The budget bill passed Thursday by the N.C. Senate would cost Mecklenburg County more than $33 million a year by shifting more sales tax revenue to rural counties.
That was the reason that Sen. Bob Rucho of Matthews broke with fellow Republicans and voted against the bill.
But GOP Sen. Jeff Tarte of Cornelius voted for the budget, despite a news release last week that said he and Rucho “would be forced to vote against any bill that includes” the redistribution proposal.
The Senate budget will now go to a conference committee with the House, which will try to reconcile differences.
Rucho, who co-chairs the Senate Finance Committee, joined three Mecklenburg Democrats in voting against the Senate Republican budget, even though it includes provisions he authored that expand the services subject to the sales tax. In the end, it was the way the taxes would be redistributed from urban to rural counties that caused him to vote no.
“I was outgunned,” said Rucho, who had pushed for a distribution formula that would not have hurt Mecklenburg and 20 other counties as much.
“It was allowing the winners to win and losers not to hurt as bad,” he said.
Tarte said he voted for the budget despite his opposition to the sales tax redistribution, which he described as a “massive” problem.
“(The way) I look at it it’s an interim vote until we get to a final vote,” he said. “It keeps the process going.”
When the proposal gets to the House, it’s certain to face opposition, at least from Mecklenburg lawmakers. Republican Rep. Bill Brawley said he agrees with Democratic colleagues that the provision is not good for their home county.
Rucho also acknowledged that he was an architect of another controversial provision, one that phases out the sales tax refund for non-profits. Hospitals, colleges and other non-profits said this week the provision would cost them millions of dollars in lost revenue.
The budget would lower the cap on the sales tax refund they get now. It’s now capped at $45 million a year, which effectively exempts virtually all non-profits from sales taxes. It would drop to $1 million by 2020.
Rucho said phasing out the refund would allow the state to gradually lift the “zero bracket” deduction for taxpayers from the current $15,000 to $18,500. That would essentially exempt the first $18,500 of income from personal income taxes.
A family with an income of $50,000, for example, would pay tax only on $31,500, reducing the effective rate.
“The dollars that come from the elimination or phase out of sales tax refunds for non-profits went to raise the zero-bracket deduction for low- and middle-income people,” he said.
One Democrat wasn’t buying it.
“That’s political spin to cover up the corporate give-aways,” said Sen. Joel Ford of Charlotte.