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House Committee advances constitutional amendment to cap state income tax rate

A bill to place an amendment to the state constitution on the ballot in November passed the House Finance Committee Wednesday with less than 15 minutes of debate. The amendment would cap the state income tax rate at 5.5 percent.

“I understand the differences we have in tax policy across the members of this body and the role that plays in politics,” said Rep. Graig Meyer (D-Orange). “What I want to speak to is the practical impact.”

Without the option to raise the income tax in times of crisis and emergency property taxes, sales tax and user fees would have to go up when the state and counties need additional resources, Meyer said. Those are the taxes that have the greatest impact on poor North Carolinians.

“If you’re a working person you’re likely going to see your property tax, sales tax and user fees go up at some point in time,” with this cap in place, Meyer said.

The current individual income tax rate is capped at 10 percent. The rate is set to be 5.25 percent in 2019. Revenue from income taxes accounts for over $12 billion, more than half of the state budget.

Democratic lawmakers argued that freezing the income tax through a constitutional amendment would build in an inflexibility that would make increasing spending on essential things like education next to impossible and could threaten North Carolina’s AAA bond rating.

Senator Tommy Tucker (R-Union) said tax changes since Republicans took power in the General Assembly in 2013 have resulted in massive budget surpluses and savings, which has kept the state’s bond rating secure.

Rep. Harry Warren (R-Rowan) said it was worth putting the question to voters.

“This is a bill asking for a constitutional amendment to be put on the ballot,” Warren said. “This isn’t for us to decide, whether we’re going to cap it. It’s for the people to decide.”

Rep. Robert Reives (D-Chatham and Lee) said the rigidity of this sort of cap doesn’t belong in the constitution.

“That’s the problem — you’re adding it to the constitution,” Reives said. “That makes it pretty darn tough to get rid of it later.”

“Adding things to the constitution gives you the kind of inflexibility that does cause you financial problems in the future,” Reives said.

Rep. Rodney Moore (D-Mecklenburg) asked for a roll call vote, to be sure individual votes were on record, but his motion was denied and the bill was instead passed out of the committee on a voice vote and sent to the Judiciary III committee.

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