RALEIGH, NC (WECT/AP) - Gov. Pat McCrory is unhappy with the state Senate's new economic development proposals, saying they're too expensive and fail to make clear the state has a long-term plan to recruit companies to North Carolina.
McCrory made the comments while addressing leaders of cities and towns meeting in Raleigh on Wednesday, shortly after Senate leader Phil Berger (R-Rockingham) rolled out a legislative package to counter one the House has already passed.
Berger's office sent out a news release, saying the Economic Development/Tax Modifications bill (SB 338) will:
• Reduce and simplify state corporate taxes by moving to a single sales factor in 2016, ensuring businesses are not penalized for making long-term investments in the state by purchasing property and hiring large workforces. Many neighboring states, including South Carolina, Virginia and Georgia, use a single sales factor formula, and this has put them at a competitive advantage over North Carolina.
• Create a new economic development tool for attracting major manufacturing projects – like automobile and aerospace manufacturers – that commit to investing at least $1 billion and creating at least 2,500 new North Carolina jobs. The tool will be housed within the existing Job Development Investment Grants (JDIG) program, but not subject to the cap.
• Lower the corporate income tax to four percent beginning in 2016 and three percent beginning in 2017, making North Carolina's rate the lowest in the Southeast and keeping the promise of lower corporate taxes state leaders made in 2013.
• Implement safeguards to the JDIG fund, including a quarterly allocation requirement, to ensure funds are awarded and administered responsibly and not exhausted within a short period of time.
• Ensure that struggling, mostly rural counties also benefit from the JDIG program. Last year, three counties with a median income of $56,796 – Wake, Mecklenburg and Durham – received almost 90 percent of the funds designated for the entire state. The bill will guarantee projects in North Carolina's other 97 counties – where the median income is only $40,175 – receive more than half of funds going forward.
“I'm trying to comprehend how the governor wants to spend $1 billion on new incentives, but considers it ‘breaking the bank' to allow North Carolina taxpayers and job-creators to keep about $500 million of their own money,” Sen. Berger said in an email statement. “The math does not add up.”
The Senate's plan offers less award money to reload the Job Development Investment Grant incentive program. McCrory says the plan divides North Carolina. Charlotte and Raleigh-Durham would benefit less from the grant program in the Senate plan.
“The governor needs to accept responsibility for rapidly draining his jobs incentive fund and directing close to 90 percent of the state's incentive money to its richest three counties, including his own,” said a statement from Senate Majority Leader Harry Brown (R-Onslow). “These counties already receive a disproportionate share of sales tax and transportation funds, and it's time for the 97 other counties in this state to be treated with respect. In fact, Mecklenburg County receives more in sales tax revenue than more than 50 of our least prosperous counties combined.”
The Senate plan is drawing both praise and criticism from advocacy groups, depending on their political stance.
“The corporate tax cuts in the Senate's proposal would further reduce revenue for investments in our public schools and universities and other building blocks that help drive the success of businesses,” said Alexandra Sirota of the Budget & Tax Center with the progressive-leaning
NC Justice Center
. “Businesses need an educated workforce and modern infrastructure to be successful. Cuts to the tax rates for profitable corporations or changes to the way corporate income is considered for purposes of taxation also won't address falling wages for the average North Carolinian. Furthermore, the Senate proposal changes to taxes paid by profitable multi-state corporations would not guarantee reinvest in our state and be at the expense of small, home-grown North Carolina businesses."
“Americans for Prosperity supports this plan because it delivers substantial tax relief to North Carolina and limits the growth of incentive expenditures that help fewer than 1% of businesses in our state,” said a statement from Donald Bryson, State Director for the conservative
Americans For Prosperity
group. “A 2% corporate tax cut is attractive to potential employers and unburdens the businesses that already call North Carolina home – regardless of political connections or geography.”