Gov. Pat McCrory is trying to push a tax overhaul agreement over the finish line that would in turn lead to legislators passing an overdue state budget. But he said Monday he prefers to limit the scope of tax changes and doesn’t want them siphoning away too much money.
While the governor told reporters that he and House and Senate leaders are “very close” to getting a tax plan completed, his conditions may place him at odds with tax offers from the legislature. Some would phase in changes over several years, while the latest Senate plan approved last week could ultimately result in nearly $1 billion less annually for state coffers.
The governor also said he’d prefer making tax changes only through 2015 before reassessing whether other changes are possible.
“My goal is to ensure that we have sufficient revenue to meet our budget needs that I have presented to the House and Senate for the next two years,” he told reporters at a news conference. “If that is not met, then I’m going to have serious concerns about the bill because I’m not going to put” the state’s finances in jeopardy, he added.
Competing House and Senate plans would reduce top individual income tax rates and subject more transactions to the sales tax rate most people pay. While the House would reduce the corporate income tax rate, the Senate wants to eliminate it entirely.
McCrory has said for months that he would like to see North Carolina’s income tax rates be reduced to make them competitive with surrounding states and that any tax overhaul would be “revenue neutral.”
“My goal is to meet the budgetary requirements of state government. To me that’s the definition of revenue-neutral,” he said.
McCrory has publicly favored a House proposal that fiscal analysts at the General Assembly predict would ultimately result in $360 million in fewer revenues for the next two years, compared to more than $660 million in the Senate plan.
A tax plan has “got to happen soon because it’s delaying movement on the budget,” he said, but added “I’d rather have no bill than a bad bill.”
The two-year outlook is important because the state budget House and Senate Republicans also are negotiating covers two years. The budget was supposed to take effect July 1. A stop-gap spending measure continues through the end of the month.