A major conservative donor’s decision this week to divert a planned $25,000 contribution away from state House Republicans highlights an increasingly bitter divide within the party over tax policy and government spending.
Raleigh businessman Bob Luddy, who chairs the board of the conservative Civitas Institute think tank and is an influential financial supporter of conservative candidates, emailed a sharp critique of the House budget to House Republicans, who are in the majority.
Luddy complained that the budget advancing to a major vote on Thursday does not include new tax cuts and extends tax breaks for specific industries. He called the spending plan too “liberal” and said he’s decided to withold his planned, annual donation to the House Republicans’ campaign committee.
With his email, Luddy entered and helped to crystallize a budget debate in which the priorities of Gov. Pat McCrory and House Speaker Tim Moore do not appear to be in line with that of Senate leaders and several conservative advocacy groups.
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The governor and House leaders want to extend tax credits for solar and other renewable energy projects, technology data centers, and research and development, saying the programs create jobs. But Senate leaders, Luddy and others say the tax breaks are simply handouts for what they term “special interests.” They instead want to cut overall corporate and personal income tax rates.
“I had planned to donate $25,000 this year to the House Republican Caucus to help re-elect a conservative supermajority,” Luddy wrote in the email to all Republican House members this week. The message was posted to the Civitas Institute’s blog Tuesday night.
“Unfortunately, after seeing the $1.3 billion in additional spending and no across-the-board tax relief in the proposed House budget I had to reconsider,” he wrote. “We now find that based on the Republican budget, special interests such as film producers, non-competitive solar energy manufacturers and out of state companies are favored over hard-working taxpayers and North Carolina businesses.”
Luddy said he instead gave the money to the conservative advocacy group Americans For Prosperity to “fight the liberal House spending plan.”
AFP is lobbying heavily against the budget and targeting GOP budget writers with ads that say they “sold out taxpayers.” The advocacy group launched a radio ad campaign against a House plan to spend $60 million a year on a film industry grant program.
Luddy – who runs a commerical kitchen ventilation company and a growing chain of private schools – donated a total of $160,000 to the N.C. Republican Party during the 2014 campaign cycle, records show. N.C. Board of Elections records don’t show how much of that money went toward state House campaigns.
A recent analysis by The Charlotte Observer placed Luddy as the top North Carolina donor to federal campaigns in 2014.
Asked about Luddy’s offensive, Moore, who is in his first term as House speaker, took a conciliatory tone.
“I certainly have nothing but respect for Mr. Luddy and his support for our caucus,” the speaker said Wednesday. “My hope and my belief is that once this budget plays out, folks who have supported us will continue to do so, and maybe folks in the past who haven’t will come forward and support us.”
Rep. Paul Luebke, a Durham Democrat, said it’s rare to see a major donor openly tie their money to a policy goal. “Anyone who follows politics knows that money plays an inordinate and excessive role, but to state it so plainly is unusual,” he said.
Reached Wednesday, Luddy said his move was designed to combat lobbyists’ influence in those budget provisions. “If there’s anything that really upsets me, it’s special interests,” he said. “We can certainly bring it to the light of day and slow it down.”
He added that his own involvement isn’t based on self-interest. “I don’t want anything from them except good government,” he said. “You won’t see me advocate for anything beyond better education, lower taxes and good government.”
Luddy founded Franklin Academy, one of the state’s first public charter schools.
The budget plan that is generating concern is making its way through the House this week, with debate scheduled to start Thursday morning and stretch throughout the day. The House version has not called for any new tax cuts, although current law will likely trigger a further reduction in the corporate tax rate.
“With respect to taxes, you do have $360 million in tax reductions baked into the first year,” said Rep. Nelson Dollar of Cary, the top budget writer.
Spending under the House plan would increase by $1.3 billion, or 6.3 percent.
Luddy and some Senate Republicans argue the increase should instead be 2 or 3 percent. But Moore says that “isn’t much of an increase” given the cuts of past budgets.
It’s the tax credits that have divided House Republicans this week.
A number of them voted against the tax and fee section of the budget during a Finance Committee meeting Monday evening. Among the “no” votes was House Majority Leader Mike Hager, who’s been a prominent critic of incentives for the solar industry.
Luddy is a major supporter of Hager, giving him $5,000 in the last election cycle.
Backers of renewable energy credits worry that North Carolina would lose jobs if those industries found a more attractive package elsewhere. “We have really rolled back the tax credits significantly over the last few years, and I think the credits that are in there are proper and responsive to creating and expanding jobs in North Carolina,” Moore said.
But Luddy says the state shouldn’t prop up the solar industry. “These guys couldn’t exist without government subsidies, and those subsidies have to come from every working taxpayer who are capable of creating way more jobs than the solar industry could ever create,” he said.
Americans for Prosperity has said the budget is “filled with special interest giveaways” and is working to reverse them already. State director Donald Bryson says Luddy’s new and “very, very generous” contribution will allow the group to expand those efforts as the budget battle continues.
“The budget was so negative in the way it came out, even to get to a compromise is a long way away,” Bryson said.
While the budget draft was developed by several dozen Republican appropriations co-chairs and vice chairs, AFP’s message is targeting two legislators: Dollar and Senior Finance Co-Chairman Jason Saine of Lincolnton.
The group’s ads on social media feature photos of the two lawmakers and say they “sold out taxpayers.” Saine fired back Wednesday, calling the tactic “an infantile approach” because the budget is far from complete.
“It does seem a little disingenuous to target me and not others,” Saine said.
The budget will likely pass the House on Friday, and the Senate has signaled it will make major changes – possibly removing the tax credits and instead adding corporate and personal income tax cuts.
Luddy could find the Senate’s budget goals more to his liking. Senate leader Phil Berger has said that with revenue growth, “now is the time” for additional tax cuts.
Moore also raised the possibility of lower taxes in his remarks to a reporter Wednesday. “We know there’s going to be further tax relief we’re going to work on, and so we’ll need to budget for that as well,” he said, adding that what the House approves this week “will not be the final word on the budget, but the first step.”
Charlotte Observer staff writer Jim Morrill contributed to this report.
The Luddy file
Raleigh businessman Bob Luddy is active in a variety of roles:
▪ President of CaptiveAire, a major national manufacturer of commercial kitchen ventilation systems.
▪ Education entrepreneur who is chairman of the board of the Franklin Academy public charter school in Wake Forest and founded the growing Thales Academy, a private school chain with four Triangle locations.
▪ Former candidate who ran for the Wake County school board in 1997.
▪ Supporter of conservative political causes, including as board chairman at Civitas Institute, a think tank. One study this year placed him as the top North Carolina donor to federal political campaigns in 2014, with $362,000 in donations made to candidates and committees. All but $6,000 was to Republicans.