Good morning? The House Committee on Finance is now in order. would like to welcome our Sergeant-at-Arms today Regi Sills, Marvin Lee, Terry McCraw Corry Brison, Young Bay, Bill Morris and Jim Moran. We are also assisted with pages today if you will please stand and be recognized as I call your name, Henry Allen from Wake, George Ali New Hanover, Daviand Bigs from Nash, did I say your name correctly maam? Elisa [xx] Elemex, Brandon Filis Gaston Enlish or Rachel, Rachel [xx] form Mecklenburg, welcome to the committee on finance we had two bills notice of 531 has been pulled, Representative Tin is recognized to present HB389 thank you Mr. Chair this bill was brought to me by [xx] Fire district or fire department North of [xx] basically what happened right now is there county collects the taxes gives it to [xx], Manoe, Manio then gives it to [xx] Allen fire department this for their county to just give it directly to [xx] fire department it passed on local government without objection and I ask for your support any questions for Representative Moore? Mr. Chair at the proper time move for a favorable [xx] to the appropriate time move for favorable report from a good friend of Representative Ton. The motion is a favorable report to house bill 389, so many as favor the motion say aye, Aye! oppose no, to house bill 389 so as many favor the motion say aye, Aye! Oppose no motion carries. Thank you Mr. Chair [xx], hope you have a delightful day sir. Alright, we're going to continue with some old business, this to be the finance portion of house bill 97 as amended by the senate, we chairman Sain would you like to open with some comment sir. Yes, thank you sir, thank you Mr. Chairman, I appreciate you chairing today, I appreciate members of committee being here as we explore further the tax proposal and finance proposal from the senate as we've gone through this, it seems like it's another day and another tax increase and I've got some real concerns want to share that with you as we open and want to do that by just reading an editorial that's in my local paper Thursdays and Fridays and I think they hit it spot on. And title senate budget needs work, there's a big difference between conservative spending plans and reckless ideological penny pension North Carolina senate appears to be choosing the second round. The story in our Friday edition detail had the senate's budget proposal would say the state more than 200 million dollars by the next to fiscal years by eliminating nearly 7000 teachers assistants. Wednesday's edition included the story about how the senate bought the cars for new corp on individual income tax [xx] donations for the taxation of larger nonprofits for the state's sales tax. Itemized tax reductions or donations will be capped at 20 000 non profit facility tax refund, were dropped from 45 million to one million by 2020, the senate also propose changes by the way the state distributes tax revenue by county, the formula now in place directs most of the money to the county where the sales occur the past favors the urban counties for rural residence to do regular shopping, quote, according to an article by The N&O. The Senate budget which state that an allocate most of the money based on population, which has the effort of offering a boost to small rural counties, urban counties could lose millions something somehow for the house [xx] strongly oppose, well obviously, and that is my commentary, but those are all preposterous ideas, and ideally the house will talk some sense colleagues in the Senate, when the two bodies convene to negotiate the final budget. There's room fourth form in the way the state funds education but it's far more likely that over the long term education can be more viable with a county by county evaluation of administrative practices in accounting. Teachers and teacher assistants aren't generally known for big spending on projects, but administrators are. A more efficient and accountable system overall is a far better solution than removing teacher assistants which most educators agree play a vital role in the classroom. Tax incurred upon donation in large nonprofit is also the wrong thing to do, the state doesn't need or deserve any portion of any person's donation to a charity or nonprofit. Nonprofit groups are still feeling the sting of recession and fundraising is as difficult as ever.organizations that do good work in their
communities don't need the declining services that would result from having funding siphoned off by the State. The new scheme for the disbursement of the sales tax revenue by population drew some references to Karl Marx in the North Carolina House a bit of a stress, before anyone familiar with the ideas for which Marks actually stood. The plan does however have decidedly left his flavor a bit of a stress, before anyone familiar with the ideas for which Marks actually stood. The plan does however have decidedly left his flavor which makes its origin all the more surprising, sales tax revenue should stay in the country where it was collected. If that means that Mecklenburg County keeps sales tax paid by Lincoln County residents then and so be it. Tax policy should be all about fairness, and the senate proposals anything bad, Mr. Chairman, I offer that to you, and this what's being said over there across all the state right now. I know chairman Houston's, local paper the gas in NewZeed has something very similar in their Sunday edition we have multiple groups here that will be impacted by this tax plans, shouldn't be enacted, I think the house is doing the right thing by going through this piece by piece looking at all the implications, I I think Representative Carney had some good comments last week. We've got a lot of smart people in this room, there's a lot of smart people in the other Body, on our Appropriations team that will look at this plan, we will take the time necessary. I'm glad we passed the Continue Resolution last night, but we should take the time necessary to fully vet the proposal that has been put to us by the Senate, and I appreciate your chair today, thank you. Thank you Mr. Chairman. Miss Canada is recognized. Many of you have gotten a spreadsheet that was distributed in response to a question by Representative Steinburg on how the tax would play out if counties chose not to implement the additional local option sales taxes, and she's going to go over that chart and explain it and we'll take questions on that, then we'll move on to comment for the remainder of our time. Miss Canada. Thank you, Mr Chair. For everyone's reference, this is the 11 X 17 document that was handed out at our last committee meeting, it looks like this. Miss Canada, what's the title? The title is Local Sales Tax Distribution. comparison of projections under the current law in the senate budget. Thank you. The lady is recognized. Thank you. As you mentioned this is prepared on the response members request, request you made of our staff last time, was to show analysis of the projected revenue under the senate proposal compared current law, without any additional revenue the counties would realize if they held referendum and levy additional [xx] tax protocal so in other word the other document that we held up previously showed the maximum potential revenue under the senate plan if counties were to levies all articles that would be authorized in this analysis and instead looks at only articles that counties are already levying it will show reference it will pass OK otherwise the analysis is the same all of the numbers are the same as what you saw on the document but as I walk through it their is a change from current rule to senate budget and that's different because it doesn't include any additional Articles being levied. I worked in the first line as an example, in the grey Alamance County. we've pointed this out before but just as a reminder but just as a reminder this is not a total and this is the same for all items through out here this isn't a total of Alamance county government and it's municipalities, the county line only shows the amount retained by the county government. So for Alamance county government you see the 13, 14, sells tax distribution the 14, 15 projected sales tax distribution as we discussed last week that's assuming a three and a half percent growth rate. And then the next series of columns are showing 15, 16 current law projected total against as the same from the document you saw previously, the senate budget which is subtotal from more you saw previously and the change from the current law to the senate budget. So in this case for Alamance county we're showing assuming a three and a half percent growth rate and incorporating updated populations projections from office of state budget and management, there is a potential increase for or protected increase I should say for Alamance county of $464, 000 or a 2% increase. The next blocks of columns all do the same they are 16, 17 current law begins to incorporate this Senate change in distribution and then compares the senate proposal or senate budget to current
law and this front page goes up to fiscal year 1718 and if you flip that page over to he back couldn't fit it all into one sheet but on the back you'll see fiscal year 1819 and fiscal year 1920. Mr Chair I'm happy to walk through more of the documents if it would be useful to the members that's the general format that I have described. OK, are there any questions for miss Canada? Representative Ross. Thank you Mr Chairman this was brought up actually in the last but I'd like to go a little bit further with it because since we just mentioned the Alameda county. I went back and checked some of the figures and of course as it was just stated this is based on a growth rate assumption of three and half percent and I took the city of Burrington and I went to the city manager in the tax department and the growth rate in Burrington over the last five years and I want you to keep in mind they've just come off a monster recession. So any kind of average you get out of the last five years is going to be fairly conservative. Growth rate has been 5.4% in Burrington over the last five years now as you get towards the end of recessionary period where we are now the growth rate is 12 . 4% so the numbers that the Senate is using are seriously flawed when you use an assumption of 3 and a half percent and essentially what this proposal is going to do is it's going to force cities like Burrington to have a massive tax increase to make up for the loss revenue. Cities like Burrington all across North Carolina has spent lot of time over the last decade or so trying to rebuild themselves after losing the textile industry and of course then the recession coming and on top that and I know for a fact such as Burrington again have spent an enormous amount of money in trying to build the infrastructure to attract retail because they felt like that was one that they could try to fill the gap that came from the loss of some of the industry that we had in the past. I think that we need to take a very very serious look at some of this numbers we're getting from the Senate because they tend to show numbers that show slight increase or no increases in revenue and the numbers that I'm getting back from the near municipalities are showing fairly substantial shortfalls and I just think it's wrong to pass that burden back onto municipalities, as I said all we're doing here is we're going to pass a big tax back on the people of this communities the urban centers, most of them have worked hard to rebuild themselves over the last couple of decades and and this is one way that they have done it and I think that this time they come along and take part of revenue and send it somewhere else it's just a bare policy Representative Lucas do you have a question for Miss Canada? I'll pass at the moment sir thank you alright so far I have Stam, Adams and Marilyn[sp?] Representative Stam mine is a different subject if you want to we've got the questions we're ready to start okay, three quick things and last meeting I inquired about the quantifying to our taxpayers to pay federal income tax this is because of the switch from income tax to sells tax and on your federal tax return you can only deduct on of the other in 98% of the itemizes deduct the income tax. It has been quantified now it is unaccounted for, unstated $47 million tax increase on tax payers, which is not accounted for, second item and this does relate to the assumption on the senate budget the 97 counties will adopt this referendum and obtain essentially if that assumption is correct how much is the extra sales tax when Floyd implemented it and it's about 3 to 400 million a year so that in the document but it's not stated as tax increase but it's there just to maintain the same services that you have to offset their against the supposed tax decreases thanks. Thank you Sir, Representative Adams. Okay Representative Meyer. Thank you Mr. Chairman, I'm just
curious about impact of some of the tax provision on a business industry specifically on skill manufacturing and Representative [xx] from [xx] to talk about what might, what this provision might have impact on their business I wonder if you want to be recognized Mitchell Haini from the audience for a statement. I have her on the list, Miss Haini if would please approach the microphone, recognize you for two minutes please. And thank you Mr. Chairman, I'm Mitchell Haini, Mitchell Haini, well, we acknowledge and appreciate the [xx] would benefit from the proposed changes to the franchise taxa and the implementation of the single sales factor. We are concerned that the benefits from those changes will virtually be negated by an increase in the manufacturing rate from 1% $80 max to 4.75% $500 max per article. In regard to try to manufacture North Carolina is already disadvantaged compared to surrounding State because Georgia just out Carolina Virginia has brought exemption including full exemption of [xx] manufacturing equipment and his change would further disadvantage our state. Let's be clear this is not simply taxing increase from $80 to $500, because you have to consider that companies like Cree purchase millions of dollars binders don't qualify for the single article. For example both purchases and supplies chemicals, gases, minerals, powders don't qualify as a single artical. Also we have we have a lot of smaller dollar high value in purchases like soaplets, linslets insulators that don not reach the cub is eligible for the maximum tax. So this really has an increase in tax from 1% to 4.75%. It is misguided to think that it's just an increase from $80 to $500. We've seen some estimates that show that this would increase revenue to the state of a $100 million for fiscal 15, 16 we estimate it would cost Cree about $5 million in additional tax each year. It doesn't seem logical to that the legislative intent would be for a single tax to bear 5% of the burden of the tax increase. This are some of the reasons that Cree, a local manufacturer with almost 3000 employees in the state is against this proposed legislation. Thank you Miss Hane. Mr speaker may I comment briefly? alright go ahead. Thank you Mr Chair I just want point out that advanced manufacturing is one of the only growth sectors for blue color workers in North North Carolina and we really want to encourage businesses like [xx] to continue to work here and hire people into there manufacturing facilities and we do not want encourage manufactures to move to neighboring or they have a facility in Wisconsin that can ramp up quite easily I would much rather keep those charts[sp?] here. Thank you Mr Meyer OKay, I'm going go to the sign out sheets I've the one from today I also have the ones from the previous meetings so if you haven't been crossed off and you're here today you will get your chance are there any other comments from the committee? Alright Sam Taylor NC bio. Good morning Mr Chairman and members of the committee, my name is Sam Tylor, I'm President of the North Carolina Bio-sciences Organization with the life science is trade association for the industry and North Carolina. The purpose of my comments today is to express our organizations deep concern regarding the impact of the senate and budget on North Carolina's innovative capacity. By innovative capacity I mean the ability to discover, develop and commercialize new products that will power our economy on the future. Innovative capacity produces companies with high margins, ipay and a tendency to stay where they're founded. The Senate budget raises two particular issues, one was addressed by Miss Henginia and I will not address that again. The second is the absence of legislation extending the RND tax credit. Both budgets emit that type of language and therefore the tax credit would expire at the end of this year. The tax pay credit is the sign post of North Carolina saying we're welcome, and open for business for RND companies. 38 States have RND tax credits.
The RND tax credit was the single credit that was single identified in a study in 2009 by the University of North Carolina as having been positively correlated with job growth. We know that the senate budgets of, the Senate budget makes a lot of positive changes in the tax code, but we think it's very important for North Carolina to keep its RND tax, its RND sign post up, its RND brand intact, and we would ask you to include in the final conference report the RND tax credit extension. Thank you very much. Mr. Chairman, parliamentary inquiry. Yes Sir. If the [xx] creditor is not in the house budget and is not in the senate budget would it be in order to put that the conference report under house rules? Well, the answer is no well, with all [xx] Sir, we all know how it should be, but we also know sometimes that's not necessarily how it is as I've often said as a bald headed man, I've learned that life is not fair and some things just happen. Mick Berry city manager for the town of hickory thank you for the opportunity to spend a couple of minutes with you this morning. One key point I wanted to make speaking on the sales tax redistribution is most of the communities in North Carolina are not actually growing we hear a lot about Riley and Charlotte and the growth taking place there, but when you look I've got a hand out I'll share with you when you look at what Hickory done over the last 10 years we've actually cut our workforce by 10% and we are not growing, we have done a detailed analysis of the cost of the city incurs to serve our commercial areas and as the point is already been made we've invested a lot to have those commercial areas but we know By address and by police and fire calls and the public services works that we spend over $3.4 million every year, that is to support those areas and obviously need the sales tax to help with that. Beyond the commercial areas when you are a regional hub like, we are in we have daytime population of about 40, 000, I'm a sorry a residential population of just over 40, 000 but our day time population swells to over a 100, 000. So we have folks coming not just for the retail but for jobs obviously and other things and some of those facilities visiting do not pay property tax the community college, the hospital etc. So as these folks coming in our community they are not a property taxpayer, they are in a car wreck we rule our police, we roll out fire, we don't send them a bill, we hope the through sales tax that will collect from and then in the future that will ever to re coup some of that cost. I also wanted to point out to just body this, there is already a bit of redistribution of sales tax. taking place in that. Traditionally when sales tax, local sales tax was approved by the General Assembly it was always shared between the counties and the cities on article 46 which is approved in 2007 this continue that, that quarter since sales tax by referendum stays with only the county and not the city, so I would encourage you to consider in the bill that you are looking at right now going back to the historical [xx] of sharing any local sales tax with the cities, thank you. Thank you sir Chairman Sain, did you have a comment? I do and thank you Mr. Manager, your point is part on if you would come backup because I want to have a little bit of dialogue with you particularly since my wife is one of those who come to your city everyday to work, and one of the things we are talking about tax fairness and redistribution and I have hard time with that word, it has many syllables but redistribution is to talk about those tax plan but the only way, and I come up and have lunch with my wife sometimes, she works there at a hospital we put plenty of tax on your services if something should happen say any point in time we use the road, we use many resurfaces and rough down town [xx] a great place to go, but the point is that that is only point in time that you your city is able to collect any type of pay for us using your services and to reistate that you said that your population is our
resident or population is 40, 300 day time we estimate about 100, 000 people Mr. [xx] over 100, 000 people in your city everyday, every work day at least then also on the weekends, so I think that point need to be brought home where we live we have the advantage of going to the city of [xx] city of [xx] [xx] [xx] which we visit a lot of the weekends. The only opportunity that this areas have when we visit to get Any type of pay for the services that we consume is when we visit, I think is a great point, and I'm glad we brought that out. Thank you sir. Thank you Mr. Chairman. Representative Setzer, chairman Setzer, I have a statement, I would like to thank Representative Huller for all dollars you expensed to Catawba county, we appreciate that. We [xx] you sir thank you. We are assuming that he makes no other strains on your municipal budget through additional police and fire protection require. Not at this point but we will ever diligent about that. Always a front time we are here all week being sure to take, tip your server, Diana Doken and Kyle Hymen representing the city manager and mayor pro tempo of Conover if you'd like to proceed, gentleman welcome to the committee on Finance. Gentlemen and ladies thank you for your opportunity and I want to thank the faction Craig, we are a manufacturing community, Sir please identify yourself. I'm sorry, Don Dark in the city mega in the city conover. my apologies, I would like to thank the lady from Cleve representing the manufacturers, we're city of manufacturing. When I went to my apologies, I would like to thank the lady from Cleve representing the manufacturers, we're city of manufacturing. When I went to graduate school here in this great state, we were told that you want a minimum tax pays of about 40% manufacture in [xx] average is approaching 70% over our tax places manufacture. Our day time population swaved to 30, 000 while we sleep about 8200 at night. So we are very similar to our neighbors in [xx]. We focused on non residential development for the last 40 years. All our infrastructures and [xx] for the highways, water sewer, even fiber optic cable, whatever we can do to partner even with [xx] county and our neighboring municipalities was focused on business and industry and for doing that, the possible [xx] take the city of Weddington, similar population the city of Conover but their development strategy was a minimum of one acre lot so they would not be consumed by the growth around Charlotte and then it came up from last year as well. Valentine came to their North and West corners and so they're actually going to receive a benefit from being an industrial job centric city of the tune of 7 -9% under this proposal whereas communities who are industrial centric such as Conover will loose 2-3%, doesn't make a lot of sense to me for doing what we've been told was the economic development strategy of this state for the last 40 years was to promote manufacturing and advanced manufacturing with a home of four different divisions from [xx] plant. Hickory, the city of Hickory shares Hickory Spring Manufacturing with us. It has 10, 000 employees in the state, we have over 900 companies in the small town city of Canon. We were recognized by Ned Warren if you follow Ned Warren is the number six best place to do business. Number six so why should we be punished for doing what we know is right for economy development. Thank you. Thank you sir, I'm Kyle Hamann Mayor Protem City Cannova, I feel like I'm preaching to the choir here and I certainly appreciate all of you taking another look at this and breaking this down, but for practical purposes in the City of Cannova we have a Walmart and over the course of about the two years span Walmart are Walmart has about four course per service per day when you break that down, Walmart produces roughly the same amount of police call there's 564 residential units. Equate that to man hours and dollars per man hour that's 1156 man hours the base pay of $15 and 38 cents an hour or an additional police officer per year. Now we rely on the
sales tax revenues that Wallmart and other manufacturers and are sells, sales tax base produce, it's very important to our city and I hope that you realize and you understand the impact on the smaller municipalities like us. We stand to lose well total lose a county was 5.5 million dollars to overcome this lose of revenue, we have had to increase our taxes nine cents over the course of about 10 years. We can continue to endour that and put that off on our constituency we need some help. So, I ask you to continue to look at this. Thank you sir. Sabra Pharis[sp?] Thank you my name is April Pharis[sp?] I'm a citizen of Wade county, native of Charlotte, a tax practitioner with some experience in sales tax. I wanted to speak to you today on the notion that there is a fair redistribution of sales tax plan in the senate proposal. When I thought about this, I wondered about what exactly is fair about this and the only thing I've heard expressed in the senate is that there is somehow a shift of tax from one county to the other. First of all let me say that whatever this is is unconstitutional, in it's simplest form it is an appropriation annually from the general fund, the Mecklenburg county, the urban counties and the tourists counties to the other and it is both a violation due process and public purpose for Mecklenburg that's particularly true the first 1% was levied after a vote of the people. Second of all is based on numerous false assumptions. One is that everyone pays an equal amount of tax. Well the amount of tax people pay is based on their income. The IRS recognizes that in the sales tax deduction those with higher income get a higher sales tax deduction. The urban counties have higher income therefore each person in those counties is paying more sales tax. Secondly assumption false assumption is that we have a closed system. We have a lot of tourist that come to our state and they pay sales tax, and is not shifted anywhere. The third policy assumption is that there's a lot of revenue to be shifted. A lot of the sales tax based about 40% of it can't possibly be shifted and particularly that paid by low income because it's states only sales taxes. State only means taxes on telecommunication, electricity piped gas Cape TV and video programming it's all state only tax there's no shift going on. On food the 2% it's not currently it's a historical formula based on a 1997 or 987 share price per capita so it's not really being shifted anywhere else. The second another point is that our sales tax is based on destination not source it used to be based on source and that's where you got that sales tax adjustment factored right now if I buy refrigerator in Burim[sp?] county and I have it delivered to my house it's attributed to my county not the other so there're other factors but I particularly wanted to bring this to your attention and thank you for your attention. Miss Ferris were you reading? any remarks? Yes sir, May we have those? I tell you I will email a copy of this because some of the things I have written in here I did not say OK thank you. Marcus Streithen excuse me Mr. Trice Rep. Bradford did you have a question for the previous presenter? No just remarks at the appropriate time OK . Yes sir Thank you Mr. Chairman committee members my name is Marcus Sreithen, I am a lawyer with broke spears here in town and I represent the North Carolina cable telecommunications association trade industry for the cable TV industry we appreciate appreciative of any efforts by this body of course to simplify the tax code and reduce regulations and burdens on business we applaud the steps have been taken today then we appreciative of the general reductions in the franchisee tax general corporate rate which are expressed in the current version of the budget, however their are some significant tax policy issues that have been raised and was come over from the senate for the first time like to address
first with regard to the corporate income tax the proposal of course is to move to single cells factor which for our industry is not a change we are currently subject ourselves to single cell factor so we have no opposition concern with that however ever the way that this proposal is written it actually takes us out from single cells factor and then transitions us back over a period of three years it sure does not make sense from the tax administration stand point second with respect to looped marketing sourcing this is an issue that has been there for three years it has come up from time to time in revenue laws when we have had the opportunity for a full discussion about that issue without recommendation and I do think that this is an issue where it does not mend itself to sort of black and solution that has currently been expressed in senate proposal with respect to sales tax there has been some discussion about the they hack tags they labour that but that is a significant concern for our industry cable providers or purchase service of advertising services from third parties that purchase those sort of services within a corporate structure one without the other and off course they've there supplier of advertising services the impact of in a number of ways which we think are inappropriate for tax in terms of lowering of taxes and finally the same concern with respect to the new tax on services for repairing night frustration stand point in essence this is a [xx] Thank you Mr, Traight and I'll tell you, if you've got read remarks that you'd like to leave with the curerent Clerk we'll distribute those and I will make that offer for anybody if you have remarks beyond what you gave in written form, if you give them to the clerks or the sergeant of arms will distribute to members Mr. Chair. If you will push back. If you we will come back to this I want to make sure that I understand correctly. This one fact issue currently time on cable is tax under single sales factor, but through this plan would move out of that I'd like to return back in three years is that correct? Yes sir. Okay. Thank you. John Kar North Carolina veterinary medical association Yes good morning thank you Mr. Chairman members of the committee John Corolobes for the North Carolina veterinary medical association we oppose the sales tax on veterinary services as proposed in the senate bill veterinary and health care providers and provide services that safe guide public health services or medically to sale for example labi shorts are required by law imposing sales tax on veterinary services restricts access to care and impacts public health of both humans and animals veterinary care is essential to protecting the public from diseases such as rabies and flea and tick bone diseases. Veterinary services are not widely covered by insurance and therefore are most exclusively paid for out of pocket. Drug costs have increased significantly in the past few years and this amplifies the impact of the tax. Taxing pay neural surgeries, decreases access necessary to address North Carolina's pet over population problem which will result in further overcrowding and more feral dogs and cats to contract and transmit diseases. The senate budget does not seek to expend sales tax in a broad way to other service providers as such veterinarians will be unfairly burdened for the benefit of other tax payers as the bill is currently written. Any reduction in corporate and personal income taxes for veterinarians would likely be offset by lost income from changes in client visits and spending patterns. Agribusiness is North Carolina's number one industry and veterinarians play an important role in maintaining the health of food production animals in North Carolina. The North Carolina for business council in C state range North Carolina Port Council and North Carolina Caloman Association to join us on opposing taxation of veterinary services, only five states currently tax veterinary services, Delaware, Hawaii, New Mexico, South carolina and Washington according to federation of tax administrators. Animal owners in North Carolina's [xx] border counties will seek care in Jason's states to the detriment of North Carolina veterinarians, thank you for allowing us to come at this morning Thank you Mr Carr, Chairman Zain. Mr Chair man thank you I spent my Friday at my veterinarian with not receiving services from me personally but helping them on the website, but nevertheless it kind of brings the point
home that this are tax increases, walks like a dog talks like take it back, the senate proposal will take that issue, thanks Sir. Thank you we are saying that Representative Lewis. Mr. Chair I Yes Mr. Chairman. Yes Representative Louis. Thank you Mr. Chairman, thank you Mr [xx], the current law veterans don't collect from this sales tax on the goods that they sell, under current law there are some greats that are so that veterinarians on which sales tax is collected, correct. May I follow up? Follow up. Do you considered that excessively burdensome? That is something that's already in the law and is not before us and we're not advocating to change it. May I [xx] Follow-up? Just be clear vets do currently collect remittance sales tax on the goods that they sell just not the services that they provide. On some goods Representative Lewis, there are certain exemptions relating to agriculture may be another. Follow-up. Representative Stein. I have a question, so within new taxes collected who pay those taxes? Well, the sales and use taxes are collected by the retailer for the benefit of this state from the consumer and are collected and paid back the consumer Thank you, okay chairman Mrs Griffin clarifying question, essentially the veterinary change will be similar to that for animal bill repair? Where parts currently taxed but the labour is not? That's correct. Okay thank you. Joan Riz North Carolina says Association of County Commissioners. Thank you Mr. Chairman I'm Joanna Liz with the association of county commissioners. Our main concern initially with this plan was the conversion of local sales tax to a state sales tax, and we are relieved that the architect of the plan recognize the problem that this will cause and reverse that approach and we appreciate the senate including us in the conversation from the beginning. However, while the 80, 20% redistribution split is better than the 100% per capita distribution it still creates winners and losers among the counties and therefore problems and concerns within our challenges within our associations the senate is ask for our input to make the solution better for counties and we still working with our membership to generate ideas for 100 county solutions. For example but we appreciate the recondition the counties need ore sales tax options we'd ask that the six counties they are currently able to let the two and three quarter cent to retain that authority we are happy to share any ideas we generate with house leadership also we recognize probably better than anyone the difficult challenge of existing certain areas in our State and the strong need for some action the struggle is how to achieve an equitable solution thank you, thank you Ms. Liz and we would appreciate the solutions that your members generate also be shared with the finance leadership, I am going to back to earlier speaking list so many of the [xx] are here and would like to speak today they were not allowed to speak on earlier dates we will recognize you first Rose Williams North Carolina Lake, past Nathan Bank CNC Bankers Good morning and [xx] council of bankers association my membership includes all the banks thanks for headquarters harbourage here in North Carolina we like may of these industries that has [xx] this morning have been reviewing Senate proposal there are many factors in that proposal puzzle that are potentially very positive simplification of some of the tax codes within our State the potential reduction with leap with regard to corporate income taxes and [xx] taxes however we have some specific concerns few of those items are mentioned here today one of those deals was there has been activities by banks there is a unique aspect to investments that banks may make for example if they purchase such scanning out, if they purchase a bond in another state and they're paying income or they're receiving income on these bonds, it's being taxed already in those other States, there are some provisions here that would deal specifically with those investments, and when imposed a double tax here in North Carolina. We have a concern with that proposal. We also have some provisions that are unique to banking and subsidiary structures. Under federal law so many of our activities have to be done through subsidiaries, we're not allowed to engage in certain types of activities at the
bank level instead we create subsidiaries, think about investment advisors and things like that, and so, there are provisions dealing with deductions and also dealing with interest expense. I'd be happy to discuss those individually with you all if you have questions. Thank you. Thank you, Sir. Gary Salamido, North Carolina Chamber. Trey Rabon, AT&T. Thank you M. R chairman M. R Trey Raven ATNT. North Carolina's long recognizing need for responsible tax policy that balances revenue needs of the state and the local communities were encouraging investment in infrastructure that serves public good. Current discussion of house Bill 97 is just another example of that thoughtful and deliberate assess. AT&T encourages tax principles that follow three basic characteristics: Simplicity, Transparency and Stability. you'll allow me to take a moment to describe each of these from AT&T's perspective. Simplicity, the administrative costs incurred in the taxes for more loss to society, complicated taxation undermines voluntary compliance by creating incentives to shelter or to disguise income. Transparency tax legislation should be based on sound procedures and careful analysis. A good tax system requires upon the taxpayer to understand and accept the process for tax assessment, collection and compliance. Stability Long term financial planning is difficult when tax laws are constant state of frauds, tax and regulatory certain tier crucial for business investment and innovation. Most economies and policy makers agree the sales tax should be imposed only on final consumption of good or service, not on the input the business is used to produce the products and services that they offer. Levying sales taxes on business to business transactions simply result in a sales tax being incorporated into the price of the good or the services or to the consumers. This pyramiding affect the imposition of a tax upon, a tax result in hidden taxes on consumers the net-fact of tax pyramid is higher cost to consumers and potentially reduce investment in North Carolina. House Bill 117 and House bill 97, which passed body with overwhelming support contain a data centre provision that ensures business input for data centre in North Carolina are treated fairly and equally. at a time North Carolina's economic engine shifting under high gear simple, transparent stable tax policies is even more vital for encouraging investment by both business looking the movement to the state and by North Carolina businesses who are investing here at home, thank you Mr. Chairman Thank you Mr. Redman. Representative Setzer should you need to be recognized? At an appropriate time I would like to see what aim for the nonprofit community thinks at this debacle I mean the senate proposal. I think that'd be a good question because I don't have someone signed up from a nonprofit, is there all that happens to be somebody in the audience. Would you please identify yourself sir? Conveniently I'm David Heinen with the North Carolina Center for nonprofits. We've heard from quite a few nonprofits such as United Ways, Food Banks arts organisations and many, many others with concerns about two parts of the Senate tax plan in their budget. The first that the cap on itemized deductions would effectively eliminate any state tax incentives for charitable giving. We looked at other states and why is really the only other state that has done something similar in recent years. They put a similar cap a little bit higher but similar cap in 2011 had a measurable deterrent effect in charitable giving and they decided to repeal it in 2013 and they realized that it was really hurting communities but we looked at this so there's good tax state of what happened between 2011 and 2012 in Hawaii. So we looked at that, looked at their reduction in charitable giving and so that in North Carolina the same changes happen that we would lose about 60 million to 900 million in charitable contributions every year if this implemented. A big concern is 60% of North Carolina nonprofits say that they can't fully meet needs and that of those, they said that 20% of the people that they serve would then have to turn to government for more services, so creating a new burden on taxpayers. we've also heard from a lot of non-profits. We heard on Thursday from hospitals and independent colleges about the impact of the cap on sales tax refunds.
We've heard from a lot of other non profits that this would affect them too. It would affect building projects, and also would really affect many collaborative efforts that they deal with some the larger non profits institutions. Things like diabetes prevention programs that YMCA is still in collaboration with hospitals would be at risk. And another part of that change that wasn't discussed by staff, but it's actually a really big deal for a lot of non profits, seems like a technical change is shifting that from a semi annual refund to an annual refund which should really create some cash flow issues for about 9000 non-profits around the state by forcing them to loan the state money for a year instead of six months thanks. Thank you sir I have William Nelson with Smith Anderson Thank you Mr chairman I spoke at your last meeting so I have no further comment. Thank you sir. Mark I think this maybe Drake North Carolina sale section of broadcasters. Sheriff Votavick[sp?] North Carolina lines of why MCA's Trendy hand hospitals. Have you spoken sir. Shawn Williams Airlines for America. Bill Nelson motion picture association, representative Bradford is recognized for a comment. Thank you Mr Chairman. I just want to continue some remarks that I made from the last finance meeting that we had. So I had some more time to look at the property tax rates for all 100 counties in North Carolina and there's no interesting data that's I think it's worth sharing the average property tax rate in North Carolina of all 100 counties based on my math is 64 cents, 40/100 counties in North Carolina are below that line. So 40% of the counties in North Carolina have a property tax rate below the average, OK so just sort of put that to the right side of your brain, let's go left side of your brain. When I look at the 17 counties that stand to have significant revenue loss as a part of this proposed tax redistribution. When I look at the 17 counties and I take the counties that stand to loose $5 million, or more in 2000, 1920 those of six counties that stands to loose more than $5 million were first of all their cumulative loss is 80% of the entire deficit of all 17 of those counties, and when I look at tax rate of those six counties there average tax rate is 74 cents There are 77 counties in North Carolina that has an approximate tax rate below 74 cents. So what I, we are trying to drive the point here is wont it be great to live in a county that has a tax rate that appropriate tax rate that is low and I would stand to gain a win fall from a lager county where their people are paying a greater property tax? What I would like to suggest is that for rural counties if they have revenue deficits perhaps they should look at their property tax rates. First, before they come to the counties that are already paying higher property tax rates and those counties are being asked to give yet again which would then result for the residence of those counties to have to pay more property tax increases, I think the solution here is before we go redistributing this madness of sells tax dollars that we start at the basics and have every county look within their border and reevaluate their own property tax rate and make sure that they fill their revenue gaps there first before for they keep coming back to the well that keeps giving that the point I want to make Mr. Chairman. Thank you Mr. Bradford that's all Mr. Chairman, Thank you Mr. Bradford Rep Luise Thank you Mr. Chairman the bill tolls as a follow up to Rep. Bradford from [xx] perhaps the chair is to direct they have to amend the chart that we were all handed last week to indicate the property tax
rate for the counties I think it will be very interesting to take a look Representative Lewis, I would like for them to do it this is going to be our heavy lift but perhaps also look at the cities tax rates as well since they are also subject to redistribution. Yes ma'am Miss [xx]. A clarifying question for Representative Lewis are you asking for this additional data to be added on the new chapter we've passed out that does not include the sales tax increase or levying additional sales tax article or are youasking us to repeat on the original senate document that also shows additional articles? Well, madam I don't know that can get the other piece of paper any bigger so whatever you think would be the easiest way to show I think the gentleman from Mecklenburg brings us very important and interesting challenges that we face I think that what the revealing of what the property tax rate will show is that there are many many counties that are in fact are above significantly above the state average that are not [xx] loosers Okay. Alright, Representative Goodman Thank you Mr. Chair, this is only slightly turned in cheap but perhaps as a compromise with the Senate, we can do away with the sell sanctuary distribution and redistribute the property tax from the counties with the low property taxes could raise those and adjust it that way [xx] counties most of a dollar I'm sure they would appreciate it, thank you. Mr. Chairman. Representative Lewis. Perhaps I could clarify what I asked for where it may make more sense to In addition to showing just a simple chart, it shows just what the property tax rate is per county and senior Chair's advice per city as well, perhaps the staff could also show what the proposed changes in the Senate budget will equal as a percentage of that, in other words were County X need them to increase it's property tax how much would that be the point being I know the gentleman from Mecklenburg mentioned the amount of five for some counties or for all counties, for all tax payers five million I s a significant amount of but I think it would be interesting to look at what percentage of the total part that $5 million was Yes, Mam? Yes Mam, Miss Canada Representative Louise, I understand that what you're asking is to show not only the property tax rates but also for the projected gain or loss in sales tax revenue how much is that in terms of the property tax rate? My concern about showing that for every year of this is the documents that we have produced go out about five or six year, and because counties have three [xx] at least seven or eight years, we have counties doing a revaluation and every year, and especially as you get further out in time, if we to put that data on there it will be less accurate over time because we don't have a good way of taking into account revenue neutral changes in the property tax rate. Perhaps we can put it on for the first year that we have done, I think that would be accurate, more accurate. Thank you Miss Canada, and representative Louise OK with you, we were getting into big data here, and chairman [xx] and I would consult with staff, upcoming on that further representative Adams. Thank you Mr. Chairman, big data is a good term for it, I mean we're really getting deep into the number [xx] and I just we return to this what I've observed in this meetings has been most interesting this last few days, one of the things that jumps to my eyes this numbers are based on a three and a half percent consumption of growth where's when I talk to local communities what I'm hearing is right in between five and nine and a half is there protective growth numbers so I wonder about that the other thing is my reading is about economics indicate through three principles things that we ought to keep in mind, the three pillars of economic theory
of monitoring which we have no control over. Fiscal policy which is what this is about, and consumer confidence in this case the consumers are the communities, consumer confidence is said to be the most important of the three and I fear that what we are doing with this policy is undermining what little confidence remain after these years of distress, so I'll just like for us to keep in mind why we are looking we can roll the numbers and there's a lot of way to look at all the numbers. This principles are things that we need to keep in mind. We need to move slowly in changing tax policy, it takes a long time for communities and for the people of North Carolina to adapt to new policies so let's be judicious in our approach to making these changes, thank you. Representative Jeter. Question for staff Mr. Chair, I'm trying to understand the sales tax plan so I can make an informed decision. Is it my understanding that is an assumption that a significant number of counties would have to pass? are these bait numbers are based on the fact that a significant number of counties will have to pass in increase sales tax or is the status quo where we are at Miss Canada[sp?] Representative Jeter the senate plan does not require any county to raise their sales tax or love the additional sales tax articles, it does authorize almost all counties except those that are already at the cap to authorize additional articles refollow. Follow up. I thank you, I appreciate, I'm going to guess I in artfully stated my question. Are the assumptions on the growth based on the current rates on the counties or do they make any assumptions that counties have increased it to some level? Miss Canada[sp?] Thank you Mr. Chair, I believe I understand the question. The 3 1/2% growth rate is under relief that we've used as an example in these projections is unrelated to whether or not counties love the additional sales tax articles and in addition if I can also add the numbers that we passed out today on the long sheet passed out last week on this long sheet, also none of these numbers assumed that there would be any additional articles Okay, follow up? Well at this point I think this is going to be the last one of these Suarez we're going to hold for a while but I did want to thank the committee for your patience as we have teased out through this. A lot of the charts are static but what we're dealing with are actually moving quantities, and we have multiple variables. What's your local tax rate, how does that compare to other people? What is the shift in your business? What is your property tax rate? What is your growth? What are the reactions of the people to the changes in the tax? You can't assume anything is static, and what we have enjoyed for the last three days is to examine those unintended consequences, and the changes that we create by the changes in the tax system. One of the interesting things or some of the new math is to determine the large result from small changes in initial condition. We particularly saw that in some of the banks. I appreciate the committee for your participation in the analysis, we're going to continue to do this and as we have, I'll end session now, we stand adjourned.