NC House unveils portions of state budget plan

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NC House leaders rolled out portions of their state budget plan on Tuesday.

North Carolina House Republicans on Tuesday unveiled a tax plan for the next two years that's more modest than the Senate's proposal from earlier this month, offering a small income tax break to individuals and targeting key industries they want to grow.

The House package, which advanced through the finance committee, will be part of the state budget bill expected to be voted on by the full chamber later this week.

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But it would cost only about one-third of the $1 billion the Senate tax plan would cost, meaning more money is available for House budget programs. The Senate plan, also included in their budget bill, called on across-the-board individual and corporate income tax rate cuts.

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Rep. John Szoka, a Cumberland County Republican and key tax-law writer, downplayed the differences, which could still lead to some of the toughest negotiations between GOP leaders in the two chambers as they seek to hammer out a final budget plan next month.

"Some may try to drive a wedge between the Senate and the House," Szoka told committee colleagues. "And while I agree that there are differences between the two finance packages ... I assure you that the goal of both finance packages is exactly the same." Those objectives, Szoka added, include tax modernization and continuing a series of tax reductions Republicans say have boosted the state's economy.

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The House tax plan, which would cost $353 million over two years, doesn't make further cuts to current individual and corporate income tax rates. The rates began decreasing after Republicans took over state government in 2013.

Instead, the House would increase standard deductions for income tax filers next year by $500 to $1,000, meaning more of their income would be subject to zero taxes. The Senate plan also raises standard deductions, but the increases would be higher than what the House proposes.

For the standard deduction alone, for example, a single filer would see a $27.50 decrease in taxes in the House plan, but a $68.75 decrease in the Senate proposal.

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House and Senate Republicans both seek to reduce the franchise tax paid by corporations, although their methods are different.

The House is also trying to eliminate a privilege tax on certain manufacturing equipment. The House plan would create sales tax exemptions on equipment purchased by large "fulfillment centers" - like those run by Amazon or Walmart where online orders are processed. There would also be a sales tax refund on supplies purchases by small research and development businesses.

The sales tax breaks are designed to attract fulfillment centers with at least 400 workers to the state and to help small companies grow, Szoka said.

Large portions of the House spending proposal were released late last week. The House plan leaves out several spending cuts and policy proposals in the Senate plan approved in early May. Other details, including the House's proposed raises for teachers and state employees, were expected to be made public late Tuesday and early Wednesday.

Democrats in the General Assembly have been lobbying unsuccessfully for Gov. Roy Cooper's budget recommendations, which seek to spend more than the Republicans next year and would offer but one broad tax break - restoring a previous credit for child and dependent care expenses. The House Finance Committee rejected an amendment to revive the credit.

The Associated Press contributed to this report.

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