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Senate | June 12, 2013 | Committee Room | Finance

Full MP3 Audio File

?? Good afternoon, we'll call the meeting to order. Welcome. While I'm welcoming the- and announcing the names of the sergeant at arms, staf- I mean of the sergeant at arms and the pages, I will have the sergeant at arms staff please distribute any material that they have, if 2 or 3 of you could help in the back of the room, I'd appreciate it. Our pages today are Maggie Powell, from Wilmington, Sen. Goolsby, Jelissa Murray, Raleigh, Sen. Blue, Daniel Randell, Greensboro, Sen. Berger. Welcome, Daniel. Ashlynn Murray, Laurenburg, Sen. McLaurin, Spencer Zachary, Taylorsville, Sen. Allen. William Zachary, Taylorsville, Sen. Allran. Tyler Hendricks, Greensboro, Sen. Berger. Welcome, I hope you have a lot of fun today. I think you will, I hope you learn something today, and I'm sure you will. And thanks of course to our Sergeant at arms staff. The agenda today is Senate bill, sorry, House bill 998, we have a PCS, is there a motion to hear the PCS from Sen. Brock. All in favor of the motion please say "aye". [SPEAKER CHANGES] Aye. [SPEAKER CHANGES] Motion carries, Sen. Berger will explain the bill. [SPEAKER CHANGES] Thank you Mr. Chairman. It's a pleasure to be back with you and members of the committee, and Sen. Hunt, and those socks, and Sen. Tillman with his socks. so it's always a treat to come to finance committee. The PCS you have before you is basically the same as the bill that was discussed yesterday. The only change is in the provision dealing with the local food tax and the change in the PCS repeals food from the local tax base Nov. 1, 2014, gives counties the authority to levy a local sales tax on food effective Jan. 1, 2015. The bill that we had yesterday took the 2% tax on food off, which over time, it was 1% in 2014 and remaining 1% in 2016. So that's the only change in this bill. And Mr. Chairman, if it's appropriate I'd just like to just, with reference to the issue of tax reform, the bill you have before you is a comprehensive tax reform bill that addresses the needs of North Carolina in connection with [SPEAKER CHANGES] Sen. Meredith has a problem. [SPEAKER CHANGES] Now is this a PCS? [SPEAKER CHANGES] Yes. [SPEAKER CHANGES] So did we move to hear it? [SPEAKER CHANGES] Yes we did. [SPEAKER CHANGES] I apologize, I'm sorry. I'm sorry Mr. Chairman. [SPEAKER CHANGES] Please continue. [SPEAKER CHANGES] So we've been talking for years now about the need for tax reform. When the Democrats controlled the General Assembly, they talked about the need for tax reform. When the campaigns were waged in 2010, 2012, one of the issues talked about was tax reform. We have since January been discussing tax reform. In the Senate, one of the reasons that we have been able to move as far as we have and to keep this issue in the forefront is because of the efforts that have been made by the finance committee, by Sen. Bob Rucho, by Sen. Bill Rabin, and by the staff of the General Assembly. Before we get into this bill in any real depth, I think that whatever this General Assembly does in connection with tax reform is due in large part to the groundwork that's been laid over the years by members of this body, and members of the house, and particularly this year by Sen. Rucho in connection with bringing this issue forward. This bill will bring North Carolina into the 21st century in terms of our tax policy. It will bring us to the point where the competition among states will be such that

[SPEAKER] North Carolina will be in the forefront of states in the competition for jobs and in the competition for growth as the economy expands. Now, the important thing for us to remember is that this is an issue that has been discussed and pursued by many people. When the Democrats were in the majority, Senator Clodfelter was pursuing the issue of comprehensive tax reform. He and Senator Hartsell introduced a bill this year that addresses the need. So I don’t think the debate at this point is about the need for tax reform. What we’re talking about at this point is exactly what it looks like. And I would invite the Committee to look at the details of this plan and would be more than happy to hear the debate and answer any questions. And, Mr. Chairman, from time to time, I may need well, at many times I may need help from staff to answer some of the more technical questions that get asked. But with that, Mr. Chairman, the bill is here and I would urge the Committee to pass it with a favorable report. [SPEAKER CHANGES] Thank you Senator Burger. Members of the Committee, questions? Senator Brunstetter. [SPEAKER CHANGES] I’d like to stand for an amendment please. [SPEAKER CHANGES] Thank you. Do the members have copies or are they going to be passed. Thank you. [SPEAKER CHANGES] Yes. [SPEAKER CHANGES] Is the Committee good to go? We still have some more in the back. Okay. In the back. Now, does everyone have a copy? Senator Brunstetter. [SPEAKER CHANGES] Thank you, Mr. Chairman. I’m sorry for that delay. What this amendment does is it basically adds a year and another tier into phasing on the treatment for the sales tax refunds for non-profits. Essentially the impact would be that the larger non-profits have a little bit more time to adjust to the impact of this change. I ask for your support. [SPEAKER CHANGES] Thank you. Senator Berger, you care to comment on that amendment? [SPEAKER CHANGES] Thank you, Mr. Chairman. I think it’s a good amendment and would urge the Committee to adopt the amendment. [SPEAKER CHANGES] Mr. Chairman. [SPEAKER CHANGES] Senator Berger, further discussion from the Committee. [SPEAKER CHANGES] Mr. Chairman. [SPEAKER CHANGES] Senator Tillman. [SPEAKER CHANGES] I want to thank Senator Brunstetter for this amendment. It will help our hospitals. And all of us have been hearing from him and others to transition into the removal of sales tax exemption and I think this is a good move and a sound move. And I move that we adopt the amendment. [SPEAKER CHANGES] And so, motion to adopt the amendment. Any further discussion? All those in favor of . . . how could I have over look you, Senator McKissick. I’m sorry. [SPEAKER CHANGES] That’s all right. [SPEAKER CHANGES] Yes, sir. [SPEAKER CHANGES] I just want to make exactly what the revisions are. It looks like it started out at what $7.5 million now and going down to $100,000 over a four year period? Is that . . . [SPEAKER CHANGES] Correct. Correct. [SPEAKER CHANGES] Okay. I just want to make sure we’re reading correctly. Thank you. [SPEAKER CHANGES] Further discussion or debate? Hearing none, all in favor of the amendment please say aye. [aye] Opposed no. The amendment

Thank you. The bill is back before us, as amended. Any discussion on the, or questions from the committee on the bill? Senator Blue. [SPEAKER CHANGES] Just one quick question. I was looking at a document from the North Carolina legal municipalities that shows a tremendous impact based on, at least the way they analyzed it, on local governments, because of the change in their sales tax, the food tax. I guess you've seen this, Senator Berger? [SPEAKER CHANGES] Senator Blue, I saw an e-mail from the league on my e-mail account this morning. I have not had time to read it so I think I know what it says, but I could not represent that I've read it. [SPEAKER CHANGES] Yeah, it says that in some instances some of these smaller governments would have to, that it's decreasing their revenue by a huge amount so then they'd have to increase their tax bills by up to 50% - 60%. I looked particularly because it says with respect to two places that I represent, Raleigh County with respect...I had Wake County. With respect to Raleigh, it was a 10% increase. I just wondered, can you address that because we talked about it yesterday you were saying that most of the local governments would be left pretty much in as good a position as they're in now. [SPEAKER CHANGES] Senator Blue, the bill repeals the State authorized food tax that gets sent to the localities. It allows the counties to reinstitute that tax if that's something that they need. What I would say is two things. With the food tax included, the overall revenue is pretty flat, it's just pretty much a swap as far as the various differences. Individual counties may do a little bit better, some individual counties may do a little worse. Same with municipalities. You also have the repeal of the privilege tax, which affects the municipalities more than it would the counties. I would say there really are a couple of choices that are available to the local governments. One they could prevail upon the counties to reinstitute the food tax if the revenue is that much needed. The second option they have, as we have here, is to reduce spending and absorb any loss of anticipated revenue in that fashion. I would say that those are the options that would be available to them. They can ultimately be held harmless as a result of action by their county. [SPEAKER CHANGES] One follow up. [SPEAKER CHANGES] Follow up, Senator Blue. [SPEAKER CHANGES] In conjunction with this, if you really are going to pursue it, would you be amenable to, as a trade off, giving local governments more self-governing power so that they could in fact determine the sources that they needed to go to to generate the revenue to make up for this revenue that they say you're depriving them of? [SPEAKER CHANGES] Senator Blue, without committing to anything in particular as far as what that would be, I think we're always welcome to talking to them about the options that would be available and possible options that we would have. I mean in the bill, we give the local governments the option to do something that will address that revenue issue for them. But if there are some broader things, clearly we can talk about that. [SPEAKER CHANGES] Very good. Senator Jenkins? [SPEAKER CHANGES] Thank you, Mr. Chairman. Senator Berger, first I'd like to say I thank Senator Brunstetter's amendment. It does put off the pain a little bit for one more year. But the two areas I want to look at is, you all know, I represent one of the lowest wealth parts of this State. I represent eight counties in northeast in North Carolina. The main healthcare provider up there is Vident. Vident has eight or nine hospitals. This morning they sent me a recap of what the sales tax refund would do with the five rural ones. The bottom line is, and this does not change it, it would just push it out one year, is they would lose $2.2 million, not in revenue, but the bottom line would be negative $2.2 million as a result of losing this sales tax refund. Which would equate into a loss of over 250 jobs, it would equate into a loss of money given to the Brody School of Medicine. Interns who are working up there...

And also the docks that would be gone from that area in health care to the people. Another little item for rural North Carolina is the sales tax increase on mobile homes and modular homes and I ask the association to tell me what it was. Mobile home tax increase would go up 300% modular home tax increase would go up 95% and I just ask that you reevaluate the adverse impact you gon' have on the rural, lower income parts of the state whether in the east west north south or the central. [SPEAKER CHANGES] Mr. Chairman if i could just ask the staff to let us know what total revenue were talking about with reference to the mobile home tax revision. [SPEAKER CHANGES] Thank you senator. Oh you asked staff, excuse me. [SPEAKER CHANGES] The change to the modular homes when its fully implemented will be an additional 300 million dollars to the state. [SPEAKER CHANGES] Thank you. Senator Clodfielder [SPEAKER CHANGES] Thank you mister chairman this is a question for whoever you and he choose and I am trying to follow some of the transition provisions here and i want to make sure i understand them correctly so as i see it here the new business privilege tax will go on in 2015 and the repeal of existing local and state privilege licenses goes off in january and july of 2018 am i understanding correct that for that three year period businesses subject to this new tax will pay the old tax and the new privilege tax as well. [SPEAKER CHANGES] Thats correct [SPEAKER CHANGES] Senator the total amount payed would as i understand it theres a phase out and a phase in so what you have is a situation where while you have both the old franchise tax and the new tax the amount of the new tax goes up as the amount of the franchise tax goes down. Id ask staff to confirm that. [SPEAKER CHANGES] I wasn't asking about the franchise tax senator. [SPEAKER CHANGES] Are we clear? [SPEAKER CHANGES] Yes. Thats correct. [SPEAKER CHANGES] Thank you mr chairman. Question for staff. Am i right that right now all social security benefits are not taxed at all at the state level? [SPEAKER CHANGES] That is correct at the state level. [SPEAKER CHANGES] And am i also right that this bill will impose a tax on social security for north carolinians to the extent that its taxed at the federal level. [SPEAKER CHANGES] It would be in the income tax base yes. [SPEAKER CHANGES] Comment if i may mr chair. This bill really writes a blank check into the future. The tax revenue losses this cycle is 600-700 million this biennium. The next its 2.3billion and its at least 1.3 billion every year thereafter. Thats 2.5billion were taking out of the budget and so then we ask ourselves well who's paying for that money. From the questions we heard today we know property owners are going to pay because localities are going to have to raise property taxes to offset these losses. We know patients are going to pay because hospitals, these are hospitals that didnt benefit from medicaid expansion, they are having to deal with the affordable care act and in a time of unprecedented change in the way they do business you are imposing new taxes in a way, ive heard from all three of my hospitals in wake county, more than 10 million from each one, thats lost jobs lost services for patients, we now know that people on social security are going to have to pay for this. School kids are going to have to pay. And this budget that we're facing today that we passed out of the senate a couple weeks ago was only 770 million. And yet we've fired 4500 TAs weve eliminated 4800 teacher positions. What are we going to do when there is a 2.3 billion dollar hole next session. We are going to have a blank check that the people are going to have to pay. Well i just got an analysis from.

Budget and tax center, I don't know if you've seen it yet senator Berger but 75% of the benefit of these tax cuts go to the top 5% of earners, 50% goes to the top 1%. So we are doing a massive tax reduction to the wealthiest on the backs of school kids, sick people, people on social security, and I think this is a wholly misguided policy and I hope this committee does not advance this bill today. [SPEAKER CHANGES] Mr. Chairman. [SPEAKER CHANGES] Senator Berger. [SPEAKER CHANGES] Thank you Mr. Chairman. Senator Stein first I disagree with your premise with reference to the revenue issue because what you're talking about is a diminution of projected revenue. What we need to concentrate n is the fact that this bill would provide revenue growth for the state of North Carolina that is consistent with what we feel is the need for government growth in North Carolina. And so when you're talking about growth in revenue that is two, three, four times the inflation rate, and then you're saying we are not going to collect that money. What I would say is that means we're leaving more money in the pockets of average people, in the pockets of North Carolinians so that they can spend that money as they wish. And you're right if someone thinks that the government is going to get a certain amount of money and has ideas on how to spend that then they're going to be disappointed if they don't get as much as they thought they were going to get. [SPEAKER CHANGES] Thank you Senator Berger. Senator Rucho. [SPEAKER CHANGES] Thank you Mr. Chairman and members of the finance committee. I will first of all say to you last night was the best night, best sleep night I've had in nine months. And more importantly, senator Rabin won't be getting my 3:15 a.m. texts and emails. [SPEAKER CHANGES] I miss them already. [SPEAKER CHANGES] But first lets think about something. I don't agree with what senator Stein just said. I think what we've learned form all the study on this issue, and what we've learned from a lot of experts is that the present system is dead, busted, and we can't continue doing the way we do business. That is a given. We know it doesn't work, nibbling around the edges doesn't work. And very simply we need a comprehensive tax reform package. If you'll think about what happened yesterday that was a very rare occurrence yesterday and some of you I think in the finance committee were in attendance when we had four expert economist present to us what a good tax reform package, a pathway to the future. And senator McKissick brought up the question that I asked them to address yesterday and that was what do we do to follow and what pathway should we take to we can assure the fact that we have economic growth, we have jobs and we have prosperity for all senator McKissick, not just a certain few. And in that sense those folks laid out a plan and a pathway with certainty, with simplicity, but it was a balanced approach of how you set the taxes into place. You also have to have the ability to dial up or down which there are ways of accomplishing that that we can take advantage of base don the revenue stream without locking you into any errors. You also try a balance approach which doesn't put certain areas at zero until revenue stream is actually achieved, and I think that is very critical to win the confidence of not only members of the general assembly on both republican and democrats sides but more importantly of the public in the business community. But that session yesterday was very rare because you find economists rarely offer you direct input on how to solve a problem, and that's what they offered to us yesterday. And if you look at it you're talking about comprehensive tax reform should include lowering rates, and the rates aren't the only issue, changing the way you do business is very critical. and I will say to you that the bill we have before us does not accomplish that. And also looking at finding a way to provide the revenue growth in the long term by actually turning on all parts of the GDP not just...

the part on sales tax that deals with just on goods, and if you don’t make the transition over to a comprehensive broad-based plan similar to what Dr. Roby Sawyer said yesterday and also Dr. Russo, then you are not achieving comprehensive tax reform. You have to look at the models that have been very successful. You look at Texas, you look at Florida, you look at Tennessee, and yesterday Mike Walden was talking about Tennessee, who happens to have a zero income tax, who happened to lead the southeast in job growth. We were second to them because of the fact that certain good things have happened, but we’ll take and learn from their successes and actually create something better for North Carolina, but that means actually doing something that will make a difference and not just a stopgap approach that actually works against the direction that we want to move as was related to our economists yesterday. What we’re actually doing with this bill is finding a stopping point, or actually taking a step back or two steps back. We should be passing the tax bill that is comprehensive and achieves the goals of economic growth, jobs and prosperity. We as elected officials need to do what is right because the people are counting on us to listen to them rather than the special interests. For too long special interests have run this system, and by making the right and tough decisions, and tough decisions mean maybe not coming back and getting reelected, but if reelection is the only issue and not doing what’s right, then maybe none of us should be here to return or even should be here for that reason. So that being said, Mr. Chairman and members of the committee, I will tell you that I don’t believe that this bill the way it’s written now – this is not against tax reform; it needs to be done – but this bill is not fair and a right pathway and should not be supported, and under those circumstances it hurts me to say to you, but I cannot support this bill. I will not vote for this bill because of the fact it doesn’t achieve the goals of economic growth and job success, and in that sense, I would hope that we would find an alternative way rather than moving forward on this bill. Thank you, Mr. Chairman. [SPEAKER CHANGES] Thank you, Senator Rucho. Senator Tillman. [SPEAKER CHANGES] Thank you, Mr. Chairman. Thank you, Senator Berger. I’ve got to go back to Senator Stein’s political speech a little while ago and remind us history speaks loud. When we came down here and took a hold of the budget that you all had left us, nearly three billion dollars in the hole by their financing plans, which just go ahead and take more from the people and spend it on all these feel-good programs and get us in debt, and take one-time money and spend it on recurring expenses; we’ve done away with that. We’re cutting taxes and in this tax plan, instead of taking the money and putting it in these programs that you would like to do, Senator, we’re giving it back to the taxpayers and letting them decide what to do with it, and this will put a billion dollars or more in the taxpayers’ pockets while cutting government spending and getting our budget in line where we can handle the finances of the state without going into deficit spending, and there’s not 45 hundred teachers been fired. Not a single teacher will lose their job as far as the state money goes in this budget, but teacher assistants is… we’re still debating how many of those would be gone. Yes, there may be several hundred of those gone, but when you’re going to tell this story, let’s tell it right. We’re not firing 45 hundred teachers. Last year you remember we devastated the budget and fired nine thousand teachers. Those are numbers that scare people to death and they’re not correct, and if the NCA or you or anybody else wants to publish that, we’ll ?? and I’ll give you a ten-day headcount next fall. [SPEAKER CHANGES] Mr. Chairman, I promise my point has nothing to do with the budget. It has to do with this bill. One of the principles that I’ve brought into and I think most of the proposals I’ve seen have tried to work on, it’s very hard to work on, actually – it’s really hard to work on, is the idea that you want to have your sales tax not pyramid on you and not compound over supply chains through putting the sales tax on transactions between businesses on business inputs, and that’s very, very hard to do. You can’t get it perfect, but I think to some extent or other, all the bills that I’ve seen so far this session at least until today try to move in that direction. One of the things that sort of interests me about this bill is section 11.1, which repeals current sales tax exemptions that apply to a number of business to business transactions.

In our current tax code we’re trying to endorse that policy of not pyramiding the sales tax down through the supply chain. That’s why we have created a number of these exemptions. And I thought the goal of reform was to try and move even further in that direction so end sales tax on the end product was as low as possible. And so, here I see though in section 11.1, we are in effect putting the sales tax for the first time on a number of business inputs for a number of business transactions. I am disappointed in that and I am not sure why that is a good direction to move in. [Speaker Change] Thank you, Senator Clodfelter. Senator McKissick, this is the last question from the membership. [Speaker Change] Okay. The thing I would have really liked for us to have done is to spend a little more time and thought on what we are doing. I know we had several plans before us. I am going to refer to them as the House Plan, the ?? Plan, the Clodfelter Plan. I would have really liked for us to have spent some time trying to identify the common elements among them that would really create the best plan for this state. I think we all agree that tax reform is imperative and is absolutely necessary and we don’t want to put ourselves in a position where our income stream is particularly volatile when we go through a recessionary period. So I think that is something we can all agree upon regardless of our party affiliations and our backgrounds. But the direction that we have here now leaves us with not a plan that is perhaps revenue neutral but it creates a $1.5 billion to $2 billion gap, a shortfall. That deeply concerns me. I would rather see us come up with something that was closer to being revenue neutral in its impact and in its design. It concerns me when we talk about a flat corporation tax. It may not be called a tax. You may call it something different, but it’s $5,000 for C Corporations. And regardless of whether you are a 5 person corporation making $100,000 or $200,000 a year or whether you have 500 employees and making $20 million a year or a 1,000 employees, you all pay $5,000. And I think you need something that is tiered. I think it’s the wrong approach to take. Something that would be more thoughtful I could support. I don’t like the fact if you are a family of four and you are meeting the federal poverty guidelines and you are up there around $27,000, $28,000 a year you are paying significant taxes under this plan. That deeply troubles me. And when I looked at the impact on cities and non-profits, I just looked at a chart to try and identify the impact this has on small towns. I know in my district I’ve got Creedmoor, Oxford, Butner. Oxford and Butner are going to have to increase their property tax by approximately 11 percent to offset the impact that this bill would have upon them. And they are small rural counties. If you look at some other cities like Calabash they would have to increase their property tax by 63.7 percent. Carolina Shores 28.8 percent. Connelly Springs 49.8 percent. Rosman 40.6 percent. Boardman 908 percent. These small towns it’s going to have a devastating and profound impact. And I think we have to think about how we address those types of issues moving forward. So I do have concerns about the plan that is before us and its impact our towns and our communities, the non-profits that are there, our hospitals. We have hospitals in rural areas that are already struggling. This could be the one thing that gives them the death blow that I don’t want to see them take. These people are underserved in these rural areas. I would like to see us take more than an hour of reflection and really give it some thought. And maybe even pull a house committee, finance committee members and senate committee members together and try to look at ways that we could jointly identify something that people can embrace. Yes, arbitrarily looking at a deadline that’s on a calendar and saying we want to get out of here by then, letting that be the guidepost by which we decide upon tax reform has the potential to create some profound public policy that is not in the best interest of this state and could have some devastating impacts on those of low and moderate incomes and upon our towns and cities. [Speaker Change] Thank you Senator McKissick. We are going to open the discussion up now to members of the public. There will be some ground rules. I will ask you to please approach the ??...

in the rear of the room. If you need assistance, please call on the Sergeant at Arms. And each person will have a couple of minutes to speak. And please limit your comments to the bill as at hand. And, with that, we will open the public comment. The first speaker is going to be Mr. Lou Ebert, North Carolina Chamber. If you'll come forward please, identify yourself. [SPEAKER CHANGES] Thanks very much, Mr. Chairman, and good afternoon. My name is Lou Ebert. I am President and CEO of the North Carolina Chamber of Commerce. We're the state's largest broad-based business organization, representing companies of all sizes and shapes and all SIC codes across the state. And I'm pleased to be here to talk on behalf of this legislation. You know, it's interesting, in traveling the state, as we do often, there's not a day that goes by that we're not talking about how to create more jobs. And there's not a day that goes by where you're not talking about how to modernize the tax code. I think, as you're talking about today with this legislation, you're finding out they're inseparably connected. You can't create more jobs if you don't have the right tax climate. So, in forecasting the economic future for our state, employers understand that tax policy is de facto economic development policy. With the input of companies of all sizes across the state, we've had a chance to look at a wide range of proposals, not just this year but in past years [SPEAKER CHANGES] ?? [SPEAKER CHANGES] and we've been very consistent. We've said five things were important for us to support tax reform in our state. It needs to improve our competitiveness. It needs to have equity. It needs to be efficient, simplicity, and add certainty. After reviewing all these proposals, we feel that house bill 98 most effectively achieves these five goals. And we're pleased that Senator Berger has brought this forward. You know, my job, I get a chance to travel around the country and talk to other states and other state chambers. And I don't have to tell you the competition for jobs has become fierce. When you see governors like Rick Perry running full-page ads in California and Illinois, telling businesses in those states that their governor is working to put them out of business, you know the competition is fierce. I don't have to tell you that North Carolina's been at the receiving end of the wrong end of the jobs equation too. We've lost 330,000 jobs since the downturn, and John Connaughton, the UNC Charlotte economist, told me yesterday that we've added 27,400 net jobs in the first ten years of this century. If we're serious about jump-starting the job creation machine that used to characterize North Carolina in the 90's, we know what we have to do. The Tax Foundation, as you heard yesterday, I think, sends an important signal that North Carolina is serious about competing for jobs. To move from 44th to 6th I think sends a signal in North Carolina we're serious too. We think the Tax Simplification and Reduction Act creates a simpler, fair system that tax payers who understand and easy to comply. Thank you very much for your leadership. Look forward to working on tax reform. [SPEAKER CHANGES] Thank you, Lou. Our next speaker will be Mr. Herman Stone. Mr. Stone, welcome. [SPEAKER CHANGES] Thank you, sir. Thank you, Mr. Chairman, President Pro Tempore, and the committee. My name is Herman Stone. I'm a small business owner of Stone Theatres and resident of Mecklenburg County. I applaud Senator Berger and the members of this committee for their interest in reducing the taxes for North Carolina businesses and individuals. Unfortunately, the bill before this committee targets a specific industry. It raises taxes on my businesses and my customers and ignores the unintended consequences that result from raising taxes on movie theaters. Going to the movies is the most affordable form of out-of-home entertainment, drawing substantial numbers of fixed and lower-income people, including senior citizens. Increasing admission taxes is regressive and could put the cost of going to the movies out of the reach of those least able to pay for it. Movies have traditionally been the most affordable choice of entertainment in America and have especially valuable during difficult economic times of this country. Unsurprisingly, ticket prices for movies have increased the least among all the major forms of entertainment over the past decade. We do not want to collect higher taxes on consumers simply because they walk through the door of a movie theater. Three out of four families with children regularly attend movies. Of the movie patrons, fifty-nine percent have household incomes

of under sixty thousand dollars and twenty seven percent under thirty thousand dollars raise in taxes on movie tickets threatens the economic model, movie theaters, it ignores a significant amount of tax revenue generated for the state through two sessions which are taxed, and that would mail a sales tax rate in North Carolina now not to remain a small portion of the Change speaker: conclusion that a man on a small portion of income generated the box office and operational slim margins if this trespasses on the first raise ticket prices and higher ticket prices caused the cost of attendance and consequently decreased taxable concession sales. some study guitar. it was a decline in tax revenue from increased three hundred missions are urging all to please oppose any increase in movie ticket message. thank you very much. Change speaker:thank you much. the next spiritual beta Alexander Sirota Change speaker: please state your name and you have a phone that afternoon, Change speaker:Mister chair, Senator Berger, members of the committee, my name is Alexandra Sirota director at the budget and tax center or project of the justice center. the long called for the state to address the problems with our tax system more grateful for this opportunity to weigh in today. certainly we are very concerned with the proposal before you and we oppose this plan because it does represent bad choice for the state 's economy, women walk through some of our recent analysis that we just released in the past half-hour on this tax plan delivers the greatest benefits to the wealthiest taxpayers are analysis, which uses an economic incidence model finds that forty nine percent of all the tax cut that's less income, sales of everything and there goes to the top one percent of those who have incomes on average, almost him dollars in revenue loss that will result with raising local taxes will likely result in either raising local taxes on sales and property taxes. as we've heard are cutting services. the children, seniors and families. I you and I think it important to note that not everyone will accept from the income tax changes in this plan fully on the quarter and oversee the tax increase under this plan. finally, as I said this is bad for the economy. the more than one billion dollars loss will require cuts to schools, public safety, which support our competitiveness and quality of life. moreover, we know that with the elimination of the corporate income tax. the vast majority of those cuts will be exported to shareholders outside of the state only as few as ten percent of state residents will benefit from that, for income tax cuts and businesses care about more than just taxes. they care about an educated and skilled workforce quality infrastructure, transportation networks and attractive quality of life for their employees, all of which are at risk with the revenue losses in the spill over the long term. the adoption of the flat tax will also jeopardizes the ability of the state to benefit from the growing economy with that. I close my remarks and argue lots of the stuff that he was Change speaker:thrown out last comment will come from Marybelle 's novel Change speaker: in his chair, unmarried couple and they are today. North Carolina's of the progress of the Raven committee members think even allow me to speak today on that. we certainly applaud the efforts of the Natasha Pompidou think is needed, and however I wanted to share a few a few red flags that we certainly on what you think your attention relative to the bill under him him as you have heard that Social Security benefits are taxed under this plan. now, we haven't completed our analysis on this and I haven't found them to Berger, you said that you donate beyond tax staff available to help. posted to do that so we appreciate that, but we do have some red flags on when it comes to the overall tax burden than a date of people on Social Security. even with your tax bracket that would like to see what the analysis shows me did they get my beds with no income might be most impacted by tax and Social Security. as mentioned earlier, most states do not currently taxes and security at that right now in arthritis with thirty six states, it does not. the second issue is that we are concerned that the proposal may not generate enough income for extension services in regards to Cindy services outside Medicaid program designed privacy people in the hall, but things such as home delivered meals in homemade services, things of that

...Chair, already has 16,000 people on the waiting list. We're serving 7,000 less people today under that program than we did 10 years ago just because the cost of service delivery is going up. With the increase in the population for seniors, right now we've got 1.3 million people 65 and plus. In 20 years it's going to be 2.3 million. If we don't have these basic services to help people stay in their homes and help support their families, many of them are going to nursing homes and we're going to pay a huge fee with Medicaid because it doesn't take long at $70,000 a year for most folks to go through a nest egg. So we encourage you to look at what the long range ramifications are this and whether or not those critical services that we need to help folks are there. And the last thing that I just want to mention is that it's already been raised about the issue about what will happen with increase in property tax and things like that. We certainly echo that. Most seniors in North Carolina own their homes, or many of them own their homes and we often hear the saying that a lot of seniors are house rich and cash poor. And the property taxes go up in addition to some of the other tax burdens that we could potentially happen, it is going to be a double whammy for lots of folks. Again, thank you for allowing us to talk. We applaud you on the efforts to reform taxes and look forward to being part of the dialog for a solution. [SPEAKER CHANGES] Thank you, ma'am. Senator Hartsell? You're recognized. [SPEAKER CHANGES] Thank you, Mr. Chairman. I have an amendment. I think it's been distributed. [SPEAKER CHANGES] Thank you. Do the members have a copy of the amendment? Senator Hartsell, will you please explain your amendment? [SPEAKER CHANGES] Actually, this is, it's sort of a clarifying matter, but for many years we had a cigarette tax stamp requirement. We repealed that but at the time we repealed that stamping, we did not repeal the discount that's available. There's nobody else out there that we pay to file tax returns and what this does is simply say that hence forth, those stamps. This doesn't require the imposition of a stamp, it simply says we're not going to pay for a discount, which is actually created a windfall in some cases and just eliminates the discount for filing the return. That's all it does. [SPEAKER CHANGES] Thank you, Senator Hartsell. Do I hear a motion to accept the amendment? [SPEAKER CHANGES] Is that a motion, Senator Jenkins? [SPEAKER CHANGES] Thank you, motion by Senator Jenkins to accept the amendment. Any discussion? Hearing none, all those in favor of the amendment please say aye. Opposed no. Motion carried. That brings us back to the original. Any further comments or discussion on that? Senator Brown. [SPEAKER CHANGES] Thank you, Mr. Chairman. I'll try to make this as brief as I can. Several years ago I know Senator Jenkins and Senator Clodfelter and Senator Hole tried to propose a new tax plan. And I remember, Senator Jenkins, you remember, I'm sure well, just how hard it was to move that plan forward because it seemed like you could never get a consensus because any time you change the status quo with any kind of plan, there's always going to be winners and losers. We have to I guess admit to that, but the losers always got loud and it always stopped what you were trying to accomplish. And I think as this year's progressed, we've seen, this may be about the fourth plan I guess we've looked at this year, to try to find some tax reform. And it's pretty much a repeat, I guess, of what we saw four or five years ago when we looked at tax reform because, again, any time you try to move the needle you're going to have someone that opposes what's trying to happen. Because, again, on the front end there seems to be some winners and losers, because I think most can't see the long term effect of what it will do. I think it's what do you do to me now is kind of the mentality. I think anytime you look at any kind of tax reform. I think it is difficult for anyone to look out four or five years to see what happens at the end of the reform and what it will mean to the State or to an individual or to a business, or to a certain group of people. And so that's when you have people line up against pretty much any plan that I think you bring forward. And I think anybody in this room can sit down and spend three years to come up with a plan, propose it and you would probably have the same opposition that we've got today from maybe a different group, but the same type opposition. Because that's just the nature of what tax reform does, I guess. Because most can never look four or five years down the road.

That can only look at a year down the road or 6 months down the road. One thing I do know is, the state of North Carolina now with its tax structure is the most uncompetitive I guess in the southeast when you look at the rates. Our corporate rate’s the highest in the south east, our income tax is the highest in the south east, our sales tax rate’s right there with anyone. And this is a great thing that we’ve got a great state otherwise because I don’t know that we could compete with anyone otherwise if it was based just on our tax. Because that’s how uncompetitive we are with our tax structure. And I think all of our plans have tried to address that issue. And I think some states have done it quicker, have moved forward quicker. I think Texas is probably the biggest example in the state. You now Texas’ economy is on fire right now, you know everybody wants to be in Texas it seems like and it’s basically because of their tax structure. You know they have the best competitive rates in the nation, or some of them, and I guess their quality of life is good as well. This plan’s not perfect. I don’t think any plan will be perfect for everybody. You can’t make one that’s perfect for everybody. But I’ll tell you what it will do. It will finally get us competitive, not just in the south east but in the nation when it comes to tax rates. And I can say this. When you look at recruiting across this county and trying to bring businesses that bring jobs to whatever state. If you’re not competitive on the front end with a tax policy, you don’t even know what you missed. Because they rule you out before they decide anything. And that’s exactly what’s happened to North Carolina. We’re so uncompetitive tax wise, that many companies look at us with our tax policy and they say, why do we want to go there? Let’s look somewhere else. And I’m in the car industry and I can tell you I think a good example is the car manufacturers. Look around us. They’ve located in South Carolina, they’ve located in Tennessee, they’ve located in every other state in the south east but North Carolina. And why do you think that. It’s because we’re not competitive. It doesn’t’ make sense to locate in North Carolina. That’s just a fact. And yet you know we get into this debate today and you know I’m afraid and I’m not sure it’s not going to help my business. I don’t really help anybody’s on the front end I think everybody’s trying to figure it out. But I can tell you this, doing nothing. Doing nothing is no answer. Now that’s the easy thing to do. We can sit here and keep the status quo. And that’s what seems to be the case over and over up here when it comes to tax policy is let’s not step on anybody’s toes, let’s not do anything. The status quo’s working okay. Well you heard the stats earlier today. The status quo is not working in North Carolina. That is a fact. Look at all the numbers. It is not working in North Carolina. Look how many jobs that we’ve lost compared to every other state in the nation, particularly south east. Look at what the other states are doing to bring industries to their states. They’re all beating North Carolina. North Carolina has got a broken plan that is not working. That’s fact. And anybody that sits in a room denies that is flat room. You can’t say that. It is time we move forward. This bill again, is not perfect. And I can tell you next year we’ll be back probably tweaking this bill. Trying to do something different. Just like al legislation. We pass a lot of legislation that’s not perfect on the first time around. And we have to tweak it and we have to look at it and we have to work number and massage it. But if you do nothing, you don’t’ even have that opportunity. And I think a lot of people in this room that are satisfied to do that again. Do nothing. But to me that is a poor answer. And up here is not easy at times. Up here you have to make hard tough decisions at time. And I think this is that time. I think this is one of them. And if we’re not willing to do something this year on tax reform, I’ll predict that tax reform will go away for the next ten years because nobody will have the nerve to bring it back up and try it again after what’s gone on this year. Now if that’s the answer you want, if you want to put it off another 10 years and let us stay the status quo then I say let’s do that. But that is a poor answer and that’s not the way I feel about this issue. I think we’ve got a good bill that we can continue.

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