,” he said. The governor vetoed the 2019 state budget, but he and Republicans leaders have all said they want this time to be different.
Raises for NC teachers, school bus drivers, state employees and more
The proposed House budget would give teachers raises of an average of about 4% the first year, 5.5% combined over two years. The House proposal emphasizes raises for veteran teachers.
Under the House budget, state employees would get 2.5% raises each of the next two years, equaling a 5% raise over two years. That includes university employees except for those faculty who are exempt. The Senate’s proposal was a 3% across the board raise for most state employees.
Rep. Jeffrey Elmore, a North Wilkesboro Republican, said their goal was to look at areas that had problems with retention and recruitment, as well as give back to workers who were on “the frontlines in the depths of the pandemic.”
State employees and local education workers employed during the heart of pandemic would all receive $500 bonuses using federal American Rescue Plan funds, he said.
Elmore said the House budget targets younger teachers through benefits by restoring master’s degree pay and implementing eight weeks of paid parental leave for new mothers.
Also, because testing data this past school year was sporadic, instead of testing bonuses, the budget proposes using those funds to give all teachers $300 bonuses.
Non-certified school personnel in K-12 schools and community colleges would also have their salary floor raised to $15 an hour over the next two years, Elmore said. That includes custodians and bus drivers, who would receive raises to $13 an hour the first year and then to $15 the second year.
Retired state employees won’t get cost of living adjustments in the House proposal, but they would get bonuses of 2% each of the next two years, totaling 4%.
Individual and corporate tax cuts
The House budget began rolling rolled out in segments, and its tax plan was revealed in committee on Monday afternoon, before the full budget became public.
The House wants to reduce the corporate income tax, as the Senate does, but does not propose phasing it out to zero like the Senate wants.
The House’s budget proposal does call for reducing the standard income tax deduction rate.
In short: both chambers want to cut your taxes and corporate income taxes, but don’t agree on the amount.
The House’s budget proposes the individual income tax rate would be reduced from the current rate of 5.25% to 4.99%. That is less of a reduction than the Senate, which called for 3.99%.
The House’s standard deduction amount would increase from the current amount of $21,500 to $25,500 for married couples filing jointly. For single taxpayers, the standard deduction would increase from $10,750 to $12,750.
If the House budget were to become law, it would start with the Jan. 1, 2022 tax year.
Rep. John Szoka said the House plan to lower the corporate income tax from the current 2.5% rate to 1.99% over two years would give North Carolina the lowest corporate income tax rate in the Southeast. He said the state competes regionally more than across the country for companies to come here.
“This is one reason, I believe, they continue to come here is because we have an inviting corporate tax environment for companies,” Szoka said during the House Finance Committee meeting on Monday afternoon.
The full budget document will be released publicly by Tuesday morning, ahead of the House Appropriations Committee meeting.
The House expects to pass its budget before the end of the week. Then both chambers must pass a compromise budget that they will then send to Democratic Gov. Roy Cooper to sign or veto.
Democratic response
House Democratic leader Robert Reives, of Chatham County, said the Republican-written House budget “does not reach the full potential of what North Carolinians deserve.”
Reives also criticized the tax cuts for businesses and said in a statement that “we should be using this once-in-a-lifetime financial opportunity to build a North Carolina that works better for everyone.”
The state has a huge budget surplus of an estimated $6.5 billion.
Reives called the House budget proposal “just the beginning of the process and I look forward to working with all the stakeholders, including Governor Cooper, to craft a budget that truly reflects the needs of our state.”
The North Carolina Democratic Party shared Reives’ sentiment.
“As North Carolina fights to overcome the dual public health and economic crises brought on by COVID-19, House Republicans’ budget proposal fails to take advantage of the unexpected additional funds available and to use this once-in-a-lifetime opportunity to propel our state forward,” NCDP spokesperson Rachel Stein said in an emailed statement.
This story was originally published August 9, 2021 at 3:06 PM.
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