Well good morning everyone and I’m sure that you got a lot of information as we did on House Bill 998. This is the House version of a Tax Simplification Reduction Act, and of course, we call it the Tax Increase on the Working family act. Now, those of you who have had an opportunity to see it, know and have head this morning that what is really happening is we’re raising the tax on working families and reducing the tax on business and that’s really the essence of what we’re doing here and obviously we think that’s a problems for North Carolina, for North Carolina’s working families. We know that the sales tax is going to go up that folks are going to pay and these working families are going to have by our estimation and calculation approximately 262 million in sales taxes they’re going to pay. And that again is going to be just an awesome burden to transfer onto the working families of North Carolina who are already baring a great burden in this state. When you think about the earned income credit going away which is the tax increase and you may hear about that later on and have questions, and then look at the increase amount that folks are going to pay in sales taxes. This does not seem to be what working families in North Carolina need to recover and for this state to move forward. We don’t think it’s a fair portion of the burden and we hope that as we go forward changes will be made to respect the sacrifices the working families have already made and make sure we have a fair portion of this tax burden. Right now, Representative Tine wants to talk to us a little bit about what this tax plan means. [SPEAKER CHANGES] Thank you and good morning. In Committee today there were a few back of the envelope calculations made with individual representatives saying that they might pay more under this tax plan on certain provisions. The issue isn’t whether or not you might pay or less on a few provisions, it’s what is your total percentage salary that you might be paying and it certainly looks like once you factor in the Earned Income Tax credit, the fact that we’re increasing our electricity tax from 3.22 to 4.75. When you look at the addition of tax on services it certainly looks like the working families are going to be paying a higher percentage of their salary than those that have more assets and more income. [SPEAKER CHANGES] Now, we know again North Carolina depends on its medical ?? and they’re the ones at risk. Again 20% of folks in North Carolina don’t pay taxes at all at the upper echelon of personal taxes. So we know the folks at risk, where we grow our economy, where our state has its stability, is based on the working families in North Carolina. Representative e Luebke again, former finance chair had some observations about 998. [SPEAKER CHANGES] Thank you, Representative Hall and I do thank you him for the opportunity to comment on House Bill 998. I did have a few remarks in Committee and I really want to stress these points. It has been stated by others in the past, that these are bills, Senate Bill, House Bill, we’re talking about the House Bill that are tax breaks for millionaire. And it absolutely is. Millionaires pay marginal rates, 7.75% on all the income they make as a married couple above 100,000. So if we’re talking about a millionaire, a 4 millionaire a family making 4 million dollars Their income cuts way down their income tax cuts way down to 7.75 to 5.9. It’s going to be a significant number. When I ask in the committee, there have been no numbers run on that. But you can bet its significant. And our team, democratic team is going to have those numbers reported in the next meeting. So the one point is that it’s a tax break for millionaires. The second point it is a tax increase on the middle class and working families of the state. And you see that when you look at the expansion of the sales tax in the services. The example I made in the committee meeting just now, you have $400 of repairs. You currently pay a sales tax on that. But what this bill does is, if you have a$100 in labor they’re going to add that to your bill.
So just in the example of the trip to the auto repair shop, your bill will be 6.75% higher on labor. That is to say instead of paying $100 on labor you're paying $106.75. And this is a tax that virtually every North Carolinian is going to pay except those who are too poor to own a car. So this is an example of just one tax increase on the middle class, on working families. The fact is it's also on the poor because you make $20,000, you got a car you still got to get it repaired. You got to get tired at some point and you're going to pay that $6.75 extra that you do not pay now. That's why we say collectively this is a tax to increase, it increases the taxes on middle and working class families and it provides a tax break for the millionaires. And I'll just stop there, I'll be happy to take a question. [SPEAKER CHANGES] Since we have this time, this opportunity and certainly we want to make sure we recognize that the earned income tax credit is hitting working families at the same time. Representative Goodman has some observations as a business man who has constituents as well as clientele who have to utilize goods and services to talk about the impact of the earned income tax credit. [SPEAKER CHANGES] Thank you, good morning. Before I make my comments I want to expand on something representative Leubke said. I have a furniture and flooring business and when we sell flooring to a customer the labor is not taxed. Often times on a home if you recarpeted and refloored your whole home the total bill could be seven, eight, nine thousand dollars. The labor portion of that could be $4000 dollars and you're talking about hundreds of dollars in increase for a home owner when he remodels or upgrades his home. So I just wanted to make that point but more than that I just want to talk about the income tax credit that was removed earlier in the session which is nothing but a tax increase on low income taxpayers. In Richmond county that affected, which is my county, that affected over 6000 returns and represented over $800,000 dollars of income in our county. That is money that is taken out of a struggling economy down in rural North Carolina , it is money that people don't have in their pockets to spend and there's very little discretionary income in rural North Carolina today. And to make it tougher for consumers to go out and buy the things they need, furniture, appliances, things for their home, this was just - it's very devastating to poor people. I don;t think people who have high incomes really understand how working people and lower income people have to squeeze every dollar to be able to provide for their families. And this was a tax increase on poor and middle class families while at the same time they're going to give a tax break to people that are millionaires, and I think it's unconscionable. Thank you. [SPEAKER CHANGES] We won't belabor the point except to say it's going to be a continuing fight and a continuing effort for working families and for us to continue to pile on them transferring those responsibilities and that responsibility of the highest paid to the working families making ti almost impossible for them, asking them in essence to pay an additional by our calculations $262 million additional sales tax dollars and sales and service taxes. So we think that is a problem that needs to be addressed and we have to find a different way rather than asking our middle class really to just give up their futures, our working families to just give up their futures and allow those who are already receiving the best in North Carolina and enjoying the best to have even a better deal at their expense. I will go ahead and take questions for any of our speakers here today. Yes sir. [SPEAKER CHANGES] Their justification for some of this is, one that by lowering the corporate income tax I think you may have heard they [??] to a sticker shop right now for businesses looking to come here, that they're going to create more jobs and that's going to help working families. What would be your response to that? And then the other part of that is the standard deduction for double [??] in here as well, and that has been a part of their case for mitigating the receptivity.
Again, and I start with the standard deduction, noting that it was already commented that more than one third of North Carolinians don't do deductions. And so, They won't itemize. They won't get the benefit of that. The question of job creation, of whether or not this will be a job creator, you would have to put yourself in a time capsule and see. We haven't read Site Selection magazine, we haven't read all the national surveys that say we're one of the best places in America over the last ten years, always in the top five in almost every category, and to say now that we need to do this to attract business, um, that doesn't wash with the facts. Now if that was going to be the case, you turn around and say well, we're going to take care of our corporate rate except that we won't be competitive with South Carolina, so one of the states closest to us, we decide not to be competitive with them. If that was in fact the consideration. What we are saying is, Everyone just go to South Carolina. So I understand those comments and that theory but I think the facts show that we already have a good system in place. It attracts business. It's been successful. It's nationally competitive. And what we continue to do is find a way to raise the taxes on the middle class, now, these working families and give even more tax breaks where they're not needed, or even being asked for. Now twenty percent, as I mentioned, are not even paying income tax. So as we move forward, these working class of North Carolina, these working families have to have a chance. This is not an improvement over what we have in the tax code. Again, Put that additional two hundred sixty two million dollars in services, in sales taxes on them, just will break their backs. And we're concerned about that. Yes Ma'am [SPEAKER CHANGES] I just want to play a little devil's advocate here. [SPEAKER CHANGES] That's fine. [SPEAKER CHANGES] When we talk about taxes, many of the tax breaks for the wealthy get a pretty high level. You know, it's easy to understand the [UNKNOWN] point of view on it, but I think if you lump in some of the service taxes-- You know, services being added to sales taxes, I think that's kind of a different discussion, because even democratic tax experts say that the tax credits needed to be reformed in that department for a long time. For we are no longer a manufacturing economy, we're a service economy and so most people agree. I think the bond rating agencies ? Some services at least do need to be included into that sales tax. It's a reflection of the age that we live in. So I was wondering if you or some of the others can respond to that. Because it does seem like the sales tax is very very narrow in North Carolina and that a lot of experts on both sides of the aisle say it should be broader. That it should reflect more services. So I just want to put that out. [SPEAKER CHANGES] Ok. And I know representative [UNKNOWN] who has been finance committee chair for over a four year period wants to address that, because he also looked at that issue at a high level. But certainly to say that if we talk about these taxes on services and then say, We're going to exempt those at the highest level-- architects, lawyers, doctors, etcetera. Those professional services. Where's the equity and fairness in having that philosophy and saying, Who has to pay those taxes? and provide them to the state. Representative [UNKNOWN] [SPEAKER CHANGES] Let me say that when there has been discussion about the need to widen the sales tax base, this perspective, this point has been made in the context of maintaining progressive income taxes. The point about this bill is that it eliminates progressive income taxes. There is no progressivity in the bill that was presented this morning. As I said, and repeating: A family making forty thousand dollars is going to be taxed the same as the family making four million dollars. That is totally unfair to the middle class of North Carolina. The fact of the matter is, if you have it as we have it now, and you have the 7.5% upward bracket for families making more than one hundred thousand dollars, that brings in millions of dollars into the state, and reflects a fairness strategy. So that when we recognize the expansion of the sales tax to some services, it's in the context of still saying the millionaires should pay their fair share. The millionaires are getting a big break here, but we are finding ways to increase the sales tax
on the middle class and working families and you see that if you'll go to the bill its actually in the first page of the bill. They assert "we are reducing income taxes" and i.e we're eliminating the progressivity in the income tax, and we are increasing sales taxes. sales taxes is another word for consumption taxes. So they state on page one of the bill we're increasing the regressivity of the tax code, we're reducing the progressivity of the tax code. Thank you. [SPEAKER CHANGES] I would like to speak about a group and make kind of make it personal. My mother is 88 years old. Therefore, she's not able to do her yard, not able to clean her house as she's been able to do in the past and these are services that now she is now having to pay someone come in and do. Also she has been in her home for over 50 years. And just recently she has had major repairs to her home. And she's on a fixed income because she's a farmer and she's drawing a retirement check, Social Security check from the proceeds of a farm. So her income is very low. But now she will have to tax all those services she is having to pay for, because of this new tax reform. And not only my mother, but many seniors are going to get caught up into this because they're at an age that they've been in their homes a long time, their homes are needing repairs, they're at an age they are not able to maintain their yards and keep their homes up and so they're bringing people in. And I don't think we've thought about that number of people. Yes, they probably do fall into middle class and poor. But they are also are a subgroup that stands alone, so I think we need to understand what a hardship this is going to put on people like my mother. Who is 88 years old and unable to many of the things many of the things she used to be able to around her home. Thank you. [SPEAKER CHANGES] In closing I just want to say as we look at this its supposedly a revenue neutral bill. That means, we can really see that someone is going to pay less under this bill, someone is going to pay more. Those who are now being asked to pay more again are going to be our working families. Those who will be paying less, who will have their tax rate reduced the most will be those, who in some instances have the best of North Carolina and have already enjoyed the best of the benefits of North Carolina. So our concern again is our working families, our middle class that we have to have in North Carolina that are the bridge for this state to go forward. And this tax bill clearly shifts the burden to them and off of a fair progressive system that we currently have. No more questions? Thank you.