RALEIGH, N.C. – Several dozen legislators are back in Raleigh to discuss North Carolina’s tax structure and whether an overhaul can be approved as soon as next spring.

A joint House-Senate finance committee met for the first time Tuesday to hear from experts on the state’s sales tax and its exemptions.

Democratic leaders at the General Assembly worked unsuccessfully during this year’s session to fashion a plan to lower tax rates and increase the number of items subject to taxation. The Legislature instead raised the sales tax rate and placed a surcharge on the highest wage earners.

House finance leader Rep. Paul Luebke of Durham County said the meeting is a sign lawmakers are committed to address tax issues.

RALEIGH, N.C. – Gov. Bev Perdue Thursday signed Senate Bill 943 allowing production companies a 25 percent tax credit for film projects in North Carolina, up from the previous credit of 15 percent.  The bill also sets minimum spending and hiring requirements for qualifying film companies working in the state.

“This legislation will help grow our $91 million motion picture industry, preserve and create thousands of jobs and increase investments in yet another emerging economic cluster,” said Perdue. “Providing a strong foundation for North Carolina’s film industry is essential as we work to build a strong and sustainable economy through increased diversification.”

Companies must spend a minimum of $250,000 on production costs in the state to be eligible for the tax credit.  The bill, sponsored by Sen. Linda Garrou (D-Forsyth) also requires companies to meet hiring requirements for North Carolinians and other criteria to qualify for the incentive.

“This incentive will help keep film production in North Carolina,” said N.C. Commerce Secretary Keith Crisco.  “It will be a major boost for the film industry and allow us to compete on a level playing field in a vital and growing global market.”

“During these tough economic times, it’s critical to continue making investments that will grow jobs in our state,” said Sen. Linda Garrou (D-Forsyth). “This legislation will help expand North Carolina’s motion picture economy and create new employment opportunities across our state.”

SB 943 ensures North Carolina remains a strong competitor for film production dollars, which totaled $91 million in direct spending in 2008.  The industry employs more than 2,500 statewide.  Recent major motion pictures filmed in the state include “Nights in Rodanthe,” “Leatherheads” and “The Secret Life of Bees.”  The N.C. film industry is also home to the CW Network’s “One Tree Hill” TV series as well as hundreds of commercial and industrial productions each year throughout the state.

More than 800 movies have been filmed in North Carolina.  The state is well known for supporting its motion picture industry with a strong infrastructure and a bevy of locations that can stand in for sites throughout the world.  North Carolina boasts an exceptional variety of filming locations from the mountains to the coast, and a world-class film industry infrastructure. Wilmington’s EUE Screen Gems, home of the largest studio lot east of California, recently opened the largest film and television production soundstage on the East Coast.

More details on the N.C. Film Office

RALEIGH, N.C. – North Carolina Gov. Beverly Perdue finally is getting around to handling more than 100 bills left on her desk by the Legislature when it adjourned two weeks ago.

Perdue’s office said she signed 20 bills into law Wednesday, including one that attempts to fix the state’s coastal property insurance program.

Reforms to the Beach Plan allow state regulators to place a surcharge on every property insurance policy in the state should hurricane damage claims exceed $2.4 billion. The law also reduces the maximum value for which a home can be insured by the plan.

Perdue hadn’t acted upon any of the 108 bills until now. She has until Sept. 10 to sign or veto remaining bills. Bills not considered by then automatically become law.

RALEIGH, N.C. –  In the halls of the General Assembly, the phrase “tax reform” is like a mantra.For years, state legislators have been repeating those words, pursuing a goal that nearly everyone agrees on in principal: an overhaul of North Carolina’s outdated tax system.

The system was created in the Great Depression, when factories and farming were the main engines of the state’s economy. Now, with the economy based more heavily on services, the state tax system tends to cause sharp year-to-year fluctuations in state revenues. In times of economic downturn, that pattern amplifies the state’s budget problems.

Numerous committees and experts, both within and outside the legislature, have studied the issue, and there is broad agreement on the solution. The tax base should be expanded, tax rates should be lowered, and loopholes and deductions should be minimized.

But last week, legislators adjourned for the year, ending yet another legislative session in which tax reform got lots of buzz but ultimately was tabled.

“What we designed in a horse-and-buggy day is self-defeating, and not serving our purpose,” said Richard Vinroot, a former mayor of Charlotte and former candidate for governor.

“We need to have a revenue stream that’s consistent with where we are in our economy.”

Vinroot, a Republican, is on the board of the Institute for Emerging Issues, a group led by former Gov. Jim Hunt, a Democrat. The institute promotes better public policy, and it has urged state legislators to enact tax reform.

But no tax reform plan has ever come up for a vote in the General Assembly. This year, Democratic leaders in the N.C. Senate released a long list of proposed tax changes and tried to get those changes incorporated into the state budget.

The changes, however, were never put into a formal bill, and Democrats in the N.C. House balked at the Senate’s proposal. House Democrats said that tax reform should not be rushed into law in the midst of a budgetary crisis.

Legislators do plan to continue holding meetings this fall to try to come to agreement on a plan.
“They will travel the state, hopefully, in different locations, to allow the public an opportunity to speak and weigh in with their thoughts,” said Senate leader Marc Basnight, D-Dare. “And if the House and the Senate agree to recommendations, we will be called back in for a special session on taxation. Hopefully that occurs.”

House leaders are considerably cooler to the idea of a special legislative session to address tax reform.

House Speaker Joe Hackney, D-Orange, said he would support a reform plan if it is revenue-neutral and has bipartisan support. Neither of those things was true of the changes that Senate Democrats were pushing this year. Those changes would have raised a significant amount of new revenue in the first year.

“That was a tax increase masquerading as tax reform,” said the Senate’s Republican leader, Sen.
Phil Berger, R-Rockingham.

What Democratic budget writers ultimately settled on in the 2009-10 budget was a different set of tax increases: a $1 billion package of tax increases that the Democrats said was necessary to help close a budget shortfall. Most notably, they raised the sales tax to 7.75 percent from 6.75 percent.

Raising the sales tax is a strategy that legislators have used before to solve short-term budget shortfalls.

The problem, experts say, is that raising the sales tax undercuts the reform that everyone agrees is needed. In the long run, raising the sales tax exacerbates the problem because it increases the state’s reliance on a narrow revenue stream that responds harshly to the ups and downs of the economy.

The reason is simple. During recessions, people stop buying things, and the state collects less sales tax.

Proponents of large-scale tax reform say the state should lower the sales tax rate but also broaden it so that it applies to many more goods and services. Many states charge sales tax on a variety of services, but North Carolina’s sales tax is generally limited to tangible goods.

During economic downturns, people might not buy a new car, but they’re still likely to take their old car to the mechanic. If North Carolina charged a sales tax on those visits to the mechanic, the state’s revenues would likely not be hit as hard by a recession.

Proposals vary on which specific services should be taxed. They include a wide range of service providers, from exterminators to hair dressers to lawyers.

The same reasoning applies to corporate and personal income taxes. A tax reform plan might lower income tax rates while simultaneously expanding the base by eliminating deductions.

Any plan is sure to be controversial, because some interest groups are likely to be hurt and others would likely be helped.

Vinroot said it would take “backbone and courage” to pass a sweeping plan — which explains why no plan has ever come close to passing despite years of studying the issue.

“I think legislators and political people — of which I’ve been one — don’t like to deal with hot issues,” Vinroot said. “We’d rather deal with God, mom and apple pie.”

RALEIGH, N.C. –  A bill now on the the governor’s desk would allow the state’s second- and third-largest metro areas to expand mass transit systems if voters approve raising local sales taxes.

HB 148/SB 151 would allow the state’s voters in Forsyth, Guilford, Wake, Durham and Orange counties to  decide whether to increase local sales taxes by half a cent and car registration fees by up to $5. In order to take effect, voters must agree during an election.

Read Ratified Bill

Charlotte voters approved this measure 10 years ago for improved rail and bus systems. Groundbreaking began Wednesday on the state’s first toll road, which will cost more than $1 billion.

According to a study out earlier this year by the Regional Transportation Alliance, 53 percent of Triangle residents said they would vote for such a measure.

The state just approved the budget, which also includes an 1-cent “temporary” increase on sales taxes along with a surcharge on state taxes and higher cigarette and alcohol taxes.

With all that, will voters decide another half-cent is worth it to build trains? In case you’re wondering, a half-cent increase means for every $10 you spend, it will cost you an extra 5 cents.

BY Kendall Jones
NBC17

The North Carolina legislature agreed on a deal Thursday that would keep the government running with no budget in place and no deadline to make one.

The general assembly again passed a resolution that will limit state spending to no more than 84 percent of what was approved in last year’s $21 billion budget.

Legislators put no expiration date on the governor’s spending responsibility.

Lawmakers thought they had a deal on a new budget last week, but Governor Perdue did not approve of the new fees and taxes.

Finance committee members are trying to come up with $990 million to make up for the budget shortfall of the $18 billion the appropriations committee says it needs.

Lawmakers said they are just $40 or $50 million away from meeting that goal.

“Baby’s almost here,” said State Rep. Jennifer Weiss. “We’re not ready to name it yet. I don’t know how pretty it’s gonna be, but it’s coming.”

The saga of the overdue budget in North Carolina could be coming to a close.

“You get me the tax package today, we can get a bill to the floor Monday night and begin voting on it and begin to close up session,” Senator Linda Garrou said. “It’s time.”

It’s more than a month past its deadline, but legislators think they may have come up with a plan that will satisfy a governor who has already rejected one of their budgets.

“We’ve certainly made some changes in her direction,” Representative Hugh Holliman said. “We hope that that will be sufficient.”

This new plan raises sin taxes and has a one penny sales tax increase, but instead of an across the board income tax surcharge, this time lawmakers are targeting wealthier North Carolinians.

“The surcharge that we are looking at is only on families making more than $100,000,” Representative Paul Luebke said. “That is just 13 percent of North Carolinians.”

Some Republican lawmakers say the budget does not have to include increases at all.

“Our position all along has been that the state — just like small businesses, just like families — would need to tighten its belt,” Senator Phil Berger said.

Though lawmakers think they are close to making a deal, Gov. Perdue could say “no” once again.

“There is no deal in my mind until there is a deal on the finance as well as appropriations,” Perdue said.

Winston-Salem Journal

North Carolina taxpayers got a break last week when Gov. Bev Perdue scuttled legislators’ $980 million tax-increase package.

Perdue opposed the deal because it was both unfair to working families and failed to protect public education. Her power to veto the budget killed the package. Perdue’s opposition sent legislative leaders in search of another solution to the state’s budget crisis. Varying estimates and interpretations of the situation put the state as much as $4 billion-plus short for this budget year. The state is operating on a “continuing resolution” that extends last year’s budget on a proportional basis.

House and Senate budget and tax negotiators – the most powerful legislators in Raleigh – had made a deal that fell heavily on consumers and working families. It included a one percent sales-tax increase, a regressive tax that hits young families and the poor harder than the affluent.

The package included a regressive 2 percent surcharge on the income-tax obligation each individual North Carolinian and corporate taxpayer will have at the end of this year. It also increased taxes on beer, wine, spirits and tobacco products.

In all, only a small piece of the package hit corporations – about $15 million in income-tax surcharges and the sales taxes they pay.

The package also lacked any originality. Legislators simply pursued the same old tax increases they have used over the last 10 years as state revenues have repeatedly failed to meet their spending targets. These shortfalls arise because the state’s tax system is based on a mid-20th century economy and we’re decades past that now.

There are proposals to expand the sales tax to services, thus covering a wider economic base. If legislators were to adopt such taxes, they could also lower the sales-tax rate. We might pay a sales tax on a haircut, a ballgame ticket, car repair labor or accounting fees, but we’d also pay less on items currently covered by the sales tax, like clothes for our children.

Just as important, the tax increase would be spread more evenly across the spectrum of family incomes and to corporations. But legislators fear taxing services because so many people, from barbers to wedding-party violinists, would be newly covered.

Rather than fear a lower sales tax on those services, legislators should be afraid of the economic consequences of a sales tax that would rise to 8.25 percent in Mecklenburg, 8 percent in several other counties and 7.75 percent in the majority of counties. That is not a sustainable level of taxation.
Perdue was right to nix this package.

RALEIGH, N.C.  – Democratic leaders at the General Assembly still weren’t on the same page on taxes Monday night as lawmakers tried to regroup after Gov. Beverly Perdue balked on their revenue deal.

House Democrats want to get back to the bargaining table on taxes with Senate Democrats as soon as possible by modifying a $982 million tax package hammered out with the Senate last week, rather than start from scratch.

Perdue rattled fellow Democrats when she announced last Thursday she wouldn’t accept the plan because it contained a 2 percent income tax surcharge paid on all wage earners with tax bills, not just the wealthiest.

House Speaker Joe Hackney, D-Orange, said his chamber’s preferred option is “try to see if we can resurrect that (plan) in some way.”

Working out a tax plan nearly all Democrats and Perdue can support is a key element in passing a permanent two-year state government budget that’s already four weeks late.

“We’re going to present the Senate with a new proposal and try to be flexible and try to figure out something so we can get this thing finished up,” Hackney told reporters.

But Senate leaders seemed content with going their own way – for now – by seeking to revive their own plan to overhaul the tax system that would expand dramatically the number of services subject to the sales tax, while reducing tax rates overall.

A bipartisan coalition of business and former government leaders have pushed the idea for years as a way to tap into a tax base that has shifted from manufacturing to services.

The Senate Finance Committee will meet Tuesday to talk about “why we really need to fix the tax system rather than raise just a lot of taxes,” said Sen. Dan Clodfelter, D-Mecklenburg, one of the architects of the overhaul plan.

Hackney said it’s too late in the legislative session to work on such a dramatic change to the tax system, but Clodfelter said it was the House that had delayed discussions.

“We’ve been waiting for the House folks to sort of pick up the challenge with us,” he said. “If it’s late, it’s because we’ve been waiting on them.”

The $982 million package agreed to by legislative Democrats, who have the majority in both chambers, also contained a one-cent increase in the sales tax and higher taxes for cigarettes and alcohol.

RALEIGH, N.C.  – House and Senate Democrats in North Carolina have signed off on a plan that would raise nearly $1 billion in taxes and help them reach an agreement on the state budget very soon.

House Speaker Joe Hackney said Wednesday fellow Democrats in his chamber are ready to support the deal reached with Senate counterparts. Democrats in both chambers held separate caucus meetings to discuss the $982 million plan.

The deal would raise the sales tax rate by a penny, add an extra 2 percent onto income tax bills and increase the cost of a pack of cigarettes by 10 cents. Alcohol taxes also would go up.

Hackney said a family making between $30,000 to $60,000 would see their tax bill go up by $66 a year under the deal.

Gov. Beverly Perdue still isn’t satisfied with the state budget and suggested more money is needed for public schools. She said school starts back in about a month and education leaders still don’t know how much money to expect for their classrooms.

Perdue’s written statement didn’t specifically mention a plan hammered out by House and Senate Democrats to raise nearly $1 billion in new taxes. The governor has said she wants more revenue.

Perdue told legislators to “find a way to protect public schools and the core services of safety and public health, period.”

A look at $982M tax plan agreed to by NC Democrats
A glance at the tax package tentatively agreed to Wednesday by North Carolina House and Senate Democrats that would raise $982 million during the 2009-10 fiscal year, with the amount raised by each provision:

- 1 percentage point increase in sales tax, raising rate most consumers pay to 7.75 percent: $803.5 million.
- 2 percent surcharge on individual income tax bills: $197 million.
- 2 percent surcharge on corporate income tax bills: $15.4 million.
- Applying sales tax to digital items purchased online and
transactions involving other Internet sales: $8.4 million.

- Increasing beer excise tax by about 5 cents per six-pack: $12.6 million.
- Increasing liquor excise tax by 5 percent: $20.1 million.
- Increasing wine excise tax by 4 cents per bottle: $2.9 million.
- Raising cigarette tax by 10 cents per pack to 45 cents: $33.3million.
- Increasing excise tax on cigars, smokeless tobacco and other tobacco products by 2.8 percent: $5 million.

The state will lose $116.3 million as it conforms state revenue law to federal law that exempts the first $2,400 of unemployment benefits from state taxes during 2009 as well as other changes.

The same plan would generate $1.32 billion in the 2010-11 fiscal year.