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Senate | May 18, 2016 | Chamber | Senate Session Finance

Full MP3 Audio File

We adjourn. [BLANK AUDIO] [BLANK_AUDIO] Get going we've got a few more members, we'll give them another couple of minutes, Senator Brock's here, Colonel Rayburn is here, Okay. We want to welcome you folks to the finance Committee meeting today. And if you're in Bear Creek or Barnsley it's finance, if you're in Boston it's finance, so we're in finance today. Okay. We want to welcome our pages here today and if you will raise your hand Andria Irving, Winston Salem. Senator Burger, Konishi Soo Yung, Highpoint Senator Burger, Hunter Smith, I like that old name, Marksville, Senator Brock, Jennifer Koo Yun, Chapel Hill, Senator Woodard. Kate Taylor from Wilson, Senator Newton. Seanna Lucas from Winston Salem, Senator Lowe and DeAnthony Hall from Lagrange and Senator Don Davis sponsor there. We have two bills today to come before you and I believe We have an amendment. The first bill we gonna take up is senate bill 832, expand the 1%, $80 exercise tax on port's equipment, Senator Rayburn [BLANK_AUDIO] >> Thank you Mr. Chairman and members Senate bill 832 is a quick and simple bill, what it does is expand the 1%, 80 provision for a company located at a port for their attachment and maintenance of the machines that are used there. The machines that are used They are using are already under the 1% eighty, this is more of a correcting measure. We meant to do it when we did it originally, and it simply fell through the cracks and for that reason you'll notice at the very end of the Bill this is retroactive 2013 when we really thought We had done with. And that is the Bill. >> That in a nutshell is it. Good job Senator. Questions, comments, Senator Brock. >> At the appropriate time I'd like to move favorable report. >> All right, we'll hold up for just a minute Senator Brock/g and we'll look around to see if we have any other Questions, comments, Senator Davis. >> Thank you Mr. Chairman. Senator Rayburn, what effect would that have to businesses by having this retroactive to 2013. >> Actually the businesses that it affects would be the businesses that are in manufacturing at the port. It doesn't affect any other The limited thing because we thought when we were doing this originally for the 1% 80 on this mill machinery for these port industries this was included. And we were mistaken. >> Follow up? >> Follow up. >> fiscal note? >> fiscal? Zero Thank you. Carl Resin/g >> Yes Sir thank you. On that same issue, does that mean that the folks who didn't pay are gonna have to pay back taxes to 2013? >> I didn't follow the question Mr. Chairman. >> Will they have to pay back taxes from 2013? >> No they will not Not. >> That's a good question. All right I say if no other questions or comments from anyone we've got a motion on the floor favorable vote, all in favor say aye >> Aye! >> Any opposed no, none, Okay the bill passes, good job. >> Thank you Mr. Chairman. >> Senator Rucho is now going to To do a senate bill 818, increase to zero tax bracket and he has an amendment to put forth. >> Thank you Mr. Chairman and members of the finance committee. I think you have a packet now that shows the original bill. It also talks about explaining a summary and also And also an updated fiscal note that is there and then on the very back page of it is the amended bill. And just simply Mr. Chairman, we'd like to amend senate bill 818 with this amendment And what it does is changes or allows the effective date for the $1000 on a zero bracket standard deduction to be implemented on

the January 1st 2016 and then the $2000 Standard deduction increase to go up to 17,500 on January of 2017. And Mr. Chairman, ladies and gentlemen this is a targeted tax cut for the middle class and will Go a long way to helping reduce some of their tax burden. >> Senator Rucho that is very good and your point is well taken on this affecting more of the middle class and the lower income folks and it's a significant piece of legislation thank you. Members Amendment before you. You have copies. All in favor of the amendment? Any motion on the amendment? Senator Davis sends motion for approval- >> Excuse me. >> Senator Bryant. >> Didn't have a copy of the amendment. >> Yes. Its before you for discussion. We jumped the gun. I thought surely there wasn't a question about it. All right let's go. >> Okay thank you. >> We don't have amendments. >> Oh yes its part of the package, part of the package. >> Okay. I guess about the confusion. Thank you. >> Are you unconfused now? Okay all right any more discussion on the amendment? [INAUDIBLE] the motion. Senator Davis, moves all in favor aye. >> Aye. >> Any oppose. Amendment passed and will be enrolled into the bill. Yes Sir thank you >> Now >> Now, the bill- >> Can I have a chance to explain it please Sir? >> Yes sir. >> Thank you. Ladies and gentlemen of the Senate Finance Committee, we've done a lot of significant changes in tax policy, as we're trying to make this system simpler and fairer. I think as a result of what we've accomplished, We have seen significant changes, and some of them including, of course significant reductions in the corporate and personal income tax rates. And also raising the standard deduction, which goes a long way to reducing the effective raid on the personal income tax. But as a result of that, and something we should be looking at Is that we've seen a tremendous increase. And in some of these things that we're describing, we're one of the top states in the country on job creation. We've created almost 400,000 jobs since 2011. We have actually increased the income growth in North Carolina Which has always lagged behind the national average for roughly the last eight quarters, has increased above that, which helps significantly improve the poverty level that has plagued this State. In addition to that, we've also reduced the amount of Dependency of government programs. So by creating these jobs, people have had a chance to share in the prosperity, and also to become productive citizens. But what we can't fail to remember is the fact that, the changes that we've made in the historic Tax changes in this General Assembly has supported, including Sales Tax reduction, PIT, CIT Rates, Zero Bracket, has driven this economy forward, and made us significantly more effective in delivering what our promise was, and that was to establish a competitive Competitive economic model so that business can grow here, flourish here, and create jobs, and put our people back to work. Critics have said that the tax cuts that were accomplished would be devastating to our economy. Yet in the last two years specifically, last year we created $1.3 billion in new money above the previous year, and out of that was about almost a $450 million surplus. This year, we achieved about a $320 million surplus above what we had expected. What that means is something that we're doing is right, and And this bill that we've got before us is targeting the middle class specifically. And if we implement this bill, when it reaches $2,000 standard deduction, 75,000 tax payers will be taken off the roads completely because of the fact that the first $17, 500 of income is totally North Carolina tax free. And then in addition to that, the amount of dollars, roughly $200

million, when it's fully implemented, 80% of that amount of dollars will go to Tax payers. filing married, filling jointly with $80,000 less. So in essence, that is your middle class, and they get 80% of all these money that we're trying to work forward. This is the next Step in tax reform that we must take. There is no reason to delay this for years. It is important, and imperative because of the fact that, we've seen dollars in excess of what we anticipated. That belongs to the tax payers, and we believe that this $2000 Zero Bracket will Will exactly do what we hope and that is to go to the taxpayers. Roughly $115 per [INAUDIBLE] Mr. Chairman, if there are any questions, I will respond to them, but I would urge this committee to support this middle class tax relief act, because to vote no it would be to vote against the middle class and that's something we're totally opposed to. >> Senator, you know you broke my heart when I have to vote for it, very good and now we'll honor 10 questions I believe that Chairman Raymond has question number one and then I see two other hands and Floyd McKissick here. >> Thank you and I do Mr. Mr. Chairman and thank you Senator Rucho. I want to start by saying many of you are too young to remember the ship drag net with Joe Friday and his sidekick Bill Gannon who was Pat Gannon, only the facts. >> Nothing but- >> Nothing but the facts. Well the facts are not $115. The facts are it is $960.75 tax savings to every tax payer who is affected by this, and that's after what the 5.75 rate that we have at 5.49 that is And that is $1,006.25 per taxpayer. And that's going to 80% of taxpayers in this state. So it is a good Bill Senator Rucho and thank you. And it is tax relief to the middle class. Thank you. >> Yes Sir. And Senator Cooke from wale [SOUND] [INAUDIBLE] community. Thank you chairman. And Senator Rucho I wanna thank you in your leadership in this area, we've done a lot of wonderful things with our tax program and I know a lot of the thanks is to you and your fellow chairs. I'm curious though We've gone a a long ways in a short amount of time and I'm just wondering what you see in the future, will we continue to grow this zero tax bracket or will we do something else to help the middle class? >> Senator Rucho. >> Thank you Mr. Chairman and Senator Cook that's a good question. You always have to have a vision of where you wanna go to get there. You need to know what your endpoint is and at some point I would hope that North Carolina would reach the level of zero personal income tax similar to Florida, Texas and Tennessee. Actually Tennessee just took a move in response to our actions on taxes and totally eliminate the capital gains so they like Florida are totally zero. I think a lot of states are looking at North Carolina knowing that we're chasing them and recognizing that we are catching a bunch of them. So I would hope that one we can continue to raise the zero bracket maybe to 20 or $25000 over time. And in essence squeezing it from the bottom which goes a long way to help the middle class. And then in addition, to help everyone, continue to go below the 5.49% which we are going to effect in 2017 to a point where zero equals zero. And Its a matter of will. Its a matter of recognizing that the parameters, the matrix that you use to evaluate your success have to be constantly monitored. But it requires some bold steps to see economic growth as well as its done here in North Carolina So clearly staying, we would hope that as you continue broadening your base on towards a consumption based model, pro-growth model, you continue driving down the PIT rate, and that does nothing more than help the middle class and the small businesses who are the cornerstone of this state. And we wanna make sure we give them all the relief we can. We can. Right I've got to Senator Ford and then I've got Senator Sanderson in that order. Senator Ford. >> Thank you Mr. Chairman thank you Senator Rucho. Mr.

Chairman, if we could get staff to give us a fiscal analysis of this Bill? >> Right there. >> We have one attached and I believe if you want further Explanation we have Senator Rucho and our capable staff that are ready at chomping at the bit. >> Thank you Mr. Chairman and I respect Senator Rucho immensely in his great financial mind, but if we could rely on the hired help I would appreciate it. >> All right, we've got Jonathan Todd looks like he's Ready to go. Jonathan let's give this fiscal analysis. >> Okay, yes Sir. Senator Ford there's two fiscal memos in your pack and you make sure you'll note the one dated May 18th and you'll see there for Fiscal Fiscal Year 16/17 this proposal would reduce collections by $145 million and that is a combined effect of 2016 and part of 2017 tax year, because of the current date, if you have this $1000 increase in the standard deduction For 2016. All of that impact will fall into the 16/17 fiscal year. That's part of it. And then the next part of that is relative to the 2017 cash year. You have a partial year impact as a result of reduced withholding and estimated payments for the 2017 cash year. When you have the $2,000 standard deduction increase. So that's 2016 to 17. And then from there on out, you just get the four year impact of a $2,000 increase in the standard deduction. >> All right. Was that sufficient Senator Ford. Thank you, very good. I've got Senator Sanderson Motion no. I've got Senator Clarke and then Senator Bryant. Senator Clarke. >> Thank you Mr. Chairman. I think I heard something I'm not quite sure I understood. For a typical individual in terms of money remaining in pocket, what does this Bill Bill mean to them? As a result of increase in the standard deduction. I'd like staff answer that please? >> All right. Bill Raven just told you- >> The total impact?>. [CROSSTALK] >> The typical impact for an individual. In other words how much money would stay in my pocket if standard deduction was increased by $2,000. >> Single or married filling jointly Married filing jointly. >> Married filling jointly the total impact at the end of the day would be $1,006.25. Under the current rate if it were today. $2,000 by today's rate it would be $960.75. tax savings >> Its a lot of money A lot of money going back- >> Starting from zero going to 17 {INAUDIBLE] >> So you paying no taxes but you getting a big back rate. $964. Senator Bryant? >> I'm trying to wrap my hands around this too. But my question was more It's more targeted toward the higher income earners, we've heard about $80,000 or less, but what is the impact for those making over $80,000? Can somebody describe how it plays out for the $100,000 earner? >> Well, I think I think all of us can take that one on, Senator Russell/g-- >> Could the staff answer that one if you don't mind? >> You want the staff? Jonathan I think you've got that at your fingertips. Over 80,000. >> Yes Sir. You have a decreasing reduction in total tax paid for those over 80,000 Until that fully phases out at about 200,000 and above or they would see not benefit. >> Could I follow up? >> Follow up>> What would be the average break,for lack of a better word, or advantage for the higher income earners in that range from 90,000 to 200,000 If you could just quantify for me for that in some way that I would understand it. Okay I believe Dr. berry Boardman/g is over here I know his got the answer because senator Rucho what high income voters want >> We definitely want Rucho to be clear. >> Dr. Bordom/g >>Thank you. What happens and the reason Jonathan mentioned, there's really no impact once you get to higher income. Almost all those folks are gonna be taking itemized reductions. When you change the standard deduction for those folks, it doesn't matter, cuz they are gonna still continue to itemize. So as you get up into these much higher incomes changing the standard. And introduction doesn't really affect you. We estimate that for people with just a gross income between 100,000 and less, that about of that 200 million when you get out to 2,000,

almost 180 million of that comes from people with incomes of a 100,000 or less. Does that kind of help get you- >> Do you want another follow up? Okay. >> I was just trying to. The 180 million you're talking about is of the total cost? Right that is in- >> No. >> Excuse me? >> Not total cost. Total income aren't you talking about? >> No. >> If I may, the total cost when you move to 2,000 standard reductions, approximate 200 million. Of that 200 million almost 180 million of that cost, if you will, is returned to those with incomes Below a hundred thousand. >> Okay. Just one more declarative. >> Alright, this is last follow up Senator Bryan. >> So that's my question, where is the 20 million gone? >> There are some folks that make more than 100,000 that do not itemize. I don't have the detailed statistics but that's where the additional 20 million will come, be it for those with incomes above 100,000 that do not itemize. >> All right, Senator Blue/g, my distinguished colleague. >> Thank you Sir. So that I understand this too, cuz I'm following up on Senator Clarke, the additional tax savings or the additional money in the pockets of the group, is the delta between what it is now and what it will be under the bill, right? And so it's the tax savings between what you would pay on 15,000, and what you would pay on 175 in two years. >> $115 now. >> So it's a delta on $2,500 at 5.5%. >> But $115. According to- >> Okay. >> [CROSSTALK] >> And if you look at revenue law, Mr. Chairman, Mr. Boardman did a very good explanation on how that Worked. And it should be available online on the Revenue Laws website. So if you need some additional information on that, Mr. Boardman did an excellent job in explaining this. >> Senator Brian, I wanna finish off where you had started with the higher income tax payer. What we're doing in this Bill has virtually no effect on them, cuz they itemize deductibles instead of, However, if you'll look back a year, and see where we dropped the upper income tax, their personal income tax with the surcharge for the upper-upper of 7.75, it's now I believe 5.4999, or something like that, or 5.5. if you will look at what that did for them, we did We did them right. They're the business owners, and so forth that are expanding. So part of our plan was now, let's do something from the middle and the lower, this takes care of them. So now we've got all segments of income. And then people say, well, how you gonna lose all that revenue, and have enough money to spend? Folks we take in more money when we cut rates, and we cut taxes, and we cut the Corporate rate. We're taking in more money now, and if cut 2.8 billion over the last four or five years of taxes, that's now running around in tax payers' pockets. A lot of people said, how could that be? Why couldn't you take that money, and spend it on education? We could have, but we'd be taking it from the tax payers who have been paying more than enough. >> Mr. Chairman Is he giving a speech or? >> No, Sir. I didn't even mean to get started. I was saying, gonna say nothing. Senator Apodaca, I'd like to hear from you. >> Mr. Chairman, I would just like to say, I'd like to encourage anyone making over 100,000 that doesn't do itemizing deductions, to continue doing that for the benefit of the state. >> State loves them. >> [LAUGH] >> Doctor Dr. Boardman, the state loves those people that itemize when they're making $2 or $300,000 a year. >> If you love them, don't itemize. >> Don't itemize. Surely we've got more questions than that. >> Move for a favorable report. >> Got a motion for a favorable report. >> It's getting warmer. >> [LAUGH] >> Any discussion? Senator Cook, what do you want sir? See Seconds. Got a motion the seconds. All in favor, aye. >> Aye. >> Any opposed? Passes. >> Thank you. >> That was a wonderful job, Senator. [BLANK_AUDIO]