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Legislators
learn most 'revenue loopholes'
benefit individual taxpayers, not businesses
Barely
a day after Gov. Mike Easley proposed raising money for new
state programs by closing an unspecified number of
"revenue loopholes" in the tax code, some officials
were testifying before legislative committees and others were
giving newspaper interviews telling exactly how to do it. But
there was no pell-mell rush to rewrite the tax code after it
became apparent that most of these special provisions,
especially the high-dollar ones, benefit individuals and
worthy causes.
In his State of the State speech Monday night, Easley
said he favors closing "revenue loopholes that defy good
business practice and fly in the face of fundamental
fairness." He said he had asked retired State Treasurer
Harlan Boyles to chair a commission to study "tax
incentives that cannot be justified in our current economic
condition."
On Tuesday, a partial list of these special provisions
compiled by legislative researchers began circulating in the
General Assembly. And state
Treasurer Richard Moore appeared before the House Finance
Committee to say he believes the state could collect an
additional $200 million to $400 million a year by eliminating
various special tax provisions.
On the researchers' list is eliminating the
$1,500 cap on the sales tax on boats and airplanes, which they
said costs the state $10.5
million. Subjecting swine, livestock and poultry production
equipment to sales taxes would generate an estimated $2.2
million a year, the list says. But that's chicken feed to most
others on the list. There are tax breaks for restoring
historic structures, constructing a poultry composting
facility and developing low income or handicapped housing --
exemptions that cost the state at least $5 million a
year.
But to raise any substantial revenue, the state would have to
gore some sacred cows, such as ending the exclusion of Social
Security payments from state income taxes. Moore told the
House committee that amending the state law to track federal
law by taxing 85 percent of Social Security benefits above
$34,000 a year for individuals and $44,000 a year for couples
would generate $85.3 million a year for the General Fund. He
said the state could raise another $80 million to $100 million
by eliminating the tax break on retirement incomes. Removing
the tax credit for child-care and employment-related expenses
would generate $21.7 million, while cutting a $60-per child
tax credit for dependent children would raise $89.2 million,
Treasurer Moore said.
Former Treasurer Boyles,
however, seemed confident the state could turn over just a few
revenue rocks and find a tidy sum. In an interview with the
Winston-Salem paper, he said
"there's no rhyme nor reason to many of those (tax
provisions) in the present day environment, yet they're
continuing year after year after year." He told the
paper he believes the state forgives more than $2 billion a
year through the provisions. In another article in the
Charlotte paper, Boyles proposed a two-year moratorium on all
state tax incentives and breaks. "I think momentarily
there has to be a moratorium on industrial incentives and all
areas of targeting for tax purposes," Boyles said.
However, he said such a moratorium should only apply to new
industrial recruitment deals and not apply to such past deals
as the Federal Express hub in the Triad and the Nucor Corp.
plant in Hertford County.
Boyles also told the papers that he believes that for every
dollar raised by eliminating a tax provisions that the General
Assembly should save another dollar by reducing spending.
NCCBI
President Phil Kirk said the association was closely
monitoring the situation. "What the governor calls
'revenue loopholes' are carefully crafted provisions in the
tax code that have been scrutinized and adopted by the
legislature, mostly to encourage economic growth so businesses
can hire more people and pay more in taxes.
"We should see this talk about closing loopholes for what
it really is -- raising taxes on businesses at an uncertain
and difficult time in the economy," Kirk added.
"Several of these tax provisions benefit the
manufacturing sector. North Carolina lost a record number of
manufacturing jobs last year, so we believe the legislature
should be very careful about doing anything that would make
that situation worse."
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