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Joint | May 7, 2013 | Press Room | Berger Presser

Full MP3 Audio File

...internet, sir. [SPEAKER CHANGES] Well, I'm glad you watched it. [SPEAKER CHANGES] It was on the internet, so it was on internet. [SPEAKER CHANGES] Well, it must be true. Right? [laughter] [SPEAKER CHANGES] ?? opinion, I think. [SPEAKER CHANGES] OK. First of all, I appreciate you all being here today. I will try to go through a number of things. A lot of this is technical. A lot of it detailed. We'll try to leave enough time to answer questions you have, but today, what you've been waiting for for a significant period of time. We unveil our vision for tax reform in North Carolina. It's tax reform that will help spur economic growth and provide for the people of North Carolina the largest tax cut in North Carolina history. We expect that implementation of this concept will end up with a $1 billion tax reduction over the course of three years for people of North Carolina. And this means a tax cut for hard working families and a tax cut for job creating businesses. And ultimately, the goal is to provide the capacity for the private economy in North Carolina to create jobs, because that's what we're all concerned about and that's what our people want and need. Our unemployment rate presently is the fifth worst in the nation. Over the past decade family incomes have fallen and this General Assembly has pledged to reform our State, reform our tax code, get things turned around and that's what we're working hard to do. We have, over the past two years, begun the process and have our fiscal house in order. But the single greatest challenge we have now or the single greatest change we can make for North Carolina is tax reform. Our current tax code was written in the 1930's. This tax code was written in the depths, for the most part, of the Great Depression. The world has changed dramatically since then, but our tax code remains stuck in the 1930's. Failure to reform our tax code has cost North Carolina. We're standing still while other States move forward. We're falling behind and taxes, our high taxes, are a big reason for that. We've looked at the fastest growing States in the country and we found a common thread. In those States that are growing, that common thread is low taxes and in many instances, no taxes on income. Presently, North Carolina State government receives approximately 60% of State revenue from some form of income tax. Whether it's the individual income tax or the corporate income tax. And that's the money that people and businesses earn. And for individuals, the State, in many instances, takes that money right out of their pocket before they even have a chance to touch it. The current system, as you read through this book, and I'm sure everyone of you have a copy of it and you've looked through it, the current system is riddled with special interest exemptions and loopholes that give tax breaks to a favored few, while regular folks pay more. In other words, this is not fair. It's not fair to the people of this State. It's not fair to the State as a whole. Other States, States that are thriving economically, in many instances, tax consumption or spending. That's a fair approach for taxing, because everyone pays something, everyone has control over how much they're taxed. The more you spend, the more you pay. The less you spend, the less your pay. That's why we're proud to unveil this fair, sensible vision for reform that will, as I said, provide the largest tax cut in North Carolina history. The tax fairness plan is a three year plan to put over a billion dollars back into the pockets of North Carolina's hard working families and encourage job growth by providing tax relief to those job creating businesses in the State. The plan will substantially reduce income, corporate income and sales tax rates for North Carolineans. Give you an idea of how that works. Presently, in North Carolina for individuals, you pay 6%, 7%, up to 7 3/4% and you get to that 7 3/4% number as an individual tax payer at $60,000. Corporate tax presently is 6.9% and our combined sales tax for much of North Carolina is 6 3/4%.

The planned the income tax, will go to for 1/2% over three years the first year drops to five full 0.5% cited your 5% for the half percent in the third year of the corporate income tax over three years withdraw from 6.9% to 6% else to do something else with reference to the corporate tax fraud and it's so vivid fairly walk you through the city before school single sales slide and all of that back use a substantial Philadelphia all four are ability to recruit and keep all multistate corporations in North Carolina basically a frozen, tax corporate income of only a high rate of the calculation that fax them all to save corporation has a very complicated formula takes into account all the number of employees they haven't studied the property they have a misleading the sales limits the soloists will we do is we punish corporations that have been for use your employees corporations to fill the half over the years are having a six year (SPEAKER CHANGES) what we're talking endlessly easing into a single sales factor where the facts will to say corporation placed on the sales insight North Carolina other states are going to be as your funny man: competing with other slaves for recruiting business and the bad solos significant improvement club with reference to the other sales tax with this windows and broadens the base of all the sales tax to new service, and that it reduces the overall sales tax rate roughly the same current sales tax rate claim of much of North Carolina 63 quarters percent of non-decision after some 500 display of college fax oh and unlawfully all appear more explicit goal with reference to the income tax on the thing we do is we obvious that something will have mail which is a serum tax bracket so one to start with a GI and the others zero bracket of first year that seemed like it is for the first $10,000 as a year the third year of that fear of extract his first $12,500 for years $15,000 to what we do is for those of the lower end of the income scale golf with reference to walk for the outnumber they pay no tax deductible of 10,000 more than the first year which will follow the second and third year of live 15 in the own: (SPEAKER CHANGES) the next year again make significant changes to be a corporate tax rate Cohen, calculation of the of corporate tax law with reference too long to be home sales tax, one of the things we do know we stand days, we implement all was referred to as a business to business exemption all four of those businesses saw that goal off a franchise tax fraud and deception is fully expanded space so well for those who knew of transactions are cached if the business to business transaction that will will be exempt from the on the sales, all of the plan goes protect Federal tax deductions saw such as home mortgages are insurable contributions are himself a friend of the tax fairness act film will create a reliable revenue stream for everyone plays their fair share no one gets special breaks remove all of the one recent example of phone calls with protection system is so this idea vehicles from sunny wee of every year a look at a situation where one would love for the happening with the income tax on numbers only going to receive more revenue were less revenue on the income taxes volatile five lower sales tax places much more stable body is so something that is fair over ole miss something that will law allowed was the two projects already use soft copy and that the more accurate fashion and actually protect the citrus leaf services , including education, transportation and the social safety net (SPEAKER CHANGES ) make a mistake there a variety of special interests two would prefer to preserve the status quo: the special treatment today the custom fit for decades at the expense of the average family fun is nonetheless elected officials to pick the winners and losers in our economy of economic activity in the economy option to launch the chairman of the current tax system cannot be fixed fund noodling around the edges five from first place leaders to take a right to slam the employment front room tax reform this is a flammable guitar slate headed by in the right direction for latest more competitive and almost accrued and rode off the plane fell we share a vision for tax reform coalition government with the speaker of the ??.......

...and with members of the House of Representatives. We're committed to working together with them to incorporate their ideas into what will be the first comprehensive tax reform in North Carolina since the 1930s. We know that the people of this state will have questions. We know that you probably will have a question or two as well. We want their input and we eagerly await the input that we receive from them. People can, if they have questions about the plan, visit the website nctaxcut.com to learn more about the plan. The plan also has a calculator that individuals can utilize to see what their tax cut, what their tax situation will be upon implementation of this plan. It is, as I said, a concept and a plan. It's a work in progress. We will continue to work with the governor, with the speaker, and with members of the House of Representatives to craft a comprehensive plan that will work for North Carolina. Will work for the people of North Carolina and will make us more competitive on the national scene. With that I'll turn it over to Senator Bob Rucho and Senator Bill Rabon. They may have a couple of comments and then we'll take your questions. [SPEAKER CHANGES] Thank you, Senator Berger. Good to see everybody here today. Senator Berger pretty much outlined what we were talking about, but I want to reiterate something very, very important. And that is the fact that under the existing tax system that is based in the 1930 model, which was as eluded earlier, a depression model, also the fact that this was a manufacturing economy years ago and unfortunately we've lost that in North Carolina, and also across America. We'd love to try to revitalize that, if possible. We're seeing some very serious facts come forward. One, if you look at per capita income as an average of the US, it is declining from 1997 til today. And it is today at 1986 level, and is continuing to decline to the 1970 level. That means that everybody's paycheck is less. If you want to look at it medium household income, and that is from the NNO report, that is declined over the last decade. Again, people's paychecks are less. You're also seeing, despite the fact that we've had huge government assistance programs, whether they be Medicaid or all of the assistance programs on the federal and the state level, we've seen poverty increase. And that is something that we're not happy with at all. And then, cause we believe something very important. The best way to fight poverty is with a job. And what this is all about is creating economic growth and jobs. And that's what we got elected to do and that's why Senator Berger and myself, and Senator Rabon, members of the Senate, and hopefully the Governor and the Speaker and the House members will join us in fulfilling our campaign promises. We're also seeing a decline, or an erosion, of the sales tax base. What was happening in the 30s, that was when two-thirds of your GDP or your economy was based on selling goods, it's completely reversed. Today, one-third is actually goods and two-thirds is service industry. And the way our tax policy is, it is based on taxing goods only. That's like running on two cylinders in a six-cylinder car. You can't expect to get any type of traction or speed, and in our case, economic growth in jobs. And the last thing that Senator Berger brought to our attention was the fact that we are fifth highest unemployment in the country. Unacceptable by any standards. And therefore, we believe that this plan when fully implemented, will allow us to meet the needs of the people of our state and give everybody an opportunity for a job. Senator Rabon. [SPEAKER CHANGES] Thank you, Senator Rucho and Senator Berger. And thank you all for coming in today. To reiterate what Senator Berger said, this gives our state the largest tax cut in state history. And tax reform is going to help the working families that are struggling. It is going to provide more and better jobs, and higher paying jobs. I do want to touch on one fact about our plan, and that is that this is going to make North Carolina competitive and better than our neighbors in attracting new businesses and in taking care of the hardworking people that live here and in bringing industry to our state. If you look at the timeline and think about what Senator Berger said, you will see that over the next three to four years we are ratcheting down every single tax rate in the state. And that is a very strong, good leap, and a good, a good direction for us to head in. I think that we will be the envy our neighboring states. And I think you're going to see very good things come to North Carolina as a result of this plan. The framework that we have established...

I believe it's a solid framework. We've work on this a long time. We haven't jumped into this. We have taken our time. We've been step by step by step. We've looked at everything we could possibly look at. We've asked from input from the business communities. We have asked from input from our municipalities and our stakeholders, if you will, in the state. We have what I feel is a good comprehensive plan. One we can further our discussion with the house and with the governor and move forward. It is a good day for North Carolina as Senator Berger said and I'm very proud to be apart of this day and to be a member of the Senate taking these steps. Thank you very much. [SPEAKER CHANGES] We will take your questions. Scott. [SPEAKER CHANGES] You mentioned the B2B transactions. Did I understand you say that the way you would determine that is if a customer was a payer of the franchise tax that is how it beā€”that's how you would limit the B2B. [SPEAKER CHANGES] One of the things that we are looking at is expanding the base of the payers of the franchise tax to include LLCs. By making a modification of the current two hundred dollars that they pay to the Secretary of State and having that money or whatever the fee would be go into the general fund. Then those folks would register, get a tax certificate and with that tax certificate they would be exempt from the B2B transactions. On the expanded base, again. There's also a provision that would exempt capital purchases from the sales tax. Currently, some capital taxes are subject to the sales tax, but that sales tax is limited in many instances so we would exempt capital purchases there. Some definition so that would go with that. [SPEAKER CHANGES] Can you or Senator Rucho talk about why you feel like that is a good way to try to go about creating this kind of [inaudible]?? [SPEAKER CHANGES] Thank you. That's a good question. As Senator Berger alluded to, what this does is registers every business in the state. In doing so, no one can quantify, but there is a significant part of our economy that is the underground economy of people that choose not to pay taxes and do nothing. By moving forward with this plan, registering every business and by giving them the B2B exemption; if they register, you know that they are participating in the system. If a business chooses not to participate in the system with a consumption based tax as described everyone will pay that tax and therefore, one way or another, they are paying into the system. Again, what that means is talking about fairness. Everybody should pay something as Senator Berger alluded to and that's what that particular part with the registration in the franchise tax will accomplish for us. [SPEAKER CHANGES] Scott, one of the reasons for the B2B exemption is the ratcheting effect that you have when you pay tax on the business inputs and then the final product is taxed as well. So, you exempt the B2B and tax the final product. [SPEAKER CHANGES] Do you feel like it's double taxation? [SPEAKER CHANGES] It's double, triple, quadruple. The pyramid is involved. [SPEAKER CHANGES] Just to follow up on Scott's question. Do you have estimated what's the cost of that in the big picture? [SPEAKER CHANGES] We have an estimate. We've been working with the Department of Revenue. It's our expectation that the implementation cost, if that's what you're getting at-- [SPEAKER CHANGES] The B2B. [SPEAKER CHANGES] About $5 million is the implementation cost is the estimate that we've received from the Department of Revenue. [SPEAKER CHANGES] On the B2B exemptions? [SPEAKER CHANGES] On the moving, the tax plan as we have kind of outlined overall. I don't know that the full $5 million is just for the B2B. [SPEAKER CHANGES] Okay. [SPEAKER CHANGES] Maybe I'm not getting to your question. [SPEAKER CHANGES] Don't you want to know how much you spent that to bring in by bringing in all those additional businesses that are not getting the franchise--- [inaudible crosstalk] [SPEAKER CHANGES] Is it a net gain or net loss or--? [SPEAKER CHANGES] The base gets broadened by about $60 billion dollars. Is what I understand. [SPEAKER CHANGES] On just the franchise or also on the sales tax that they would be paying on service? [SPEAKER CHANGES] How many services do you plan to tax and what kind? Are we going to tax everyone that's being taxed in another state like the Senate proposed earlier? [SPEAKER CHANGES] That's one of the things that we are looking at. The current concept is that if a service is being taxed in another state it would be apart of the expanded base. Things like attorneys, accounting...