Under the Dome

NC House attacks Senate tax shift

Bonnie Threlfall grooms Rocky the dog at Town and Country Animal Care Center in Apex. House members are concerned about a Senate sales tax plan that would add taxes on services like pet grooming – increasing revenues to help offset controversial changes in how sales tax money is allocated among counties.
Bonnie Threlfall grooms Rocky the dog at Town and Country Animal Care Center in Apex. House members are concerned about a Senate sales tax plan that would add taxes on services like pet grooming – increasing revenues to help offset controversial changes in how sales tax money is allocated among counties. cseward@newsobserver.com

They talked about Communism in the state House on Tuesday. And Karl Marx. And Christmas.

Members in the House of Representatives took full-throated aim Tuesday at a plan that has already cleared the Senate and would fundamentally change how sales tax revenues would be distributed at the county level.

The formula now in place directs most of the money to the county where a sale occurred – an approach that favors urban counties where rural residents typically do their shopping.

The Senate budget would change that and allocate much of the money based on population, which has the effect of offering a boost to small, rural counties. Urban counties could lose millions – something some House members strongly oppose.

“Last night I was reading the Communist Manifesto so I could get a better understanding of redistribution of wealth – so I could be prepared for this bill,” said Rep. Charles Jeter, a Mecklenburg County Republican.

No House members spoke in favor of the Senate plan during Tuesday’s 90-minute discussion, and the tone gave indications of a long debate ahead.

Rep. Paul Tine, an unaffiliated legislator from Kitty Hawk, noted that Dare County would see the biggest revenue drop under the proposed distribution formula. Other counties in Tine’s northeastern North Carolina district, however, would benefit.

“I can’t destroy one county in my district to the benefit of three counties in my district,” he said. “Our economy is not doing well, and our real estate has not recovered on the Outer Banks.”

Rep. Bill Brawley, a Mecklenburg County Republican and a Finance Committee co-chairman, said communism might not be the best comparison.

He invoked a socialist slogan most often associated with Karl Marx – “From each according to his ability, to each according to his need.”

Speaking of the Senate plan, Brawley said: “I think it might take it from ‘each according to his ability’ and give to ‘each according to his political power.’”

The comment appeared aimed also at Senate Majority Leader Harry Brown, who’s pushed for the distribution change. One of the biggest winners in the plan is tiny Jones County, which is in Brown’s district.

Brown, however, says the issue is one of fairness. Brown argues the current distribution system means residents of smaller counties are effectively financing their larger neighbors when they go shopping. He also wants to eliminate a decades-old “adjustment factor” that weights the formula in favor of some counties – all part of an effort he says will help close a widening rural-urban divide.

Overall, sales tax revenues would increase statewide because the Senate wants to add the tax to services like auto repair, pet grooming, advertising and veterinarians.

Brown’s plan would let counties raise local sales taxes up to 2.5 percent through a voter referendum, which would allow many to make up for any revenue losses. House members, however, worry that approach to county budgets isn’t realistic.

“I’m looking at the number of referendums over the past several years that have passed … and it’s very close to zero,” said Rep. Bob Steinburg, an Edenton Republican. “These aren’t very popular.”

Tuesday’s meeting showed the House is taking time to consider the Senate budget and its many policy proposals. Another House Finance Committee meeting is set for Thursday.

Budget talks inch closer

Members in the state House officially – and unanimously – voted down the Senate’s budget, a step that launches spending and policy negotiations that are expected to last for weeks.

The House’s top budget writer, Rep. Nelson Dollar of Cary, criticized the Senate for adding policy provisions to the budget debate, issues that range from a Medicaid overhaul to income tax cuts.

“I do believe we have expressed a concern with the amount of policy placed herein,” Dollar said. “The budget should be for truly budgetary items to the fullest extent we can possibly achieve that.”

Tuesday’s vote means House and Senate leaders must appoint teams of negotiators who will work out the differences behind closed doors. Because an agreement by June 30 is unlikely, both chambers are expected to pass a temporary state budget within the next week.

“We are fundamentally transforming the economy of North Carolina” with the Senate budget bill, said Rep. Jason Saine, a House Finance co-chairman and Lincolnton Republican. “Our position is that these are very serious changes, some may be correct and some may not be. We’ve just got a long way to go before we get to any sort of agreement. It’s incredibly complicated.”

It prompted a joke from Rep. John Blust, a Greensboro Republican.

“If the Senate’s going to insist on these, has the speaker given any consideration to some sort of Christmas break?” he said.

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