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Corporate tax breaks rolled out in Senate committee

RALEIGH Corporations would see a tax break as soon as next year with more cuts to come under a measure Republican lawmakers are pushing as part of a massive tax overhaul.

Charlotte Sen. Bob Rucho touted a bill Tuesday that would lower the corporate tax rate from 6.9 percent gradually to 6 percent by 2016. It also would eventually impose the tax only on a company’s sales in North Carolina. The current system also taxes a business’s property and payroll in the state.

Rucho, who is leading the tax effort, said the changes are key to luring companies and jobs to the state. North Carolina’s current rate is the highest among neighboring states.

“What we are trying to find is broad-based tax policy that would eliminate the onerous tax, provide us the opportunity to create a pro-growth economy, and then in doing so, be able to create the jobs each of us promised as we were running for election,” Rucho told the Senate Finance Committee reviewing the legislation.

The measure stops short of completely eliminating the corporate income tax – a major goal for some Republican lawmakers and Gov. Pat McCrory. Senate GOP leaders proposed abolishing all income taxes earlier this year but the cost of the cuts is tempering the overhaul effort.

The Senate committee didn’t vote on the bill. It is one part of a larger rewrite of the tax code that is expected later this month.

How lawmakers pay for the tax cuts still remains unclear. The corporate tax cuts are expected to cost the state $345 million by the time they are fully implemented in fiscal year 2017-2018.

A fraction of the costs are offset by the elimination of four tax breaks, including deductions for corporate contributions to charity and property donations for conservation purposes.

Sen. Tommy Tucker, R-Waxhaw, voiced concern about abolishing charitable deductions for businesses, saying “that certainly impacts the community.”

But Rucho said the larger goal is to treat everybody the same.

“If corporations choose to support a charity of their choice they can do so,” he said. “But it shouldn’t include everyone else paying for that choice.”

Alexandra Sirota, the director of the N.C. Budget and Tax Center, a group advocating a more modest overhaul, said the costs of the plan still concern her.

“It would reduce the available money for investment in schools – it would impact everyone in North Carolina,” she said.

The two major components of the overhaul have not yet been heard by lawmakers: a reduction or elimination of the personal income tax and a higher sales tax applied to dozens of additional services.

And two major players also remain on the sidelines: the House and the governor, though McCrory is expected to outline his ideas in coming days.

Republicans and Democrats pressed Rucho on a timeline for the remaining legislation. Asking for patience, he said the individual parts will come together in one proposal in two weeks. By then the legislature may be in its final weeks, but Rucho said he still expects to get a measure approved this session.

“When you have a complicated problem, the way you solve it is you break it into pieces,” he said.

Democratic state Sen. Dan Blue, a veteran Raleigh lawmaker, questioned the Republican strategy of breaking the bill into pieces. Each tax bill, he said, only generates more detractors.

“It’s never going to go anywhere, not the way they are developing it,” Blue said. “You can wrestle with a crocodile easier than some of these issues.”

Frank: 919-829-4698
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