NC House defeats economic incentives bill

08/19/2014 11:04 AM

08/20/2014 10:09 AM

In a rebuke to Gov. Pat McCrory and Speaker Thom Tillis, House Republicans on Tuesday helped defeat a bill that would have given the administration millions to lure jobs while capping local sales taxes.

The House voted 54-47 against the Senate-backed measure that drew fire from conservatives as well as liberals. Twenty-eight Republicans – including several GOP leaders – joined most Democrats to defeat the bill.

The measure, which seemed dead as recently as last week, had been resurrected amid a flurry of closed-door meetings and complicated trade-offs with the Senate that themselves sparked opposition.

The bill would have created a $20 million Job Catalyst Fund and expanded two other incentive funds that Commerce Department officials said were crucial to help North Carolina compete with other states.

It also would have capped local sales taxes at 2.5 percent, though a separate bill would have exempted Mecklenburg and five other large counties.

It was the incentive package that split Republicans, who debated it over 10 hours in closed-door caucus meetings.

“It means more government intrusion in private enterprise,” GOP Rep. Larry Pittman of Concord said Tuesday.

Americans for Prosperity, a conservative group funded by the Koch brothers, called the incentives “crony capitalism.”

“Is it embarrassing to the speaker of the House that he couldn’t whip up enough votes to get them to vote for corporate welfare? Probably,” said Donald Bryson, the group’s deputy state director.

Tillis, who faces Democratic U.S. Sen. Kay Hagan in November, was among 40 Republicans who voted for the bill. But the GOP caucus, generally united, split. Republicans such as Speaker Pro Tem Paul Stam and budget chair Nelson Dollar, both of Wake County, joined opponents.

Commerce Secretary Sharon Decker, who lobbied hard for the changes, said her department remains “committed to making North Carolina as competitive as it can be.”

“HB 1224 would have given us additional tools to be competitive in recruiting and retaining business in North Carolina,” she said in a statement.

“Throughout this short session, I stressed the critical importance of having the tools available to be competitive. The McCrory administration will return with new and innovative ways for job growth to continue.”

Holding bills ‘hostage’

Many lawmakers objected to the process.

The Senate wanted the incentives bill and tied to it a budget fix the House wanted. That would have given school districts more flexibility with teacher pay and allowed them to avoid cutting teacher assistants.

The bill would have given school administrators authority to use money for teacher pay for teacher assistants. The Senate made the bill contingent on House passage of the incentive bill.

“The Senate is holding this whole process hostage,” state Rep. Darren Jackson, a Raleigh Democrat, said during floor debate.

Republican Rep. Bert Jones of Reidsville called the process “disrespectful” to the institution, its members and the “people of North Carolina.”

Rep. Becky Carney, a Charlotte Democrat, said she didn’t understand why House leaders had pushed a vote on the bill when other, bigger issues appeared to have been pushed off until next year.

“All of a sudden 1224 became the most important bill, more important than coal ash, more important than Medicaid,” she said. “It’s just unbelievable to me.”

Tax cap controversial

The sales tax provision also sparked opposition.

Critics said it would tie the hands of local governments. The Metropolitan Mayors Coalition, which McCrory helped found when he was mayor of Charlotte, expressed its opposition in a letter to lawmakers.

“We believe any changes to local sales tax authority should be a part of the larger conversation on tax reform and economic development,” Raleigh Mayor Nancy McFarlane and Huntersville Mayor Jill Swain wrote on behalf of the coalition.

Dollar, the Wake County lawmaker, said the bill would have limited the ability of his county to someday enact a transit tax.

“That is just not fair to the now 1 million people in Wake County,” he said.

The defeat helps clear the way for Mecklenburg County’s planned referendum on a quarter-percent sales tax hike. The new tax would largely go to augment pay for Charlotte-Mecklenburg Schools employees.

County commissioners Chairman Trevor Fuller applauded House members for “not standing in the way of allowing Mecklenburg County to speak for itself.”

“It was the right thing to do to let our residents show ... how much we support our teachers, how much we support education,” Fuller said. Staff writer David Perlmutt contributed.

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