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THE
UGLY: ATTEMPTS TO GIVE OUT HUGE FAVORS TO FRIENDS
The low of the session came this week when the Senate revealed its amended
business incentive bill (HB 1734) which gives out hundreds of million
of dollars in grants, tax breaks and buildings to various businesses
and groups. While such giveouts are not so unusual in themselves, they
were particularly offensive after the months long budget debate where
legislators said they had no other revenue available to fill the budget
deficit and so had cut nearly $1 billion in programs, services and state
jobs plus left another $100 million for the Governor still to cut. Also
unsettling is the inclusion of a cut in some corporate tax rates only
one day after increasing sales taxes which mostly affect low and middle-income
individuals.
This is the bill that passed the House last week and primarily contained
a new program with little oversight, that allows a small group of officials
to hand out up to $15 million per year in grants to businesses to encourage
them to create new jobs in NC. The reasoning for this is that other
states are offering such grants and NC will lose new jobs if we don't
offer them too. But as Kim Cartron of the NC Budget and Tax Center noted
in testimony to the Senate Finance Committee, "to prove that these
jobs would not come to NC but for these grants, we're going to need
a sizable appropriation to the Psychic Friends Network because we'd
have to be mind readers." That is because it is almost impossible
to tell what motivates the creation of jobs, and many survey of executives
have shown that incentives are not their primary consideration when
deciding where to locate. This program is likely to cost the state over
$500 million in the next 15 years.
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the bill even worse are the additional Senate give aways, including: |
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A
cut in the coporate tax rate amounting to a loss of $20 million
per year in state revenues;
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Creates
travel and tourism grants which would be state grants to build
stadiums, colloseums and other such venues;
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Obligates
for years significant portions of North Carolina’s tobacco
settlement for specific building projects, and
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Expands
tax incentives for the film industry.
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The House,
in a very confusing procedural move, is holding meetings on a new bill
(House BIll 1753) that includes just the parts of the Senate Bill that
have not previously been reviewed by the House. They are doing this
so they can begin to discuss the issues these Senate additions present
without having to wait for the Senate to send over their bill. Presumably
this is being done because they hope to adjourn by the end of next week
and the House is trying to speed up the process. In a meeting today
that went over the new Senate options, Representative Leslie Cox said,
"This bill has a timing problem. We're trying to get out of here
and this bill needs a month or more of discussion. I'm not sure it could
pass the House even if we were here until December." Complaints
were raised by several members about each of the new items and the members
were invited to make amendments to the bill on Monday when it again
will be heard in House Finance at 3:30 and House Appropriations after
session Monday night. The Senate will vote on their version of the bill
on Monday night.
Also in line to get some favors, in another bill about to become law
(House Bill 1670), are the biggest banks in the state. Last year legislators
closed a corporate tax loophole that had allowed many businesses to
avoid paying millions in state taxes. The larger banks then realized
this was going to affect them far more than they had previously thought,
and so they have secured a cap on how much they will have to pay. Electric
Utility companies will also benefit from limitations on how much they
will have to pay in state taxes. These caps will mean an estimated loss
of about $30 million per year to state revenues that otherwise would
have been paid under this bill. Senate leaders said it is worth it,
however, because the companies have agreed to pay the capped amounts
within 15 days of the signing of this bill instead of challenging the
loophole closure and paying nothing as they had begun to do. This seems
to be tax policy at its worst - by coercion. Hardly a happy state of
affairs during any time, and especially not now when the state is facing
multi-billion dollar deficits every year.
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IT
IS TIME TO CONTACT YOUR STATE SENATORS AND REPRESENTATIVES AND
TELL THEM:
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1)
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IT
IS INAPPROPRIATE TO GIVE MILLIONS OF STATE DOLLARS TO BUSINESSES
WHILE CUTTING PROGRAMS FOR INDIVIDUALS AND RAISING THE SALES TAX; |
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2)
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DO
NOT PASS ANY BILLS THAT WOULD GIVE AWAY LIMITED STATE DOLLARS TO
BUILDINGS AND BUSINESS IN THIS RUSHED METHOD AND POSSIBLY LEAVE
THE STATE IN GREATER DEFICIT IN FUTURE YEARS. |
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Go
to the Covenant
with NC’s Children website and send an e-mail message or
letter to every member of the Committee with a few clicks of your
mouse.
Use the suggested text or compose your own message. It ’s easy
and quick. |
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(TOP)
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THE
BAD: BIG LOSS FOR MIDDLE AND LOW INCOME AS SALES TAX INCREASE PASSES
This week the legislature passed the bill giving local governments the
option to collect another half-cent in sales tax in their county. (Senate
Bill 1292) If counties take the option, it raises the total sales tax
to 7 cents per dollar in all counties expect Mecklenburg where it will
be 7 1/2 cents. Counties can add the half-cent starting December 1,
2002 and it is estimated to raise $188 million. This half-cent is on
top of a half-cent increase made last year which is currently going
toward the state coffers, but which is scheduled to end on July 1, 2003.
The sales tax passed after massive lobbying by local governments and
their associations. They argued that they needed a source of new funding
to replace the over $350 million of state moneys that was withheld by
the state in order to help pay for the state budget deficit. Because
of this loss of revenue many counties have made severe cuts to locally
funded programs. While the sales tax will not completely refund the
counties for the moneys lost, it will give them some new moneys this
year and more next year when the sales tax will be in effect for the
entire fiscal year. Clearly it is essential that programs necessary
to serve the needs of residents must be fully funded, but the sales
tax is not the only option to come up with the necessary money.
Legislators, however, told local governments that their only option
to get any money this year was to add the half-cent sales tax. At the
same time though, legislators are considering bills that would give
out hundreds of millions to business including through a corporate tax
cut. The sales tax increase once again piles more of the burden on low
and middle income households to pay for the government services, programs
and infrastructure that benefit all residents of North Carolina - including
corporate residents.
In general, the sales tax is the most regressive tax in North Carolina's
state and local tax system. It is important to keep in mind that any
regressive tax changes in North Carolina would be layered on top of
a tax system that already burdens the
lowest 20% of taxpayers more heavily than any other income category
and places the smallest burden, as a % of income, on the those with
the top 20% of incomes. As a % of income, the proposed additional 1/2
cent local sales tax would hit the bottom 20% of taxpayers 6 times harder
than the top 1% of taxpayers and would hit the middle 20% of taxpayers
4 times harder than the top 1%. Adding to the burden of those least
able to pay is a real low of the session. Legislators must now promise
not to repeal the sunset of the state's half-cent sales tax when they
come back next year to more substantial budget deficits. The cost of
funding wanted and necessary state government must be paid by everyone,
not just a voiceless few.
(TOP)
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THE
GOOD: BIG WIN FOR CONSUMERS IN HOUSE ON PAYDAY LENDING BILL
By Rob Schofield, NC Consumer Action Network, A Project of NC Justice
& Community Development Center
It appears that the hard work of consumer advocates paid off on Wednesday
as the House of Representatives voted 59-50 to dramatically amend the
industry-backed payday lending bill (SB 104). The vote came after more
than three hours of debate over two days. As folks will recall, the
bill would have put North Carolina's permanent seal of approval on the
inherently abusive practice of 14 day payday loans (also called "deferred
deposit transactions"). Last year, lawmakers allowed a four-year
experimental law on the subject to expire after it was shown that the
practice had become predatory for the vast majority of borrowers. The
bill proposed by the industry during the waning days of the current
session would have reinstated the basic model abandoned last year by
allowing lenders to make an unlimited number of back to back, two-week
loans to borrowers with effective annual interest rates of 390%.
The key vote came on a proposed floor amendment by Rep. Mickey Michaux
of Durham that proposed to limit any payday loan to an effective annual
interest rate of 100% apr. As a practical matter, the amendment would
have required either much longer loan terms (on the order of 55 days),
much reduced fees, or a combination of both. The amendment was adopted
after an extended debate in which folks from across the ideological
spectrum weighed in on both sides. While consumer advocates are now
prepared to support the bill with only a few additional modifications,
the payday industry appears to have rejected this possibility and it
APPEARS there will be no further action on the measure. Speaker Jim
Black announced today that lawmakers are aiming to adjourn for the year
late next week.
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