$6.5 billion surplus spurs talks of even further tax cuts in NC
RALEIGH, N.C. (WNCN) – Following the news that North Carolina is expected to take in billions of dollars more in revenue in the next two years than previously thought, Republicans in the Senate say they’re discussing whether to propose even further tax cuts than what they included in a bill they passed last week.
“It’s changed everything as far as the current tax package that we were proposing,” said Sen. Brent Jackson (R-Sampson), who is one of the chamber’s budget writers.
On Tuesday, state economists reported that North Carolina state government revenues are projected to be $6.5 billion more than anticipated over the next two years. That does not include funding from the federal government through the American Rescue Plan, Gov. Roy Cooper’s office noted.
The news came just as the Senate prepares to roll out details next week of its proposed budget.
A bill the Senate passed last week and sent to the House makes a variety of cuts to state taxes, including the personal income tax and corporate income tax.
Under the plan, a family of four making the median income would save $325 annually on their tax bill. The proposal also phases out the corporate income tax by 2028.
Jackson said lawmakers are spending the next couple of days analyzing the new revenue projections to see what steps to take next as far as proposing any further tax cuts.
“Well, that’s what we’re looking at. We’re looking at all options to see what we can do,” he said.
Cooper (D) has been critical of the Republican tax cut plan because it would benefit wealthy individuals and families, as well as cut corporate taxes. While it also would lead to more low-income people paying no state income tax, Cooper has said tax cuts should be more targeted.
“Even though the Republican Senate bill giving big tax breaks to corporations and the wealthy is bad policy, we have enough money to pass my entire budget plus all those tax breaks with more money still remaining. We must now negotiate a responsible bipartisan budget that addresses everyone’s concerns,” Cooper said in a statement.
Last week, Republicans in the General Assembly reached an agreement among themselves after months of negotiations to spend $25.7 billion in the new fiscal year that begins July 1 and $26.7 billion the next year.
The revised economic forecast shows the state taking in about $29.7 billion in revenue next year and $30.7 billion the year after that.
When asked if those updated numbers mean Republicans would agree to spend more than they already have, Jackson said: “That is not our intention on the Senate side. We agreed upon that number, so that’s what we’re planning on sticking to.”
Sen. Wiley Nickel (D-Wake), who voted against the tax cut plan last week, said the updated revenue numbers make him more optimistic the two sides will compromise on a budget. Cooper and the General Assembly never did agree on one in 2019, remaining at odds over whether to expand Medicaid and how much of a raise to give teachers.
“There is a compromise budget that includes much of the Republican tax cuts if we can do the things we’ve got to do in this state, like invest in infrastructure, give our teachers the respect they deserve,” said Nickel. “It would be a level of dysfunction nobody could even imagine if we can’t get a budget done.”
Though Senate leaders aim to pass their version of the state budget next week, there is no expectation a bill will make it to Gov. Cooper’s desk for his signature until at least early August, said Jackson.
Senators will still have to negotiate with the House on the specifics of what to include.
Though he didn’t give details, he said the Senate’s budget plan will include pay raises for state employees, though it’s unclear how much they’ll be.
Cooper has called for teachers to receive an average raise of 10 percent over the next two years.
“The state could absolutely do more,” said Tamika Walker Kelly, president of the North Carolina Association of Educators, which represents teachers and other school employees. Her group is supporting Cooper’s proposal. “To not invest in our public schools with a budget that fully supports public education is fiscally irresponsible on the part of our legislature.”
Jackson said he does agree with Cooper on the need to add at least $1 billion to the state’s Rainy Day Fund.
“There is some concern that a lot of it is one-time money, and it’s not recurring,” he said. “We’ve got to be careful, which to me says we need to put as much as we can in the savings reserve so we can be prepared as we move forward for when we have another downturn.”
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