RALEIGH, N.C. (AP) — House Republicans offered their own tax overhaul plan Thursday that would reduce personal and corporate income rates like their Senate counterparts but reveals stark differences over the scope of sales tax.
The House proposal would expand the sales tax to cover a handful of new services, such as from automobile repairs to warranty and service contracts. The Senate framework introduced last week, in contrast, would make North Carolina’s sales tax base one of the broadest in the country.
The competing plans would reduce slightly the 6.75 percent combined state and local sales tax consumers in most counties pay, decrease the corporate income tax rate and convert the current three-tiered personal income tax rates to one flat rate.
But the differing views on the sales tax are dramatic as GOP leaders and Republican Gov. Pat McCrory seek to fulfill a commitment to carry out tax changes this year after decades of false starts.
Rep. David Lewis, R-Harnett, one of the House plan’s chief authors, said Republican leaders believe the sales tax expansion should be incremental. For example, Lewis said a lawn mower repair shop already collects sales tax on the parts they use. Now they would collect it on the labor they provider as well. The Senate plan would subject entire new industries to collecting sales taxes for the first time.
Lewis said House member think their version is easier to administer.
“It will not create the extra burden on businesses that are not currently levying the sales tax,” Lewis said.
Senate leader Phil Berger, R-Rockingham, said earlier in the day that broadening widely the tax rate gives the state enough revenues to lower income tax rates, which in turn encourages business to move or remain in North Carolina and create jobs.
“The more you broaden the base (and) the more you lower the rates, the more likely you are to have the kind of economic growth that we hope tax reform will help lead to,” Berger said.
The House release came the same day Americans for Tax Reform President Grover Norquist held a news conference with Berger and praised the Senate plan. Norquist, who also spoke at a barbecue lunch attended by 150 behind the Legislative Building, said he’s not taking sides with the competing plans because both chambers are ultimately aiming over time to reduce and eliminate tax rates.
“You have Republican leaders in the House and the Senate that are largely moving in the right direction and they’ll have a debate about how fast to go there,” he said, but “there aren’t bad guys in this rodeo.”
McCrory hasn’t formally taken sides but offered a more positive take on the House plan Thursday compared to his comments on the Senate plan. The governor would be asked to sign any plan into law.
“I am encouraged by the bill details I have seen in the House plan,” McCrory said in a statement.
Lewis said he’s optimistic an agreement can be reached.
Senate and House Republicans contend their respective plans cut taxes by more than $1 billion over time. Critics say the Senate plan would raise taxes on many low- and middle-income families.
The House plan gives cuts to upper-income taxpayers and corporations and will discourage investments in education and infrastructure, the liberal-leaning N.C. Budget & Tax Center said in a release.
Althea Taylor-Jones, 66, of Kernersville, said she’s worried any plan with higher sales taxes will be hit those fixed incomes harder.
“It could be fair for some, but for others, it’s definitely not, because regardless to what your income level is, you’re still paying the same sales tax,” said Taylor-Jones, a board member for North Carolina AARP.
