The North Carolina Senate Finance Committee signed off on Senate Bill 607 last week, legislation that would refer three constitutional amendments to the March primary ballot. The proposed amendments would implement a spending cap, referred to as the Taxpayer Bill of Rights (TABOR) preventing government spending from increasing faster than the rate of growth in population and inflation; establish a reserve fund for emergencies; and cap the state personal and corporate income tax rates at five percent. Americans for Tax Reform (ATR) supports these proposed amendments and is urging North Carolina legislators to give voters the opportunity to decide on these commonsense reforms that will make the state more economically competitive by supporting SB 607.
If approved by voters, TABOR would cap the state budget this year at the $21.65 billion spending target already proposed by the Senate. This smart spending cap would ensure that state government lives within its means and grows at sustainable rates. TABOR would also reduce pressure to raise taxes on North Carolinians moving forward. SB 607 includes a provision that would allow the General Assembly to exceed the spending limit with a two-thirds vote.
Another Senate proposal would create a rainy day savings fund for financial emergencies and natural disasters. Due to a last minute amendment passed on Monday night, the language of the bill now guarantees annual deposits to the fund equaling two percent of the prior year’s appropriated budget. These deposits would continue until the fund reaches 12.5 percent of the budget or $2.6 billion. Access to emergency savings would require bipartisan support through a supermajority vote. Like TABOR, this proposal would add an additional layer of protection from overspending should North Carolina encounter economic or natural disasters.
The third proposed amendment would cap the corporate and personal income tax rates at five percent by 2020. Allowing North Carolinians to keep more of their paychecks is not only good for Tar Heels, but benefits the state as a whole by maintaining a favorable economic climate that attracts employers and investment.
“It has been the intent and the desire of this legislature to do our level best to lower the most onerous tax we have – personal income,” said bill sponsor Sen. Bill Rabon (R-Brunswick).
North Carolina legislators are currently in negotiations to finalize the new budget. The state made great progress with the pro-growth tax reforms enacted in 2013 that significantly reduced the personal and corporate income tax rates. The spending and tax caps proposed in the Senate last week will complement those reforms, make the state more economically competitive, and allow North Carolina legislators to pass further tax relief in the future.