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Senate | June 13, 2013 | Chamber | Session

Full MP3 Audio File

members of better seats, members and guests of the gallery of Lisa house all electronic devices, Williamson and Brian Reverend Peter Millers in a chaplain at members and guests in the gallery. please stand up [SPEAKER CHANGES] or you are here with us and your holy new everlasting Lord prayed out senators from rightful beach to hospital of Carolina will be reminded of your holiness, everlasting love today. we pray that will saturate the conversation hearts and minds in Christ Democrat and [SPEAKER CHANGES] Thunder bird is recognized for motion things present feature Wednesday June twelve two thousand thirteen is that examiners have the correct I moved we dispense with the reading of the journal and that is then approved as written connections Journal for juvenile stands approved as written leaves of absences a grant for sudden movements that are widowed and Graham soon as normal motion of Senator Kathy Harrington, Gaston County Giuseppe to extend courtesy to get of the gallery to the winner of the proudest kid in Gaston County essay contest Patrick Lamb is also known as father can him Shannon Lamb and sister Mallory landed in the gallery please stand to be recognized, graduations him and [SPEAKER CHANGES] do not judge, and were going to say ratification of those and you'll be in the possession, so… important to us. this president, although I'm disappointed we can't rent but bills up front. I need to clarify the record also. I'm a mama. other ministers laugh areas. I just wanted another two hours. North Carolina West bashful in that correct sandbags of Jayanthi the Lord in the grammar need to know that I learned the Reverend this president after five forty eight Marine fisheries rulebook to production is on today's calendars to be removed. they count today's calendar and sent to the rules committee for further look at without objections or thanking the present House Bill seven twenty seven alternate procedure for obtaining salvage title is on today's calendar acid be removed and replaced the home calendar for Tuesday June nineteenth objections ordered house going okay. we'll get to that number, regardless of any committees, Senator Abbott out of reverse address simple committee report in the Superior Court work rate him the room upgrade at no segmented in this capacity, I got revolution to seventy one. confirm utilities commission appointment favourable so… programs address is presently the deathly brought forth some good home from the calendar for immediate consideration objections were many other reports of standing committees, not when we run into the calendar for the day. we will start with the House joint resolution alternate resolution two seventy one four three high resolution two seventy one. confirm utilities commission appointment soon drop of doctors recognize thank you, Mister President, members smashingly had the pleasure of having on him daily at the

him. he is nominated by the Governor to be on the utilities commission Bailey's highly qualified as I felt sooner did he spot ever qualify as an engineer, not a lawyer so that in itself made us happy soon as the final secret but anyway, Don is originally from Rutherford County still lives there. my understanding than an engineer. he went to NC State University and then he may it went south on the Swift University, South Carolina arrival. weight loss to UNC this week, but that has nothing to do with his appointment, but not highly qualified by great addition and how it recommend his appointment to the board [SPEAKER CHANGES] newsletter today hearing on the question for the Senate is the passage of House joint resolution two seventy one are available about our proposal vote no five seconds p.m. Re: work work work work. I sigh at Hartsell I Doctor Barker. I will design thirty four having an affirmative and zero in the negative House joint resolution two seventy one is adopted, and it will be used with movie I around size and there is method of electronic invoice here was just one reading to second ratings that allow it to third reading. here's a further discussion or debate your not suppose that is a passive House joint resolution two seventy one on its third reading all table. say hi. I was no guys have a elsewhere resolution two seventy one is adopted, and it will be enrolled him about Mister Don Bailey, with those a day in the audience Mister Bailey of your ear up, please stand and be recognized. thank you so much for your service. thank you for being here what's that got him a really good move in our calendar for the day, starting with that little bills reading that will bill, House Bill five sixty two. the only lap sixty two parenting copyright is vital. the discussion of a hearing unpleasant rows of his passes in Senate committee substitute House Bill five sixty two on his third reading on favourable vote on. I was about no five seconds relapse of the voting. the clerk recorder.after I research setting, voting affirmative and zero in the negative Senate committee substitute House Bill five sixty two passes its third reading to reset the house for concurrence in the Senate committee substitute for us sinners in proper mistrust to some fourth committee report out of order so you can send for it. in order for going him addition [SPEAKER CHANGES] , I was committing submitted and passed House Bill five forty three sacraments of the number one guardian sham roles of MADD has a provider 's favourable house Bill five forty three calendar moving on the public goals. the call House Bill seven thirty three three seven forty three URI allows the missionary changes in a discussion or debate during the question for the Senate ashe passes the Senate committee substitute House Bill seven forty three on its third reading on payroll but I was about no five seconds real out of the voting work record about Kinnaird, I

Parmon, no. 41 having voted in the affirmative, and 6 in the negative. Senate Committee Substitute to House Bill 743 passes its third reading. Amendments will be engrossed, it will be sent to the house for concurrence in the Senate Committee Substitute. Moving on to second meeting roll call. Public Bills, House Bill 817, the clerk will read. [SPEAKER CHANGES]. House Bill 817, Strategic Transportation and Investments. [SPEAKER CHANGES]. Senator Harrington is recognized. [SPEAKER CHANGES]. Thank you, Mr. President. This bill is a new plan for transportation, and we've worked hard to see all regions of the state have more opportunity than ever to fund all modes of transportation. It has been reviewed and vetted in the Transportation, Finance, and Appropriations Committees in both the House and Senate. It passed the House with 102 votes in a bipartisan effort, to reform our transportation system. I would like to thank Senators Stein, Blue, and McKissick for their comments in the Finance Committee, which resulted in several improvements to the bill, and I very much appreciate them working with us to make the best bill possible. And if I may, Mr. President, I would like to yield to my Co-Chair, Senator Rabin. [SPEAKER CHANGES]. Senator Rabin is recognized. [SPEAKER CHANGES]. Thank you, Mr. President. To debate the bill, to speak on the bill. [SPEAKER CHANGES]. You have the floor, Senator. [SPEAKER CHANGES]. Thank you. Members, for two decades we've worked with the transportation framework that changed the face of our state. Paved thousands of miles of road that built an interstate system that expanded commerce and connected people and places. Changes to our state that the creation of the Highway Trust Fund brought about then, now demands that we modernize and prepare for the next two decades. This bill is about what is best to do for our state as a whole. Without undue influence of politics, but it gives a local voice more opinions and more responsibility in how we move forward in the transportation decisions of tomorrow. The connections and access between our rural areas and our urban areas are areas that this bill directly applies to. I want to say that a lot of work has gone into this. It's gone through six committees, we've talked to everyone who has wanted to come to the table and talk, it is totally and completely without any partisan measures in it, a study group has worked countless hours on it, and we have brought to the floor of the Senate a bill which has passed the House with over 100 votes. A bill that finally will keep North Carolina in the lead and its infrastructures will go forward. I appreciate the work of everyone. I certainly hope that we can have the support of everyone in the Senate. Thank you very much. [SPEAKER CHANGES]. Senator Stein, for what purpose do you rise? [SPEAKER CHANGES]. To debate the bill. [SPEAKER CHANGES]. Senator Stein has the floor. [SPEAKER CHANGES]. Thank you, Mr. President. Members of the Senate, I just want to thank Senator Rabin and Senator Harrington. McKissick, Blue, and I were concerned about the public transit piece. They didn't, maybe this will make y'all happy, they didn't do everything we wanted, but they did do something and we appreciate their willingness to work with us. And thank you very much. [SPEAKER CHANGES]. Mr. President. [SPEAKER CHANGES]. Senator Blue, for what purpose do you rise? [SPEAKER CHANGES]. To debate the bill. [SPEAKER CHANGES]. Senator Blue has the floor to speak to the bill. [SPEAKER CHANGES]. Thank you, Mr. President. I just want to say that as one of those who participated in the creation of the Highway Trust Fund, that I thought that it was a great creation back in 1989. It was a bipartisan effort, Governor Martin was the Governor, and driven primarily through the House by Speaker Mavretic. But the amazing thing is that we put together the votes to pass that, which increased the amount of money available for transportation in this state, transportation construction. Increased it on the order of about 50, 60 percent immediately, and over time about 100 percent. And I think it's timely that the formula be looked at. You have to cobble things together from a political standpoint when you're trying to do something new, and especially something like, that generated the kind of income that the Highway Trust Fund did. I want you to know that I stand ready to work with Senator Harrington, Senator Rabin, or anybody else who's working on it. And they, I think, have done a great job, I serve on Appropriations Subcommittee with them. But I stand ready to help them. And I think all of us

[0:00:00.0] …To know that not in the long run but in the short run and immediately we are gonna have to do something drastic to put resources and to build in the transportation infrastructure that this state needs for the 21st Century and now that these adjustments have then made I hope all of us are ready to put our shoulder to the wheel to do just said. [SPEAKER CHANGES] Senator Nesbitt what purpose you has? [SPEAKER CHANGES] Thank you Mr. President, speak on the bill. [SPEAKER CHANGES] Senator Nesbitt has the floor. [SPEAKER CHANGES] Thank you Mr. President and members of the Senate, I would like to speak to this bill about what the bill doesn’t do not necessarily what it does do as Senator Bill pointed out in 88 we wanna get the trust fund bill we substantially increase the amount of money going into transportation I believe almost doubly because we had a situation where they are just simply wasn’t enough, we have half of the state that did not ___[01:04] in highway anyway near and we had to get people back in the game and that over the years has I think tremendously enhance this state is certainly has enhanced our transportation system and I think that’s a very much a part of good jobs etcetera. And the big problem with this bill is we are taking the same resources which everybody in the room would say are not enough and now we are register it. Well, the people that are getting and not getting enough, do you know of anybody that got excessive highway funds or excessive maintenance allowance? I don’t, and we are gonna take all of that and put it in department and we are gonna registered it and by the way we will find out about all of this how we are gonna do that, we don’t have the formula now. We are gonna be tell later what that will be. And for those who live outside of the three main urban areas in the state, you are giving up the only sure thing you have got which is the equity formula that guarantees you get a little bit of money to go into the system where we are going to let DOT basically decide where the money goes and I wanna tell you something they are powerful in the state, they will descend on them and we get all the money but you don’t have to believe me go look at history that’s why you have an equity formula. So, everybody gives a little bit or anything left for some. And the more rural you are I think the more you are at risk in this bill. And I cannot believe that with the history we have the transportation programs and transportation money that we are sitting here taking a pig in the poke and saying, “We are gonna step up we got and then we will find that later what we are gonna have.” I know what you are gonna have and you are fixing to find out what you are gonna have? You are gonna have less in these areas that needed and I know of some what happens every time you go through this people get call, “Oh, this will help you or this will help you.” And every time we have ever done it didn’t haven’t help you. I know the Senator Apodaca now up way we are looking at Act 26 it needs to be widened from ___[04:06] Bill, we have got a missing link of the interstate highway system in Asheville, North Carolina. Act 26 starts in one line I would be willing to bet that this thing don’t fix that when I see the mobility fund which was what I think we are heading toward all these things still get push to the back and just to understand that’s what you are doing and you are gonna have to explain to your people where the money went, where it’s gone? [SPEAKER CHANGES] Senator Kinnaird what purpose you ask? [SPEAKER CHANGES] To speak to the bill. [SPEAKER CHANGES] Senator Kinnaird has the floor to speak to the bill. [SPEAKER CHANGES] Thank you I receive this along with 169 other people but I felt that it was very significant, I don’t know where the person is from but he… [0:04:59.9] [End of file…]

[Speaker Change] As a lifelong resident of North Carolina and transportation professional, with thirty five years’ experience in North Carolina and supporter of the current administration, he wants to point out there are three areas that he feels quote devastating several programs which has already placed North Carolina as a leader in Southeastern transportation. And I agree with that so I want to describe to you what he feels is very detrimental in this Bill and I agree with. The first is a rail transit system. And of course our Governor was responsible for one of the best systems in the State. And then our interstate rural passenger service which will are just embarking on will be impacted negatively. And finally bicycle pedestrian. Well we say that’s not very important. But as he points out and as I know from my experience industry comes here for certain reasons. There are four leading ones that have come up with studies. The first is good transportation system which of course we have. The second is a good education system which we have had. The third is a well-trained community workforce. And the fourth, believe it or not, is amnesties. And this type of bicycle mode of transportation, which is being diminished, will have an impact when people are looking at the quality of life and wanting to come here. So I think he hits it, the nail on the head, and I agree with him and for that reason I will not vote for the Bill. Thank you. [Speaker Change] Senator Apocada, what is the purpose you arise? [Speaker Change] To speak on the Bill. [Speaker Change] Senator Apocada has the floor to speak to the Bill. [Speaker Change] It’s always amazing to me how we can find ways to not to do things in this chamber. You know, Senator Nesbitt and I agree on a lot of thing. We disagree on a lot of things. And I think this is one we will have to respectfully disagree on, because the week before last I arrived on I twenty six at about quarter to five o’clock, and tried to get to Hendersonville from Ashville. I can go by the RDU airport at five fifteen and make better time than I did going down the road down to Hendersonville. The point of this is, we’ve had the old system, it hasn’t helped. This system gives us a little light at the end of the tunnel. You know, I would love to be able to have a greenway between Ashville and Hendersonville, ride a bicycle, take a train. But right now I would love to drive between Ashville and Hendersonville. So it can’t be any worse than it has been and hopefully what I see in this is, and my compliments, this may give us a little light at the end of the tunnel. So I fully support it. [Speaker Change] Further discussion, further debate. Senator McKissick, what purpose do you arise? [Speaker Change] To speak on the Bill. [Speaker Change] Senator McKissick has the floor to speak to the Bill. [Speaker Change] I would like to thank Senator Rayburn, Senator Harrington for working with us on this Bill. I think it’s better than where it originally started. I have some concerns about provisions in here related to mass transit and the way those funds would be competed for because I think in those major urban areas [???] where we do have high concentrations of population, we need to do all that we can to decrease the number of vehicles per day on our roads and to provide alternatives. Whether they are fixed rail systems, bus systems, or what have you. So I would like to see greater flexibility to allow for that. But having said that, I think that, well if you look at the ratios that will be provided for in terms of forty percent at state level, thirty percent at regional, kind of thirty percent local, it provides a reasonable approach that we deserve to fully evaluate and take a look at. And to try to go down this route, I think it’s a thoughtful route. I think if it helps us prioritize our projects, which helps us to spend our resources more effectively, then I believe it’s an approach we should give a try. [Speaker Change] Members and guest in the gallery, let me just remind you again. Please silence all of your electronic devices at this time. Thank you. Is there any further discussion or debate? Hearing none, the question before the Senate is the passage of the Senate Committee Substitute number three, the House Bill eight seventeen, on its second reading. All in favor will vote aye. Oppose the vote no. Five seconds to be allowed for the voting and the clerk will record the vote. Forty two having voted in the affirmative and five in the negative. Senate Committee substitute number three to House Bill eight seventeen passes its second reading and it will remain on the calendar. House Bill nine ninety eight, the clerk will read. [Speaker Change] House Bill nine ninety eight,

Exemplification and reduction act. [SPEAKER CHANGES] Senator Berger is recognized. [SPEAKER CHANGES] Thank you Mr. President, members of the Senate. We have come to this point in the discussion, the debate on the issue of tax reform. We've talked about it for years. I've been in the General Assembly since Janunary of 2001 and I think it's a subject that has been discussed literally every session since then. We have not, up until now, been able to move anything that could be described as comprehensive tax reform. We have, and you've all heard all of these things, and on much of these things there's much agreement. We have a great need for comprehensive tax reform. We have, at the present time, tax rates that are among the highest in the country and clearly the highest in the Southeast. We have a tax system, a tax code, that is overly complicated. It is a tax code that, if you get the book, is about that thick that we ask our citizens and our businesses to comply with, and it is a tax code that is sorely in need of updating and reform because you see it's based on a model that dates back to the 1930's for an economy that really doesn't exist anymore. And it's a tax code that many of us believe make it more difficult for North Carolina to shake off the after-effects of what some are beginning to call the Great Recession. Unemployment rates remain one of the highest in the Nation and many people point to the fact that we're just not competitive in connection with our taxing system; and so what we have in front of us is what in many respects is a compromised bill. Many of you who are on the finance committee have heard a lot of this and you've seen a number of bills that have been introduced this year to address the subject of tax reform. You've also received, I am certain, as I have received, numerous hundreds probably thousands of emails on various aspects of tax reform. And so what we have is a bill that I believe represents a significant effort towards comprehensive tax reform and represents a real compromise in terms of some of the issues that were out there. So let me tell you what the bill does - and I'm just going to read this summary from our nonpartisan staff. The Senate Committee substitute for House bill 998 reduces individual and business tax rates, it helps offset revenue loss from the wait reductions applicable to all taxpayers by eliminating tax expenditures and referential rates and referential refunds in the sales tax. The bill makes the following specific changes to the state's tax structure. One: It replaces the individual income tax structure with a simple flat rate structure. It eliminates all exemptions, deductions, and credits except for the child credit, provides a zero tax rate for the first fifteen thousand dollars of income for married filing jointly, and sets a flat rate of 5.4% for taxable years beginning on or after January 1, 2014 and reduces the rate again for 5.25% for taxable years beginning on or after January 1, 2015. Our current individual income tax rate has a high marginal rate of seven and three quarters percent so it represents a substantial reduction from the current rate. Second thing: It replaces the current tax structure on business entities with a new flat rate per business entity. Current business tax structure consists of a corporate income tax, franchise tax, state and local privilege taxes, and annual reporting fees payable to the secretary of state. The bill phases out the corporate income and franchise tax, eliminates the state and local privilege taxes, and eliminates the annual report filing fees. When fully implemented the flat tax amount for ?? corporations will be five thousand dollars and the flat tax amount for all other limited liability business entities is seven hundred and fifty dollars. Significant thing about that is, not only does it reduce the rates, it simplifies the

[Speaker Change] The calculation of tax for businesses across the State. Third thing, the Bill eliminates overtime, several sales tax exemptions, and preferential tax rates. It eliminates the franchise tax on electricity and the excise tax on pipe natural gas and taxes the two with the State combined general rate. And it eliminates the gross receipts privilege tax on amusements and taxes amusements at the State and local sales rate. The Bill continues a distribution to cities of a proportion of the generated from electricity, pipe, and natural gas. The next Bill that the Bill does say. It eliminates food from the local tax base effective November One, Two Thousand Fourteen. Food is currently subject to a two percent local sales tax. The Bill does give counties the authority to levy a sales tax on food at the county’s local sales tax rate. Local sales tax rates for counties vary from two percent to two and three quarters percent, county to county. The next thing, the Bill begins to require for farmers to meet the annual gross income tax require, gross income tax requirement of ten thousand dollars from farming operations to qualify for sales tax exemptions for farmers. The next, the Bill eliminates the estate tax. Some have referred to that as the death tax. Next, the Bill eliminates the ear marking of State revenues derived from the deed stamped tax and the scrap tire disposal tax by directing the proceeds from those taxes to the general fund. And then the Bill eliminates the two percent to wholesalers for remitting excise tax on cigarettes and other tobacco products. Passing this Bill will help create jobs. Reason I say that is the economist that we’ve talked with will tell you that reducing taxes, reducing obligations in compliance with taxes on corporations makes those corporations more competitive and makes it possible for them to create jobs. You have to look really no further than the rating structure from the tax foundation which rates every State in the nation, in terms of business climate. Presently North Carolina is ranked forty fourth in business tax climate. We have one of the worst business tax climates in the nation. If this Bills past as drafted North Carolina’s business tax climate will move up to number six. We will leap frog all of the States that are ahead of us in our region. A lot of folks talk about Texas and how great Texas is in terms of creating jobs and how their tax climate is as good as it is. If you look at the business tax ratings from the tax foundation, Texas currently ranks ninth. We will end up ahead of Texas in terms of business tax climate. That will translate into jobs for the people of North Carolina. That will translate into additional business activity in North Carolina. That will translate into all sorts of good things for people looking for jobs and are starving for jobs at the present time. The other thing that this does is, we have heard, loud and clear from people from across the State that its, its problematic to tax food. Well if it’s problematic for the State to tax food, then it’s problematic for local governments to tax food as well. And so what, what this Bill does is says, as far as the State is concerned food is not something that should be in the sales tax base. However it does give local governments the ability to move, to move in that direction if they, if they see fit. The other thing that we have heard is that there were a lot of concerns about the possibility of taxing other things such as prescription medicines. This Bill does not do that. There were other concerns expressed about the impact on, on the people already on social security. I actually met with a representative of the AARP and I asked her to present us with some scenarios that they were concerned about in terms of how this Bill will impact people who are receiving social security. And in each instance that they provided to us of an example of a couple or an individual. Their income, social security income, plus any other income. In each instance, under this Bill, they would either pay less State tax or their State tax would remain at zero. And so this is a Bill that is positive.

for the people of North Carolina, including the elderly population. We also had the fiscal staff run some scenarios that were similar to scenarios under the House version of this bill for various people at various income levels. And in each instance, the overall tax burden on North Carolinians under those scenarios were less under this bill than under the bill that came over from the House. Again, this bill represents a significant compromise from the position that has been advocated. In many corners, it represents a huge win for the people of North Carolina, in that, if we believe that the free enterprise system is the best system available to us, and that jobs are created in the private sector, ultimately, not all jobs created in the public sector, that what this bill will do will help jump start the private sector economy in North Carolina, will create jobs, will provide opportunity for our people, and will be something that will be significantly better than the tax system that we currently have. I'll be more than happy to answer any questions, Mr. President, and urge you to support the bill. [SPEAKER CHANGES]. Is there any discussion or debate? [SPEAKER CHANGES]. Mr. President. [SPEAKER CHANGES]. Senator Clodfelter, for what purpose do you rise? [SPEAKER CHANGES]. To speak on the bill. [SPEAKER CHANGES]. Senator Clodfelter has the floor to speak to the bill. [SPEAKER CHANGES]. Thank you, Mr. President. Members of the Senate, let me start by saying I greatly appreciate and respect the amount of effort that's gone into this bill. Trust me, I do. I know how much work and effort it has taken to put a bill like this together, as it has been required for every other proposal that we've seen this session and in prior sessions. So, it's a good piece of work. It's a good piece of work to get it all pulled together. I'll also say to you that an awful lot of this, in fact, almost all of the elements of this bill are very familiar to me. I've seen an awful lot of them before. I understand an awful lot of them. I think I do, at least, better than I did when I first started out on this exercise. At the end of the day, though, the judgment that has to be made about the bill doesn't lie in any particular piece of it. However familiar that may be, or however good you may think individually, it's what they all look like when the puzzle is assembled and the picture emerges as a whole. And that's the basis on which I have to render my judgment about the bill. There are, as I say, components of it that I think are quite good, but the picture that comes out when all of the puzzle pieces are put together for me is not one that I can support. And I know it will be said that reform is largely something that is in the eye of the beholder. I'm only one beholder, there are 49 other beholders in here, and there are 120 beholders across the hall, and one sitting up the street. So I'm only going to speak from the perspective of the eye of this beholder. Why the picture that emerges from the bill as a whole is not one that I can call, certainly not comprehensive, tax reform. It violates in many respects quite a number of principles that I've come to accept over years of studying and being an observer of the issue, and a participant of the issue. And I want to talk about some of those broad principles, as I say, because that's the judgment I render based on those principles, and not on the details of the bill. It is not, it is not revenue neutral. I don't think it pretends to be, so I'm not going to sort of say that it fails in something that it doesn’t pretend to do. But that's important. And I'll tell you why I think it's important that a true restructure of the tax system should be revenue neutral. It's because it's the only way you can avoid confusion using tax reform with debates about budgets, spending levels, and spending priorities. And tax reform ought to be about the design of the system for raising the revenue. It should not be a debate about whether we have enough, whether we have too much, or whether we should spend more or spend less. Whenever you violate the principle of neutrality, you inevitably confuse the debate and draw all of those other issues into it. This bill is not revenue neutral. In a year of full implementation it will generate 1.3 billion dollars less than the current revenue system adjusted for inflation, with growth adjusted for inflation of population growth. In other words, it will

Yield 1.3 billion less after you take into account inflation and population growth than our current tax system will do today. And so that means we’re all of sudden talking about budget issues in those years. I don’t know what the debate will be. I may not be here. Ah, maybe I won’t be here. Ah, but there will be a debate. There will have to be a debate at that point about how we will fund that shortfall. It violates the principle of neutrality and for that reason I can’t call it really tax reform. It confuses tax and spending issues in the same bill. It is not comprehensive. It does not address one of the main pillars of our revenue system, the sales tax. It doesn’t address the sales tax in any comprehensive way. Senator Berger’s quite correct. The sales tax we have today was designed for and structured to respond to the economy of the 1930s. This bill does not update that design in any substantial respect. One of the main pillars of our revenue system is largely untouched. Where it is adjusted where the base on which the sales tax is calculated and paid is adjusted it violates another key principle of tax reform. It expands the tax base of the sales tax to cover more transactions that are business to business transactions. That’s where the basic expansion in this bill lies. In exactly the opposite direction of what every expert on tax policy, on what every commentator, on what every business has told us, don’t pyramid your sales tax by taxing business inputs and business to business transactions. But the largest revenue gain in the sales tax in this bill after the repeal of the current exemption for sales tax paid by nor non-profits the largest gain in the tax base after that is from the repeal of exemptions today that are granted for business to business transactions for purchases of capital equipment, raw materials and business inputs. That’s the wrong way to go on comprehensive tax reform. The ah, bill is not balanced. It does not yield a balanced revenue system. And that’s dangerous for the future of the state as well. Currently our revenue system rests on four principle taxes. There’s smaller ones but four principle taxes. Personal income tax. Corporate income tax. Corporate franchise tax. And the sales and use tax. This bill narrows the base of the state’s revenue system to two. Principle revenue system sources, the personal income tax and the 1930s vintage sales tax which everyone has told us is going to continue to shrink and yield less and less revenue to support the essential functions of state government. So more reliance under this bill on our weakest tax and more reliance on the remaining personal income tax which is one of our most volatile taxes. Not one of our more stable taxes. One of our more volatile taxes. So from year to year, ups and downs as the econ, economic cycle progresses we’re placing more of our eggs in the basket of a tax that is going to be more volatile through those business cycles. That can work if you’re happy to have ups and downs in your revenue system from year to year like we’ve had for the last couple of decades. And have to come in here with every budget cycle and figure out what do we do with this extra money, what do we do with this budget shortfall from year to year to year. A good comprehensive tax reform will stabilize the structure of the tax system. This bill does not do that. I worry too about the principle of tax equity. And I’m going to talk about tax equity in, in the business context. As Senator Berger correctly says there will be beneficiaries in the business community from this tax bill if it passes. Those beneficiaries will by and large be the largest corporate tax payers in the state. But when you sort through the benefit from the repeal of the corporate income tax most of which is paid by 40 or 50 very large corporations in the state and the repeal of the corporate franchise tax most of which is paid by those same large corporations in the state the residual business tax that this bill will impo

The bulk of the revenue from that tax is very largely going to be paid by medium size and small businesses in North Carolina. There will be a shift in the tax burden, in the relative tax burden. Between the largest business tax payers and the small business tax payers. I haven't had enough time in the 48 hours we've had the bill before us, I haven't had enough time really to do any in depth analysis or study of that question. It worries me and I hope I'm proved wrong when more in depth analysis of the bill can be done. When there is time for it, but I, I penciled out last night several scenarios to try to get a sense of the direction the bill was heading in that regard. Looking at a small business say, a small town restaurant, or a small service business in that same small town that may have three or four employees that organizes an LLC and that throws off income to its owner who pays it through the personal income tax. Quite frankly I couldn't find a scenario in which that small business is going to better under this bill than it would do under the current tax code or under many of the competing proposals that have been offered. I do know that Bank of America will do better. And that Nucor and Lowe's, and BB&T they'll all do better. I do know that. But what I'm really struggling to find is conclusive evidence that the small business tax payer is going to do better. And part of the reason if you'll stop and think about that, if you'll stop and think about that, why that may be a worry that you should have too is because a small business tax payer mostly pays his or her taxes on his or her personal income tax return. The money passes through to the personal income tax return. And when you start looking at that return as you did last night and I say okay my business income comes from my personal income tax return and yeah I've got a $15,000 zero bracket but I no longer have any personal exemptions for me, my wife or my kids. I no longer have an ability to itemize the deductions for my mortgage interest on my home or my property taxes that I pay, I can't deduct the money that I give to my church anymore. When I did the back of the envelope calculations on that I ended up with a higher tax bill. I ended up with a higher tax bill even at a %5.25 rate. A higher tax bill than most everyone of the competing proposals we've seen this session. And even in some cases higher than the current tax code. I'm worried about the equity in this bill between the big business and the small business. And finally I wanna say something that maybe, it's not a principle that's talked about as, as widely, it may be a personal principle of my own, that is that we ought to, whatever we do here in Raleigh, by way of reform of the state tax system. One principle I have of tax reform is we ought to do as little harm as possible to local governments. We ought to leave them at least, no worse off under what we do here in Raleigh than they are today. Make it a little bit better that'll be fine, but certainly leave them no worse off than we are today. That principle is clearly violated by this bill. I think you can see it in the analysis that's done, in the fiscal note with the bill. I don't know how that flows through from jurisdiction to jurisdiction. I can tell you from having worked on that question there are going to be wide swings in the way this bill affects individual counties and individual cities. And until you get down into that you're not gonna know how it's all gonna turn out. But the bottom line on the aggregate is not pretty. I agree with Senator Berger, I don't like paying food tax. I'm perfectly happy not to pay food tax. I like getting rid of the food tax. I like getting rid of any tax that I have to pay. But I'll tell you one tax I don't like, anymore than I like the food tax. I don't like the property tax. I really don't like that bill I pay every September on my property tax. And I know that if the city of Charlotte, which will lose 30 million dollars under this bill, if the city of Charlotte has to get it somewhere, I know where they're gonna get it. They're gonna get it by raising my property taxes. That doesn't make me feel really very good about tax reform either. When I look at all of the principles that I've just gone through on the bill and I look at the alternatives that we have to do tax reform, I come to the conclusion that this, again, can't be called a comprehensive tax reform bill from North Carolina. It is a big tax cut, it is a big tax cut for large corporations currently doing business in the state. And its a good tax cut for people who, I guess fit in the.

-a lot of people would put me in, fat cat lawyers. I’ll do pretty well but it’s not comprehensive tax reform. [SPEAKER CHANGES] Mr. President. [SPEAKER CHANGES] Senator Jenkins, for what purpose do you rise? [SPEAKER CHANGES] To speak on the bill and send forward an amendment. [SPEAKER CHANGES] Senator, do you want to speak first and then send forward your amendment? [SPEAKER CHANGES] If I could please sir. [SPEAKER CHANGES] Senator Jenkins, you have the floor to speak to the bill. [SPEAKER CHANGES] Thank you very much Mr. President, ladies and gentlemen, the Senate. I too, like Senator Clodfelter and Senator Rucho believe very strongly that tax monetization is needed. I’ve worked on it for a long time. I’ve been dishonored just like Senator Berger has that we haven’t gotten there. But I must say that I’m not sure that what we’ve got before us today is really where we should be. And I want to talk about one particular area that’s going to be impacted adversely from this tax plan and that is the rural part of North Carolina. And I gave you two examples of how it would impact Carolina. First is the repeal of the sales tax exemption for the nonprofits would have a very adverse impact on our hospitals. In my area Vidant health care, which is based out of Greenville, North Carolina has five rural hospitals in my part of the world. Those hospitals combined would have a net loss, not loss revenue reduction, but net bottom line loss of 2.2 million dollars in this bill. We’d lose 250 jobs, we would lose 8 million dollars that goes to the Brody School of Madison, and we would lose 70, I mean 50 positions that are for interns that are coming out of the Brody school at these hospitals. Not to mention the health care that would be lost to the citizens of that part of the world is that the jobs that are in that area, these jobs are some of the best jobs that are in that rural part of the state. And another area that’s important to rural North Carolina, and some people like them, some people don’t but they’re a fact of life. And that is that you have mobile homes and you have module homes and in this bill you’re increasing the sales tax on both mobile homes and module homes. Mobile home tax rates would go up 317% . Module home taxes would go up 100%. Our lesson yesterday in the Senate finance committee: a Mr. Lou Ebert with a North Carolina Chamber says amongst other things, that this tax bill was equitable. And I’m sorry Mr. President, but I have to say to Mr. Ebert, he needs to come out of his glass tower and go over to Eastern North Carolina, or rural Western North Carolina, or rural Central North Carolina and look around because this tax bill is not equitable for rural North Carolina. [SPEAKER CHANGES] And Mr. President, if I could I would like to send forward an amendment. [SPEAKER CHANGES] Senator you can send forward your amendment. [SPEAKER CHANGES] Clerk will read. [SPEAKER CHANGES] Senator Jenkins moves to amend the bill. [SPEAKER CHANGES] One second Senator, while we get it up on the dashboard please. [SPEAKER CHANGES] Senator Jenkins, you have the floor to explain your amendment. [SPEAKER CHANGES] ?? it’s on the dashboard. This bill addresses some issues that have to do with agriculture. As everybody knows agriculture is still our largest business in North Carolina; it’s a 70 billion dollar business. There’s several little clean up items within this amendment which writes out two things that are really not used a whole lot today, and that’s two things: tobacco flues and tobacco sheets. But what it really addresses is other parts of agriculture that were treated differently that will be impacted by something Senator Clodfelter mentioned earlier and that is business to business taxes. This would basically treat all forms, shapes, and fashions of agriculture the same and basically what it does is it would take out of the it would keep the exemption for commercial logging, woodchipping, and packaging items that would have moved over from being exempt to refund it would ultimately rephase that and I’ll be glad to answer any questions. [SPEAKER CHANGES] Any discussion or debate? Senator Berger, for what purpose do you rise? [SPEAKER CHANGES] To speak to the amendment. [SPEAKER CHANGES] Senator Berger has the floor to speak to the amendment. [SPEAKER CHANGES] Members of the Senate, we appreciate Senator Jenkins offering this amendment and we understand the importance of the agriculture-

community to North Carolina, and to the rural economy of North Carolina. Unfortunately, his amendment would put the bill out of balance and I would ask you to vote against the amendment. [SPEAKER CHANGES]. Is there any further discussion or debate? Hearing none. Senator Stein, for what purpose do you rise? [SPEAKER CHANGES]. Question for the bill sponsor. [SPEAKER CHANGES]. Senator Berger, do you yield? [SPEAKER CHANGES]. Yes. [SPEAKER CHANGES]. I thank you. As best I can tell, this bill is going to cost the General Fund 5.3 billion dollars over the next six years. It isn't in balance by any sense of that word. How does this amendment put it out of balance? [SPEAKER CHANGES]. Well, Senator Stein, you and I have a disagreement about what that cost is. We would consider the number that you cited as a tax cut to the people of this state. What the bill does overall is it generates revenue, notwithstanding Senator Clodfelter's statement about revenue neutrality. It actually generates more revenue year over year than we're currently receiving. It just does not generate the amount of revenue that someone would like to project that we would have, and some would like to spend as we go forward. The way the amendment would put the bill out of balance, is that the funding stream that is available would actually be lessened as a result of this amendment. So if your complaint and the complaint of those folks who have a problem with the bill is that the bill itself does not generate enough revenue, this amendment would actually make the bill generate less revenue. That's what I would say is out of balance. [SPEAKER CHANGES]. Is there any further discussion or debate? Hearing none, the question before the Senate is the passage of Amendment 1. All in favor vote aye. Opposed will vote no. Five seconds will be allowed for the voting. The clerk will record the vote. Barefoot, aye. Newton, no. Daniel, aye. 18 having voted in the affirmative, and 29 in the negative. Amendment 1 fails. The bill, un-amended, is back before the body. Is there any further discussion or debate? [SPEAKER CHANGES]. Mr. President. [SPEAKER CHANGES]. Senator Jackson, for what purpose do you rise? [SPEAKER CHANGES]. To speak on the bill. [SPEAKER CHANGES]. Senator Jackson has the floor to speak to the bill. [SPEAKER CHANGES]. Thank you, Mr. President. Members of the Senate, Senator Jenkins' amendment was a good amendment, but I've had a lot of conversations and a lot of work on this bill, and I've had a lot of conversations with Senator Rucho. Is this bill a perfect bill? No. Do I love this bill with all my heart? Absolutely not. Do I love our current system better? Absolutely. But I've talked with my Ag-folks, and I've done a lot of soul searching, and I've looked at all the exemptions we in Ag are getting. And to Senator Rucho's benefit, he's right. As he's picked at me many times, we get everything we've got exempted. And I got to listening to my small towns, and to my small hospitals. They were going to be sort of negatively impacted, if you look at it that way, from this bill. And fair is fair. I don't know a single farmer that, especially the ones I talked to, and I have spoken to a lot. And Senator Rucho knows that he and I have had many conversations over the last six months on tax reform, and Senator Rabin as well, and Senator Berger. But fair is fair. And my folks, that I have spoken to, will support this bill. They say it's much better than what the alternative was, and I would have to agree. No offense to Senator Rucho, he and I disagree on this. And I think the world of him, he's done a great job on tax reform, on trying to get this to the table, to get it to this floor. But folks, this is a work in progress in my opinion, and I fully support this bill and I would ask that you do the same. Thank you. [SPEAKER CHANGES]. Mr. President. [SPEAKER CHANGES]. Senator Walters, for what purpose do you rise? [SPEAKER CHANGES]. To ask Senator Jackson if he'll yield to a question. [SPEAKER CHANGES]. Senator Jackson, do you yield? [SPEAKER CHANGES]. I should've known better, but yes, sir. [SPEAKER CHANGES]. Senator Jackson, when you purchase a new farm tractor, will you have to pay

[Speaker Changes] Tax would be capped at this current fee? [Speaker Changes] I would not, no sir. [Speaker Changes] Okay, to speak on the bill. [Speaker Changes] Senator Walters has the floor to speak to the bill. [Speaker Changes] And Senator Jackson brought me out of my seat when he was talking about fairness of this bill, and I agree we all want tax reform. But the last time I looked, the forest products industry was part of the agricultural community of this state. And if I buy a new piece of logging equipment next year, my sales tax, I pay full sales tax, so someone explain to me, in this chamber today, is that fair? [Speaker Changes] Mr. President. [Speaker Changes] Senator Jackson, for what purpose do you rise? [Speaker Changes] To speak on the bill a second time. [Speaker Changes] Senator Jackson has the floor to speak on the bill a second time. [Speaker Changes] To address Senator Walters concern. Senator Walters the way I understand the bill, you would not pay full sales tax next year on this, it would be winged out over a four year period, if I understand this bill correctly. Thank you. [Speaker Changes] Senator Walters, for what purpose do you rise? [Speaker Changes] To speak a second time, I’m sorry. [Speaker Changes] Senator Walters, you have the floor to speak a second time. [Speaker Changes] I’m still looking for the equity where it is phased out one year, or four years, or immediately, I don’t understand that part. Thank you Mr. President. [Speaker Changes] Is there any further discussion or debate? [Speaker Changes] Mr. President. [Speaker Changes] Senator Blue, for what purpose do you rise? [Speaker Changes] To debate the bill. [Speaker Changes] Senator Blue has the floor to debate the bill. [Speaker Changes] Mr. President and my fellow Senators, one of the things that we’ve talked a lot about in this session, at least I’ve read a lot about it in the press is public private partnerships. And there is no entity in modern day society, in our society, that generates new ideas, new thoughts, comes with the private sector to address issues that we don’t have to address as a state on as broad of a scale as the non profit sector in this state. Right now they provide more than 425,000 jobs in North Carolina, and for most of this session we’ve been talking about job creation. We’ve given it good lip service. 425,000 jobs they provide. They do things that we’d ordinarily have to do on a statewide basis, if they weren’t doing it. Whether its the 38 private colleges and universities, whether its the hospitals, whether its the multiple counseling groups that do things that we would do, whether its the churches, and the church schools And think about that, you know, in my district, I know churches that have been erected that cost 20-25 million dollars, and when I look at some of the educational programs they’re pursuing, some of their various other ministries, they are rendering a service far greater than anything that we would do, and we would be spending 5-10 times as much to do it. We would be creating a separate bureaucracy to do it. And so when you start taxing non profits, you start down a slippery slope, I know you’ve got provisions in this bill that you’ll only tax those over a certain amount immediately, but once you start down the slippery slope, you’ll keep sliding down it. And for the life of me, I can’t understand why one of the biggest employers in my district, Wake Medical Center, ought to have to pay taxes on the same stuff that ?? Hospital is buying, and they’re doing the very same thing, when Wake Medical Center is far exceeding the charity care, they give more free service, more contributions back to the community then probably any other hospital or health system in the state. Yet, this bill will cause them to pay millions and tens of millions of dollars in taking away tax exemptions. Although they do things that we would have to do at the state level, if they were not there...

Not just the medical care aspects of it but their coordination with all of the other state social services, agencies and stuff in this county. Now maybe you just don't like that particular non-profit, but if you can really tell me why this health system ought to have to pay sales taxes and Rex Hospital which is part of the UNC system does not have to pay sales taxes, or basically can't deduct all of their sales taxes, I'd really appreciate it. And you know, part of the effort over the years, there are not a lot of publicly owned hospitals left because about 20, 25 years ago, the light-bulb went off and people realized that not for profits could run these institutions than the governments that were running it. And that's why they flourished, that's why they prospered and that's why most hospitals in this state are owned by non-profits now. Those that are still profitable and able to survive in this climate that we're in. And so in this bill you're creating another uncertainty in the health care factor. You turned down Medicaid which was a stress on them. You're gonna start taxing the products that they buy which is another stress on them, and I just can't for the life of me understand it. But let me give you two other quick examples and I'll sit down and shut up. I mentioned the churches and there are huge churches in this county, as many of you have huge churches in your counties. If you go on a serious church building effort as many of them in Wake county have done, it's not unusual to spend as I say, 10 million, 20 million dollars. And those that have schools spend much more than that. Two of the successful non-profits running schools in Wake county, Cary Academy. Exceptionally good school. Raleigh Christian Academy, good christian based school, big student population. They buy activity buses, they buy food, they do all of that stuff for the hundreds of students that they have. And yet you want to subject them to taxes. Why should they be taxed for doing the same thing that we as a state are trying to encourage them to do and educate kids in alternative ways, if we're not gonna tax the public schools? They're doing the very same job. They're doing it cheaper and they run very good service. And I could go on and on about research organizations. I could talk about the efforts that we make across this county to get everybody to participate. The United Way and The Triangle group that pulls together contributions for all of the non-profits by talking to the business community in this state and ordinary people and everybody about contributing and allowing them to take that charitable contribution because it's doing the same thing only it's doing it usually better than if they were paying it directly in a tax. And so they get a charitable contribution for it and you've decided in this bill that you're going to do away with that. I'm just trying to find some of the equity that Senator Clodfelter was talking about, not the equity, the equitable treatment that Senator Clodfelter was talking about and I just don't see it in this bill. And I hope that you respect and care enough about the non-profits in your area that you'll at least rethink what this does to what has grown up to be a tremendous institution in this state, and something that renders invaluable service. That saves lives, develops people and makes the tax that we would pay far less than what they would be. [SPEAKER CHANGES] Mr. President. [SPEAKER CHANGES] Senator Apodaca for what purpose do you rise? [SPEAKER CHANGES] See if Senator Blue will yield a question. [SPEAKER CHANGES] Senator Blue do you yield? [SPEAKER CHANGES] I yield. [SPEAKER CHANGES] Senator Blue can you tell me what the current balance is of the Duke endowment fund? [SPEAKER CHANGES] It's in the - the Duke endowment is a separate entity than Duke University. I don't know whether you know that or not Senator Apodaca. The Duke endowment is based in Charlotte, it helps support Duke university...

University but it also builds rural hospitals. It builds all kinds of things. [SPEAKER CHANGES] Churches [SPEAKER CHANGES] Churches [SPEAKER CHANGES] Churches [SPEAKER CHANGES] It supports Methodist ministers all across the state. But I don't know what the amount of the endowment is. [SPEAKER CHANGES] Follow up, Mister President. [SPEAKER CHANGES] Senator, do you yield? [SPEAKER CHANGES] I yield [SPEAKER CHANGES] Do you know what the salaries are of the top three executives at Wake Med? [SPEAKER CHANGES] I don't know what they are but it doesn't matter. [SPEAKER CHANGES] No, it doesn't. Thank you. [SPEAKER CHANGES] Mister President [SPEAKER CHANGES] Senator Robinson, for what purpose do you rise? [SPEAKER CHANGES] To speak on the bill. [SPEAKER CHANGES] Senator Robinson has the floor to speak to the bill. [SPEAKER CHANGES] Thank you so much and I certainly appreciate the work that Senator Rucho and Senator Berger and the others put into this tax plan. And whatever you call it, it certainly isn't a tax reform. But what I see as one of the normal people, not one of the wealthy business people or the lawyers who make quite a bit of money. But the normal folks around here, the gray in America group like Clark Jenkins and Tillman and a few others. I may not be as old as you guys. But anyway, the concern I have is about the elderly. And what we see in terms of a tax plan that really is going to shift the burden away from corporations and wealthy people to the middle class. And when I think about people who have worked all of their lives, what they look forward to as being able to retire with an ability to live at least at the quality level they once had. And they count on that Social Security and a little bit of pension to make it. And different from some of you, don't have the ability to squirrel away some money and investments that's not taxable so that they can have something to pull on and shove in. There are people in my church and my community, folks that I serve, who are not at that higher level and not quite at the very bottom where they're going to be able to benefit from this proposed tax plan. But there are people in that middle group who have just enough to make sure that they are going to be able to continue to pay whatever that mortgage they may have because they sent some children or grandchildren to college and now they aren't going to be able to deduct that interest. And they are going to be able to buy some food and maybe take an occasional trip or something like that. But what this does is decreases their ability to be able to do that because they've got to pay some taxes. And different from what you're saying, Senator Berger, I have some other information that shows a lot of other scenarios. A lot of other scenarios. This is for a retired teacher whose income is about fifty five thousand dollars with about twenty five thousand of that coming from Social Security and the other coming maybe from some pension. That tax of nine hundred dollars is going to double to eighteen hundred dollars. And there are some other scenarios and I can show you where I got them from too, if you want me to share. And there are some other scenarios that I can give you where that person in that middle income bracket who is elderly are going to have to pay the taxes. And when we get to a certain point in life those of us who don't have all of the money some of you all have, we look forward to having just enough to be able to do some basic things and don't expect our state government, that we have supported all of these years, to tax Social Security, to tax our ability to live. And so I differ with you. I differ with you in terms of, I don't have to talk about what Clodfelter talked about. He's the expert in that area or what Clark talked about. I can talk about average people. I'm average. I may have a little bit more because I have this subsistence that you all have but the folks I am talking about don't have that subsistence. ?? you to come down here and get their little money and add into the pot.

Have that. They’ve just got to depend on that little pension and that little social security to be able to make it. And when you tax that you tax the quality of life for a lot of people in this state. Because they’re in that middle income range and there’s a growing number of them. There are fewer at the top. Even a smaller number at the bottom but there are a lot of them in that range and this is very unfair to them. [SPEAKER CHANGES] Mr. President. [SPEAKER CHANGES] Senator Rich I have a ??? [SPEAKER CHANGES] Debate to the bill. [SPEAKER CHANGES] Senator Rich who has the floor speak to the bill. [SPEAKER CHANGES] Thank you Mr. President and members of the Senate. I don’t think anyone disagrees the tax reform is not absolutely essential. Especially comprehensive tax reform. Senator Robinson talks about all of the folks that have been struggling here in North Carolina. And you know what? She is right. She’s absolutely right. But you think about it. When you defend a status quo system that exists today that leads to, since 1997, a decline in income, personal income. Why that means that everyone’s paycheck is absolutely less. And without significant fundamental changes it doesn’t get better. We’re also talking about billions of dollars Senator Robinson, billions of dollars on government assistance programs figuring that’s the way to solve it, that’s the way to get people out of poverty and yet all we’ve done is lock them into a life of poverty because in reality it’s not got any better that way. So what that means is maybe we shouldn’t do that way. In addition and Senator Berger alluded to it earlier, fifth highest unemployment in the country despite billions of dollars in incentive money that has gone in and other efforts we’re still fifth highest unemployment. That is unacceptable. What that means is the status quo does not work. Senator Clodfelter talked about a lot of principals of tax reform. He learned it when he went through, I learned it when I went through. I don’t think we disagree a lot on the fundamentals. I think we may disagree on some of the solutions and that’s fine. That’s what the debate in the senate is all about. But, there are some problems that Senator Blue alluded to. One is nonprofits. Well, ladies and gentleman of the Senate the state of North Carolina spends 9.2 billion dollars on a tax expenditure. That means, And this is something we get a report from the department of revenue, that’s goes out the back door and that has nothing to do with the appropriations process of the senate and the general assembly. We have no clue on one, really where that money goes, and what it also is, is there is no accountability to determine. We give tax dollars to charitable organizations because of deductions and all of this stuff plus the sales tax refunds. We have no clue if that money is being used right or wrong. There should be some accountability and that is one of the reasons why Senator Blue we’re trying to find a way to solve that problem. You talk about hospitals. Senator Berger, Senator ??? just mentioned a few things about that. Golly I’m not sure how you call them a nonprofit hospital. My son called me last night and read a story in the Business Journal. He said dad, how does a nonprofit hospital earn 500 million dollars? I have a hard time explaining that question. Especially when they have reserve funds of a billion dollars. Especially where they have healthcare bills. And I’ll give you one example on my end. My son had surgery. 26 thousand dollars for a three hour surgery. That was like 45 minutes for the surgery it was all the fun time we were in and that didn’t even include the doctors expense, the anesthesia, and the like. We’ve got a problem in healthcare but that’s for another day. But do you realize that non-profit hospitals pay only 1 tax . They pay the state withholding, that part of it, the Medicaid. They pay no income tax, no franchise tax, no corporate tax they don’t pay no property tax. They don’t pay a penny. And yet, look at your healthcare bill. And you tell me why it costs 3 bucks or 5 bucks for an aspirin. Someone needs to find a solution to that problem. But surely

continually giving them a tax free rem is not the answer to that because there's no way maintaining accountability there, so that's the reason why that kind of thing is going on in this bill and I have to say to you, I am a full supporter of tax reform, comprehensive tax reform, I have some problems with this bill. A couple of problems was mentioned earlier, one it doesn't go far enough to solving the real problems. We had a golden opportunity the other day when we had four economist come together at the finance committee and spend time explaining what, in their expert opinion, what is a solution to our economic problems, to our status queue failed system born in the 1930s. Ladies and gentleman, rarely do you get economist to agree about anything, rarely do you get them to tell you a solution that isn't said well on one hand or the other, they actually came out and they said this is what you need to go, we believe its the best way to move and that's like getting advice from your doctor. If you're sick you go to your Doctor and say, what is the best way to get myself healed? If I have cancer surely I may have chemotherapy, I may have surgery, I may have radiation, but the bottom line, the tough medicine is you listen to the advice and hopefully you're better at the end of it, and that's what we are trying to do with comprehensive tax reform. other than the fact it doesn't reach the full gamut that these economist said it should, which it should include a comprehensive or a broad based sales tax on goods and services. I think it was Dr. sawyer said "its very hard when your only touching 1/3 of your GDP." and that means your trying to ride down the highway with a 6 cylinder car only using 2 cylinders. Senator Graham I'm not sure that's a very effective way to drive down the highway is it, especially on the superhighways we have today, my feeling about this and I hope, that if this bill passes, which I suspect it will, there will be some additional additions to this, Senator burger eluded to, well let me step back one more, there was one other major problem that I had with this and that is planning for the future. There are a couple of ways of growing our economy, one is with organic growth, meaning you support small businesses as we did in the last biennium, we spent money, tax money in the pockets of working families, of small businesses and the like, and we created many thousand of good jobs for this state, but this bill has one fundamental flaw because it flies in the face of what is one of the principles, as senator cloudfel eluded to, and that's about fairness and its also about the proper way the money should be spent, and in this case, I didn't discuss it yesterday in my presentation for the finance, but when the chamber of commerce came out and said we endorse this bill, well my goodness, why wouldn't they? They represent some of the top corporations in the state, they have actually, and think about this now, fairness, simplicity, elimination of tax preferences and loopholes are some of the criteria you look for, lowering tax rates of coarse, retooling and creating economic growth and jobs, but one of the cardinal principles you try to achieve is eliminating loopholes. unfortunately, and one of the reasons why I'm going to oppose this bill, despite the fact that I agree with most of it that's in this here, is because of the fact that we are giving a 1.8 billion dollar loophole when we go 0 on franchise tax and corporate tax. Something Clyde failed to mention earlier, there is some sense of having a balanced approach to this, that's not balanced, that is the wrong direction, and what it really does, ladies and gentleman of the senate, is it prevents us from really doing comprehensive tax reform in the future, it blocks it right here because basically you've eliminated a lot of your options, and what that 1.8 billion dollar loophole means is, the corporations get a break, you hope they are going to invest in their state, the only way their going to grow in your state is if you have economic growth and that means disposable income in the pockets of the working families and the hard working individuals, that's not really addressed here unfortunately, but what it really does, is it takes care of about 80000

and gentleman as senator cloudfeld alluded to, there may be 200 of them or so that really paid the bulk of that taxes, their tax liability is broguht to 0 or pretty close, but what happens to the 400000 small businesses? very limited help, if we can't grow our organic businesses, our small businesses of the state, we lose one of the major tools of solving our economic problem getting out of this recesssion, but it also means the fact that millions of individual taxpayers and the small businesses are going to be paying a higher rate, higher than it would normally be necessary because of the fact that we actually re-established a loophole. I know im talking about both sides, because there are some good things I like in this bill, but there are some things that are fundamentally wrong and I hope that we learn from the discussion here today. I hope that the governer's listening and the speaker of the house and the leadership team over there is listening because of the fact that this is only, I don't even call it a beginning point, I think it needs to be reformed and rechanged, hopefully over there they'll do that, or maybe in conference we can accomplish that. What I will tell you ladies and gentlemen, other systems have failed, Other tax efforts and clodfelter failed, and about seven other groups failed in this effort. It isn't easy, it's very complicated, there are about 10000 arms to this octopus, but the fact of the natter is, you need to be able to stand up against the special interest that are in the process of saying "Don't tax me, but tax everybody else", until we can solve that problem,so I'll just say to you, members of the senate, I do support a lot in this bill, because of the two fundamental points of the loophole on corporate taxes and the fact that it doesnt go far enough to really solve the underlying problems of this economy, and that is to go to a consumption based sales and use tax, and I know senator berger said we got to comprimise on this, unfortunatly you should never comprimise on your principles, you should do what's right, the people are expecting us to do what's right, and that means you gut it out and you say "This is the right thing", its hurtful for people that have had tax preferences for a very long time, because they have been given special tax considerations, what we're saying is its time for everybody to be treated the same and treated fairly, and I hope that this bill will go beyond where we are today to real meaningful, truthful, comprehensive tax reform, thankyou Speaker Changes Mrs. President. Speaker Changes Senator Hayes, the floor is yours, senator hayes the floor to speak to the bill Speaker Changes Thankyou Mrs. President, members of the senate. One thing I wanted to talk about is, this process of tax reform is kind of interesting, it definately moves a lot and is a, one of the fundamental issues you deal with is that we budget and we forcast on a static process, which means we make statements like we expect growth to be 3 % of the year over the next 4 years, thats how we put those numbers out, the problem with it would be kind of like looking at the stock market and saying that we forcast growth at, since its history at 12%, so thats what we're expecting to return every year. theres no accounting in these systems for what may be new revenue sources, that are coming over as we expend our oil and natural gas industry. Theres no account for changes in population growth, theres no account for federal regulations, that may change sales tax collections on internet sales and how that implies where you broaden your base and how you move those, so the conclusion ive come to is like regulatory reform, this is a process, its not something we're done with today, but we will continue to move the needle forward in reforming our tax process, but when we look at this step we're taking now, if you want to sum up all of the problems in the state of north carolina that we talk about in the budget and others, look to your counties unemployment rates, look to the unemployment rate in the state. You know its not hard to figure out that our ranking in unemployment in this country, is within one of our ranking for our business climate and their tax rates, were at the bottom of the scale on both, I grew up in western north carolina, i grew up in a community being one of the

Tobacco is our number one industry. Followed by furniture, textiles, health care, government employees. We've had teachers and police officers that entire time period. But then we had a government problem. Government money came into the system and destroyed the tobacco industry. They were pretty blunt about it, they just bought it out. They changed federal policies. We watched our furniture and textiles industries leave. We've seen government become our number one employer now, followed by health care. And over the last few days, I'm hearing from healthcare like so many other of you have, that they only exist because of the government money that's sent every year. That check that comes back. Or they're gonna fall apart because we didn't give them more government expansion. Or the affordable care act. It is time that we start pulling government out of business operations. Because you look at their track record, and I can show you their track record in my community, and I can show you have government has destroyed business in our community. So we're taking away the tools of how government destroys business. Those business and franchise taxes. How they make those regulations, we're continuing regulation reform. Because the problem in North Carolina is we don't have enough private businesses that are hiring enough individuals to do the work. And with this bill, we change that model. We become one of the best in the nation in our corporate and business tax structure. We are not done with tax reform with this bill. There are many things left to come that are important to North Carolina, including expanding to a fair base so that we're not deciding on the basis of what type of commerce you're in, whether or not that commerce is taxed, and then we lower the rates involved in the base for everyone. But this is an important, an incredible step we can take along the way to fix what's really ailing North Carolina. Thank you all. [Speaker Changes] Chair asks Senator Barringer for what purpose does she rise? [Speaker Changes] To debate the bill. [Speaker Changes] Senator Barringer has the floor to debate the bill. [Speaker Changes] First of all, I don't see Senator Rucho, oh there he goes. I want to publicly acknowledge him, he actually invited me to be on the finance committee. And given my background, I think that was a very interesting choice on his part. I knew that today would come, and I wasn't sure exactly how it would. And he and I worked very hard together with many others of you on the original thoughts about tax reform. I have also worked very hard on this particular plan, and I do embrace it. I do agree with Senator Hise. This is only the beginning. The part that I focused on most was about our small businesses because I do understand that they really are the key to the economic engine of this state. We focused, I focused very hard on solid logistical implementation. One of the things that I certainly agree with with Senator Rucho is that our system now picks winners and losers. But you know, I don't fault businesses for wanting to be winners. They are our job creators, and so we had many businesses there who have taken a bad tax plan and have made the best of it. And they've used to their advantages the exemptions and the different types of special programs that we have. But we can not as leaders of this state jerk the rug out from under our businesses who are counting on those exemptions. And so if you look at the bill carefully it transitions these, these programs, these exemptions, and gives our businesses and other entities the opportunity to change their business models, to take a look, and to compete in the new, under the new plan. I do truly believe that this bill is a jobs bill as Senator Berger says. It tells to the nation, no to the world, that North Carolina is getting back to work. We will be innovating, we will be creating, and we will be producing, because our businesses will be

[Speaker Changes] Able to do so without the burdensome tax plan. I urge your support for this bill. [Speaker Changes] Senator McLauren, for what purpose do you rise? [Speaker Changes] To speak on the bill. [Speaker Changes] Senator McLauren has the floor to speak to the bill. [Speaker Changes] Thank you Mr. President and members of the Senate. I take a risk to stand up and speak as a freshman in the chamber. Most of us, of course, are probably better off listening because of all the experience of so many of you who have worked so hard on tax reform through the years. Senator Berger I couldn't help but think about when you commented in your introduction about you've been here since 2001, as I mentioned to you a few weeks ago, I'm sitting in seat 44, where Senator Berger started his freshman year here in this chamber. Senator Rucho, Senator Rabin, Senator Clodfelter, Senator Hartsell, so many of you have worked so hard to bring us to the point where we could talk about tax reform. As a freshman, though, I think I have a perspective on it and I appreciate Senator Hise and Senator Barringer who were commenting about business and I wanna speak about that in a moment but I also wanna speak about a concern that I have about this bill from the standpoint of our local governments;. I served 15 years as a mayor in my hometown of Rockingham and Richmond County, a community struggling with high unemployment as most of your communities are and what I'm afraid we're doing with this bill is pulling the rug out from under local governments and our citizens in the respect that more of the tax burden is gonna be shifted to our local governments as a result of this bill and that concerns me greatly. And I just wanna comment a little bit about that because all of you, I know, have seen the information that has been provided by the legal municipalities and I remind you though that we're partners in this process: the cities and the counties, we created them here, my predecessors did, these 520 cities and towns across the state, 100 counties in North Carolina, we created them here in the legislature, they didn't just decide they wanted to be a county or decide they wanted to be a town, they had to come to us and get our permission for that to happen. So we're partners with them and they provide some essential services: police protection, fire protection, water, sewer, industrial parks, local incentives that thats necessary to try and create jobs, recreation is another one that all of us can relate to that so many times are provided by our local governments and we can all ride around in our neighborhoods and communities that we live in and see examples of pubic recreational opportunities that are provided to our young people and to our seniors citizens as well but this budget, or tax bill is gonna require that many of these communities raise their property taxes to be able to provide those essential services like public safety, like law enforcement in our communities that we live in, that we depend on. I looked over my district last night, and it ranges from a 4% to over a 30% increase to make up for the lost revenue. Lernberg, which is a community struggling with one of the highest unemployment rates in the state, the Mayor sent me a message last night, almost over 18% property tax increase to try to make up. Senator Allran, I know he just walked out but he speaks often in committee about the impact on local communities, there he is. And I saw Hickory, over 11% impact to Hickory. Senator Payden I know is former Mayor, Goldsboro in his district over 7%, almost 8% impact and increase. So, why do companies choose North Carolina? Thats a legitimate question, I'm a private business man, I've served as mayor, I've worked with a lot of businesses in our communities to help them expand and create jobs. Why do they do this? Many times its because of the quality life. The quality of life in those communities, and those communities, provide that. Those cities, those counties, they provide that quality of life.

Those local governments. All politics is local was, is a quote that we’ve all heard many times before. Former Speaker of the U. S. House Tip O’Neil said that. So these changes in my view are going to be followed/g home/g by our citizens. And we’re going to be unfairly shifting a burden, a property tax burden to them. As a businessman I’m concerned about what that impact is gonna be on the property that we operate in our business. The products that we supply. Services that we offer our customers. What impact it’s gonna have on their, their property taxes on a local level. So for those reasons the impact on the local businesses the property tax burden I just cannot in good conscious stand up and tell you I can support this particular tax bill. Thank you. [SPEAKER CHANGES] Senator Brown. Senator Brown for what purpose do you rise? [SPEAKER CHANGES] Speak to the bill. [SPEAKER CHANGES] Senator Brown has the floor to speak to the bill. [SPEAKER CHANGES] Thank you Mr. President. And first of all I wanna begin by thanking Senator Rucho too. You know I know just how hard he has worked on this things for the past year. And, and I know how dedicated he was to come up with a package that could work for North Carolina. And I, I don’t think anybody’s ever worked harder. And I know how hard Senator Jenkins and Senator Clodfelter and Senator Holback/g a few years ago worked to do the same thing. And, and at that time I think try to come up with the best plan that they could and kinda ran into a dead end. When, when I think people started looking at the bill short-sidedly/g and, and take a look at what it means today, not what it means four or five years from now. And I think that’s true with any tax package. If you look at it today you’ll pick them all apart. I don’t think it matters what we produce. If you just look at it today, you’ll never pass a tax reform bill. It will be absolutely impossible to pass one. I think you’ve got to be able to take a look in future at what it may mean to the state four or five years from now in order to get that done. And you know when I look at North Carolina you know we’re all ranked 44th in tax climate. And it don’t/g take much knowledge to understand why when you look at what our corporate rate is. It’s the highest in the Southeast and our income tax rate’s the highest in the Southeast. You know it just makes good sense why we’re ranked there. And also look at commerce and how we look at recruiting businesses to the state. That’s an interest I have and been involved with. And I think North Carolina is a great place to live. But if I’m a business lookin’ to relocate and I would say there’s a lot of them trying to do that maybe in Illinois or California or maybe in some other states that their tax policies are even worse than ours. The first thing they’re gonna look at is the tax policy. That just makes good sense. And as they look at what states have to offer, if your policy is not a very good policy then they cross you out. You’re out of the game. You’re not even considered. And that’s exactly what’s happening in North Carolina in my opinion and why our unemployment rate has continued to be at the rate that it is. And why North Carolina has been so slow to recover from the recession is because we’re just not competitive. It’s just a fact. I don’t think anybody in this room could argue that point. We are not competitive with our tax policy. And so I‘s using an example in the finance committee yesterday if you look at the auto industry which I’m in, if you look at the manufacturers that have located in the Southeast, they’re located in every state around us. But they’re not located in North Carolina. And why not? It’s because of our tax policy. We didn’t cut, we didn’t make the cut. We weren’t there. South Carolina found a way to attract one. Tennessee’s got one. Other states. Alabama’s got ‘em. Everybody but us attracted an auto manufacturer to their states. And their major employers in other states today. But it’s because of their tax policy. Nothing else. And to be a commerce secretary in this state and try to recruit business I think the question you've gotta ask ‘em they consider North Carolina is what’s it gonna take for me to get you here? How much money have I gotta give, give you to buy your business to come to North Car

A lie. That's the position we're in today. It's not that you can sell our tax policy, because you can't. That doesn't work. So our recruitment efforts come down to what have I got to give you, what have I got to pay you, to buy you, to come to North Carolina. That's our policy right now in North Carolina. And that's a losing policy that will never, ever win. Again, this bill is not perfect. I'll be the first, I said it in finance, I think Senator Hise has said it, that it is not perfect. And if I thought that this was the end of tax reform, I don't know that I would support the bill, to be quite honest. If I thought this was it, nothing else was coming, I couldn't support this bill. But I do know this. I know five years ago there was an attempt to do tax reform. I think it's been about five years, Senator Clodfelter. And that didn't happen. And here we are five years later, and now we're trying again. If we don't pass a tax reform bill of some kind this year, I, I said it in finance, and I think it'll happen, it'll be ten years before we try again. Because I don't think anybody will have the nerve or the, the, the will or whatever it takes to go through the process of tax reform, to, to go through these issues, and be able to come up with a plan that you can get everybody to agree, when on the front end, you can pick them all apart. And that's exactly what's happening in here tonight, or today. We're picking each little pieces of this tax reform, and we just pick it apart. And that's why you're gonna vote against the bills, because you don't like this piece or that piece or whatever. But what that tells me is that you like the status quo. And the status quo don't work. It has not worked, it's put North Carolina in a terrible position. And for me, the status quo is, is the worst answer to this, to this problem we have. And I don't have to, it takes bold, it takes boldness, sometimes, to do something. And, and it takes foresight, I think, to do something. And for me, I'm trying to look at it four, five years from now, [??] this state will be with this tax reform. Not what it means next week, because if I look at it next week, I'm gonna push a red button. That's exactly what I'll do if I look at it next week. But if I look at it four or five years from now, then I push the green button, because that's the difference I think it'll make for this state. [SPEAKER CHANGES] Mister President. [SPEAKER CHANGES] Senator, Senator Rabon, for what purpose do you rise? [SPEAKER CHANGES] Thank you mister President, speak on the bill. [SPEAKER CHANGES] Senator Rabon has the floor to speak to the bill. [SPEAKER CHANGES] Ladies and gentlemen, I don't speak often. Generally, it's when I'm spoken to. I'm a man of passion, I'm a man of very firm convictions and opinions, and I normally keep most of them to myself. Known pretty much as a happy go lucky guy. Let me tell you something, I've heard a lot of numbers today, I've heard a lot of mumbo jumbo. Some of it's true, some of it's not. And I'll address some of the untruths and I'll address some of the truths, and then I'll shut up. And I'll vote for the bill after I do. But here's the way it is, folks. If you're living on Social Security and that's all you're living on, you will not pay one penny's tax in this state, other than your property tax. You will owe this institution nothing. You won't pay for tax on your food, you won't pay income tax on your Social Security check. Put that in your pipe and smoke it. That's a fact. Number two, if you grew up as I did on tobacco road, and you like it, then get ready. Because statistics show that in 2020, we will be at the same place in North Carolina as we were in 1970. Well 1970 was pretty darn good in [??], and in Robeson County and Proctorville. Even in Laurinburg. Pretty darn good. But it ain't 1970 today, folks. But that's where we're headed. So if that's where you wanna go back to, then go right on. But I can tell you this, as long as I'm in this body, as long as I have anything to do with the leadership of this state. We're gonna go in a different direction. We talk about putting things back on the town, this and that. Let me ask a question. Do you think going down the path that

?? Robinson County, in Columbus County, in Laurinburg fifteen, eighteen, maybe even twenty-five percent unemployment. How many? How many businesses are going to move there? How many businesses want to live in those conditions? If we sit on our laurels, it will only get worse. Why can’t we attract major manufacturing in this state? Senator Brown hit it. We have to pay them. We have to prostitute our state to get people to come to it. That’s ridiculous. We have a plan before us that will put us number one in the nation. Number one in the nation in corporate tax. Ask any, any economist worth his or her salt. Ask the four that spoke to us the other day. One of the single biggest drivers of the economy, the single thing we can do, for the best bang of our buck to attract business. Every one of them will tell you unequivocally, and they will argue on other subjects, the corporate tax rate. We will be number one in this nation. We will go from mediocrity to being ranked sixth in our overall tax plan. Now, you can all come up with something for a reason and a darn good reason not to vote this bill and any other bill we can come forward with. But I can tell you this, don’t blame me and don’t blame the others like me who have the fortitude to go forward and who are not scared of the dark to vote for it and take us into a new era and into the bright light of tomorrow. Thank you. [Speaker Change] Mr. President. [Speaker Change] Senators, before we move on here, I want to recognize a large group that came into the gallery, the Institute for Future Agricultural Leaders, and the Farm Bureau Youth Leadership Group. We thank you for being with us today during this good debate. So thank you for coming into the Senate. Senator McKissick for what purpose do you rise? [Speaker Change] Speak on the bill. [Speaker Change] Senator McKissick has the floor to speak to the bill. [Speaker Change] The bill we have before us today is not the bill we were promised. We were promised a bill that would broaden the base. We were promised a bill that would lower the rate. We were promised a bill that would essentially be revenue neutral. Only thing we have here today is a piecemeal approach to what I understand will be tax reform. But it’s not tax reform. We need to approach this comprehensively. We need to do all those things that are necessary so when the next recession comes we won’t be more volatile in terms of our revenue streams that are coming to us. If this bill passes and we cut our revenue streams the way we have, and we do not broaden the base which we have not done, we will be more volatile not less volatile to the whims of the economy. We need to really take this on and tackle it in a way that is aggressive, a way that is meaningful and looks at totality of what this state needs to move forward. And I am disappointed that this bill does not do that. When we talk about our corporations, in my mind, this is taking a step backwards. It’s regressive. Yes. Can we do better for our corporate tax rates? Absolutely. But do we treat corporations that have five employees and might have an income of $100,000 a year the same way we would treat corporations with a 1000 employees that might have $20 million in profit? Why should they all pay $5,000? That’s regressive. That’s unfair. That penalizes our small businesses. And our small businesses are our economic engines that create the jobs, the entrepreneurship, the ones that lead to prosperity in this state most significantly. So when we ?? a bill that treats those small businesses with five, ten, twenty employees and charges them the very same tax we charge the largest employers in our state, we are moving in the wrong direction. When I look at the impact on our cities and our town, we look at the revenue that is going to be shifted to them to make up. It’s fine to say that we are going to go…

...local bills, second reading. Roll call bill, house bill 562. Clerk will read. [SPEAKER CHANGES] Hose Bill 562 [xx] and Charter revisal. [SPEAKER CHANGES] Is there any discussion or debate? Hearing none, question before the Senate is the passage of the House Committee Substitute to House bill 562 on its second reading. All in favor vote aye, opposed vote not. Five seconds will be allowed for the vote, the clerk will record the vote. Daniel aye, Hartsell aye. Forty eight having voted in the affirmative and zero in the negative, the Senate Committee Substitute to the House bill 562 passes its second reading, it will remain on the calendar. Non roll call local bill second reading House Bill 68, the clerk will read. [CHANGE OF SPEAKERS] House bill 68 establishes [??] foster care in Gaston County. [CHANGE OF SPEAKER] Senator Harington is recognized to explain the bill. [CHANGE OF SPEAKER] Thank you Mr. President. This is a local bill that was requested by the county commissioners in my district. It authorizes the appointment of an ombudsman to serve as a resource and advocate for foster parents in Gaston county. This is one done as a time limited pilot program and will end in July 1st 2015, and I ask for you support. [CHANGE OF SPEAKER] Is there any discussion or debate? Hearing none the question before the Senate is the passage of the Committee Substitute House Bill 68 on its second reading, all in favor vote aye, opposed vote no. Five seconds will be allowed for the voting, the clerk will record the vote. Hartsell aye, McKissick aye, Daniel aye. Forty eight having voted in the affirmative and zero in the negative. The Committee Substitute to House Bill 68 passes its second reading without any objection, will be read a third time. [CHANGE OF SPEAKER] North Carolina [??] [??] [CHANGE OF SPEAKER] Is there any discussion or debate? Hearing none the question before the Senate is the passage of the Committee Substitute to House Bill 68 on its reading, all in favor say aye, opposed no, the ayes have it, The Committee Substitute to House Bill 68 passes its third reading, and it will be enrolled. House Bill 501, the clerk will read. [CHANGE OF SPEAKER] House Bill 501, Buckle County Community College projects. [SPEAKER CHANGES] Is there any discussion or debate? Hearing none, the question before the senate is the passage of Committee Substitute to House Bill 501 on its second reading. All in favor vote aye, opposed vote no, five seconds will be allowed for the voting, the clerk will record the vote. Hartzel aye, Mckinsik aye, Tarte aye. Forty eight having voted in the affirmative and zero in the negative. Committee Substitute to House Bill 501 passes its second reading without objections, will be read a third time. [CHANGE OF SPEAKER] North Carolina [??] [??] [CHANGE OF SPEAKER] Is there any discussion or debate. Hearing none, the question before the house is the passage of Committee Substitute to House Bill 501 on its third reading. All in favor say aye, opposed no. The ayes have it Committee Substitute to House Bill 501 passes its third reading, and it will be enrolled. One local bill for a concurrence. Senate Bill 325. The clerk will read. [CHANGE OF SPEAKER] Senate bill 325 Ray County school board districts. [CHANGE OF SPEAKER] Is there any discussion or debate? Senator Hunt, for what purpose do you rise. [CHANGE OF SPEAKER] Thank you Mr. President. The House made a few changes that refine, please vote for concurrence. [CHANGE OF SPEAKER] Senator Hunt recommends that you concur, Senator Stein for what purpose do you rise. [CHANGE OF SPEAKER] To debate the motion to concur. [CHANGE OF SPEAKER] Senator Stein has forwarded to debated the motion. [CHANGE OF SPEAKER] Thank you. The House only changed two districts, and all they did was move one school board member from one district and another school board member into another district. They also changed the election from the primary to the general. Neither of those changes are problematic, what remains problematic is this bill. Wake was the only school board district in the state that hired an outside political consultant to draw its maps after the 2010 redistricting. The only. Drawn to favor Republicans and yet the republicans lost. This bill is nothing more than a political effort to rejigger the districts to favor Republican candidates for the school board. You all saw the map and you saw how ridiculously gerrymandered those districts were. It goes all the way from Brier Creek, all the way around the county to Garner. We're moving away from compact districts to something that has no relationship to schools and how school kids track from elementary to middle school, to high school. Please, if you respect our children's education, vote down this motion to concur. [CHANGE OF SPEAKER] Is there any further discussion or debate? Hearing none the question before the senate is the motion to concur in the House Committee Substitute to Senate Bill 325. All in favor will vote aye, all opposed vote no. Five seconds will be allowed for the voting, the clerk will record the vote.

Senator McKissick, do you yield? Senator McKissick, do you yield? [SPEAKER CHANGES] Yes. I do. [SPEAKER CHANGES] Senator McKissick, you mentioned legal municipalities. Let me get this straight. You’re in favor of keeping the food tax and you’re also in favor of allowing a municipality to put a gross receipts tax on a company also to get more money in for them? [SPEAKER CHANGES] Senator McKissick, you have the floor. [SPEAKER CHANGES] Yes. Senator Apodaca, I’ve always felt the food tax was regressive. I would say that if we could completely repeal everything related to food taxes that’s the way to do it. We don’t need to have them, because those with the lowest-income groups will spend more of their money on food and resources of that sort than others. So, I think to the extent there were zero, no food tax whatsoever, that would be the best way to approach it because of its regressiveness on low and moderate-income individuals. It consumes a higher percentage of their incomes. [SPEAKER CHANGES] Mr. President, one more question for Senator McKissick please. [SPEAKER CHANGES] Senator McKissick, do you yield? [SPEAKER CHANGES] Yes, I do. [SPEAKER CHANGES] Let me be more specific. In your study with the legal municipalities, the municipalities like Senator Allran’s a couple of others that are really affected by this are those who put a gross receipts tax on the privilege licenses, is that not correct? [SPEAKER CHANGES] I believe that would likely be correct. [SPEAKER CHANGES] Thank you. [SPEAKER CHANGES] Senator Ford, for what purpose do you rise? [SPEAKER CHANGES] Mr. President, to speak to the Bill. [SPEAKER CHANGES] Senator Ford has the floor to speak to the Bill. [SPEAKER CHANGES] I was trying to get up before Senator McKissick, but you would not recognize me and I thought, “Perhaps I could have helped us all.” But since you didn’t do it, I want you to take responsibility for that. [SPEAKER CHANGES] Senator Ford you were too slow with your light. Get your light on faster and I’ll recognize you faster. [SPEAKER CHANGES] Thank you, Mr. President. I wanted to share with this body. The Department of Commerce, that’s Governor McCrory’s Department, presented us with a list from, “Site Selection” magazine that reported the following reasons companies who have chosen North Carolina stated in order. The reason I wanted to bring this to your attention is because there’s a contradiction from what I’m hearing from leadership and the Governor’s Department. Number one, the companies said that the reason why they moved to the State of North Carolina is that we are a right-to-work state, 69 percent of the respondents. If I’m not mistaken, that was accomplished under Democratic control. Number two is local incentives, 68 percent. Number three, our abundance and availability of skilled labor. Number four, labor costs. Number five, training programs, thanks to our great community colleges. Number six, state tax exemptions and credits. Number seven, occupancy and construction costs. Number eight, which is what we don’t talk about enough in this room, is energy availability and cost. Number nine, the availability of buildings and sites. Number 10, transportation infrastructure, roads, routes, proximity to airports. Number 11, Mr. President, and number 12, corporate tax rate. 39 percent who responded said that they reported that this was a factor for them. Number 11 and number 12. Ladies and gentlemen I submit this information to you and again this is coming from our Governor’s Commerce Department. Thank you. [SPEAKER CHANGES] Mr. President. [SPEAKER CHANGES] Senator Hise, for what purpose do you rise? [SPEAKER CHANGES] To ask Senator Ford a question. [SPEAKER CHANGES] Senator Ford, do you yield? [SPEAKER CHANGES] I would be more than happy to. [SPEAKER CHANGES] Senator Ford, if North Carolina has one of the worst corporate and business tax structures in the state why would that ever be a reason a business would choose to come here? [SPEAKER CHANGES] Senator Hise, I would have to get you to ask the Department of Commerce. This is their list. Right now we’re not on the same page with that Department. [SPEAKER CHANGES] Mr. President. [SPEAKER CHANGES] Senator Hise, did you have a follow-up? [SPEAKER CHANGES] To speak to the Bill a second time, very quickly. [SPEAKER CHANGES] Senator Hise has the floor to speak to the Bill a second time. [SPEAKER CHANGES] Quite literally when we survey companies in this state and say, “Why did you come here,” they’re never going to put our corporate tax rate on that list, because it’s horrible. I want to wait until we fix that system in North Carolina…

Then lets ask the businesses once again what the reason is. And if anybody thinks our business recruiting has gone well recently then perhaps they need to take another look at the Department of Commerce and what its been doing, and how about we add some tools to that that can make it possible to recruit better businesses. [SPEAKER CHANGES] Senator Gunn for what purpose do you rise? [SPEAKER CHANGES] To make sure I'm not the only person who doesn't speak to this bill. [SPEAKER CHANGES] Senator Gunn you have the floor to speak to the bill. [SPEAKER CHANGES] I want to share just a brief story. You need to get on Main street. Now we do a lot of good work and I appreciate everything that everybody does in here, you but you need to get on Main street, you need to get out there in the market, you need to understand what's going on. You need to sit across the table with an industry and they look right at you as you're trying to do your best to sell this state and to sell your region, and they look right at you and they say, Senator - and it this time it was Rick because I was looking into real estate transactions, he says, we're concerned about your taxes. Senator we're concerned about your taxes! I said, what's your concern? We're looking at [??] taxes to relocate. Now folks, we can get stats. Thank you Senator Ford, that's great, good stats, thank everybody for sharing these stats. But I'm telling you, you need to get out there on the street and be in front of these people and understand that this is in the forefront of business opportunities. I am living it. You know what the real estate business has been through, you know what it is. Don't you Senator Walters? You know. Senator Tucker do you know what it's cost you in business because we are not an environment that works? I'm telling you this plan is going to be a game changer and it is the start, but I just got to tell you, if you get out there on the street and you listen and you're out there face to face with these companies that are looking at trying to expand and trying to locate here, their concern is taxes. Thank you. [SPEAKER CHANGES] Mr. President. [SPEAKER CHANGES] Senator Stein for what purpose do you rise? [SPEAKER CHANGES] Senator Stein has the floor to debate the bill. [SPEAKER CHANGES] Thank you Mr. President. Members of the Senate, we've heard a lot of discussion. I'd like to say what this bill is not, and that is tax reform. Senator Clodfelter I think did an excellent job arguing that point persuasively. Your own finance chair has argued that he's not gonna vote for this bill because it does not represent comprehensive tax reform. And tax reform is one of those issues you don't do piecemeal, you can't do it piecemeal. Senator Apodaca was asking Senator Mckissick about civic taxes, you ask any one person about any one tax, guess what? They're against it. They should be because no one tax is good, we all don't want to pay taxes, but we also recognize we have to pay taxes, we have to fund the business of the state. what is that business? Educating kids, having an excellent community college and university system, building roads, having public safety, providing healthcare for our people. Guess what that is? Those topics are 90% of the state budget. So do I want to have these taxes, do I want to have them? No, I don't want to have any one of them. But do we have to have some taxes? Of course we do. And you can't go just cutting individual taxes, that's not tax reform, that's picking favorites. This is not tax reform, it is a tax cut for the wealthiest among us and for large profitable out of state corporations, that will be paid for on the backs of the average tax payer here in North Carolina. Let's looks at the winners and losers of this proposal. It's gonna cut about eight billion in income franchise in state taxes over the next five years, and raise 3.7 billion in sales and privilege taxes. Who are getting those eight billion dollars in cuts? Well, that's pretty straight forward, the wealthy and large corporations. An analysis by the Budget and Tax Center shows that 75% of the benefits go to the wealthiest 5% of the population. Half of the benefit of your tax cuts goes to the top one...

Percent of the people in this state. Those are people earning $393,000 or more. Senator Apodaca said do we know how much the top earners at ?? get paid. I expect it’s around a million bucks. It’s a lot of money. So why are you cutting their taxes by tens of thousands of dollars? They don’t need a tax cut. Yet you’re giving people who earn that amount of money a massive tax cut. Who’s paying for the shift that you all are doing, in terms of who’s getting these tax benefits? Well, we’ve heard from my colleagues. People who own property. Property owners in small towns and large cities and counties across the state are going to see their property taxes go up because of your bill. Patients who no longer receive health services at hospitals that are forced to cut critical services because they don’t have the revenue to pay for it. Hospitals are large, complex organizations. But you failed to expand Medicaid, they’re no longer getting compensated for people who don’t have health insurance, they’re having to deal with changes as a result of the Affordable Care Act, so what are you all doing? You’re going to throw repealing the sales tax refunds that they get on them. Those are employees of hospitals who will lose their jobs, and patients who will no longer get services, because of your tax bill. Non-profits, other non-profits and churches can no longer get the benefit of people who give money and get a charitable deduction. They are going to suffer because of your tax bill. North Carolina has never taxed Social Security. Under this bill, for the first time, we are taxing Social Security to the extent that it’s taxed by the federal government. We heard Senator Robinson talk about that issue. There are 900,000 hard-working North Carolinians who benefit from the Earned Income Tax Credit, which you all in this bill are allowing to expire. 900,000 people you are raising the taxes. In fact, by factoring in the elimination of the Earned Income Tax Credit, your bill actually increases taxes on the bottom 40% of earners in North Carolina, at the same time you’re giving half of the benefit of your tax cut to the top 1%. Folks, this is upside down. People are struggling in this state. And the ones who are struggling are not those earning $393,000 or more. The biggest cost is going to be borne by the people of this state. We’ve already seen the consequences of your cuts for this biennium. 700 million you all are cutting in this biennium. 4500 TAs, 4800 teacher positions eliminated. Financial aid for 10,000 students, gone. Tuition up for community colleges. Critical economic development initiatives abandoned. Why? Because you’re choosing to give 700 million dollars in tax cuts this year. That’s all bad enough but you all are taking the easy way out. Oh my goodness, let’s take 700 million out of this budget and see what the consequences are. But let’s push into the future 2.3 billion in the next biennium and another 2.6 billion in the biennium after that. 1.3 billion every year. So over the next six years, y’all have only identified 12.5% of the billions of dollars we’re going to have to take out of this budget. The easiest thing a politician can do is make a promise in the future, no make a promise today, but make that cost get paid by somebody else in the future and that is what you all are doing. We are writing a check, you are, to the tune of 1.3 billion every year, that’s going to come be paid through worsening infrastructure. Larger class sizes, fewer teachers, less pre-K education, degraded universities and community colleges, diminished public safety. That is the price of the bill before us today. And we’ve heard talk, oh we’re just slowing the rate of growth, that’s not actually a tax cut, we’re just slowing the rate of growth. That rate of growth is pretty basic. What it is, is inflation, which exists, and the population increase.

People are moving to this state. I know y’all want to harp on how bad North Carolina is, and by the way the one thing that all four of those experts said the other day is don’t be swindled by these lists. The tax foundation, their entire criteria is how low can you go? If you go down to the bottom, guess what. You’re going to go to the top of their list. That’s not how you make policy, on where the tax foundation ranks you. What you do is you make policy on what’s best for the people of this state. You all are cutting that money off of that baseline. The baseline is just inflation and population growth. A lot of self congratulation, a lot of self praise, for tackling this tough issue of tax reform. There is no tackling of tax reform today. Y’all are doing the easiest, easiest thing to do. Cut taxes but let the future people of this state pay for it. I urge you to oppose this legislation. [SPEAKER CHANGES] Mr. President. [SPEAKER CHANGES] Senator Apodaca, for what purpose do you rise? [SPEAKER CHANGES] To speak on the bill. [SPEAKER CHANGES] Senator Apodaca has the floor to speak on the bill. [SPEAKER CHANGES] I am always in, well what do you call it when I hear the righteous indignation on the back row and call it out. You know folks we’ve got a basic, we’ve got one basic thing here. There is one decision we’ve got to make here. Are we a state that’s going to be guided by government or are we a state that’s going to be by, taken forward by business. It’s that simple. It’s not complicated. We can hear all the talk. We can hear about buying farm equipment and losing our tax exemption. Well when I go buy a copier, I still pay taxes. I never thought to call my attorney to talk about my tax situation. So I call my accountant. That’s what they’re for. And I went over it with my accountant. Yes, I have 3 LLCs, a Sub-S and a C. And he said, this plan will probably cost me more but not a whole lot, because I’m already paying taxes as a business person. But they key, the key what we’re trying to do, is get more people employed. We’re not looking for more tax revenue. We’re not looking for more incentives. You know, if you get people employed, it takes care of almost 90% I’d say of problems we have as a society. So it’s not complicated. It really isn’t. We hear east and west played against each other. We have gone with the failed policies over the last 20 years and seen no improvement east and far west. Correct me if I’m wrong. I keep hearing that. But you know, government’s got to help. Government’s going to help. Well it hasn’t changed anything. Those folks out there are struggling. You know the best we can do is find a way to get them employed. Or they may have to do as Americans have done and what they’ve done for centuries, is move to where the jobs are. And I’m sorry but that what’s we’ve always done as a society. We’ve gone to where work presents. We talk about taxing non-profits. Why should I as a tax payer subsidize non-profits? Why should I subsidize the Duke Endowment which has a balance of 5.6 billion dollars? They do phenomenal work. They do. I’m a Methodist. I know what they do for the Methodist church and everything else. But 5.6 billion and they’re upset about a tax exemption. You know, I’m sorry about Wake Forest. I’m sorry about Davidson. But you know what? I’m having a hard time finding a lot of sympathy. So my concern is educating the kids of North Carolina and looking after our schools. We could go down the path, but when I hear quotes from the budget and tax center, oh please. Please. You know, what [LAUGH] I don’t even want to go down that path. Let them deal with what they want. Folks, it’s simple. Do you expect government to take North Carolina or do you expect business? And if you expect business, you’ll vote for this. If you don’t, vote against it. [SPEAKER CHANGES] Senator Brown, for what purpose do you rise? [SPEAKER CHANGES] To ask Senator Stein a question. [SPEAKER CHANGES] Senator Stein, do you yield? [SPEAKER CHANGES] I yield. [SPEAKER CHANGES] Senator Stein, I’m an automobile dealer. How do you look at me as a business owner? Do you see me as a big business, a small business, a mid-size? What’s your impression as a business owner? [SPEAKER CHANGES] You’re a small business. [SPEAKER CHANGES] Small business. I agree. And I’m going to tell you a little bit about my business, if I could. [SPEAKER CHANGES] Senator Brown, would you like to speak to the bill, or [SPEAKER CHANGES] Let me speak to the bill.

...Senator Brown has the floor to speak to the bill a second time. [SPEAKER CHANGES] I'm a small business owner. I have about a 115 employees in Jacksonville. During the recession, I had to lay off about 30 people. Got down to about 80 employees during the recession. Been able to hire some of them back. They help my business does. I collect the highway use tax. I collect title and registration fees. I collect sales tax. And the State pays me nothing to collect any of those. A matter of fact, I get an audit once in awhile to make sure I've collected it right, and if I don't, then I pay a penalty because I didn't. So that's what happens to me. As far as property tax goes. I paid the City of Jacksonville this past year about $55,000 in property tax for my business. I pay the County of Onslow about the same. About $55,000 in property tax. I paid about $25,000 this year in privilege tax. In privilege tax to have my business. My payroll at my dealership is about $450,000 per month. I pay $450,000 a month to my employees. My debt on my business, I got a debt that I pay about $40,000 a month to pay for my buildings that I operate in. I have a balance on that about $3 million. Worry about it every single month, especially when I'm up here trying to fit this stuff. And yet we sit here and we talk about how bad the business guys are. And yet I'm willing to take the chance to borrow the money, to go out there and borrow that money, risk everything I've got because I have to put it all up to borrow the money. If you can get a bank to loan it to you right now. Put it all on the line. My homes, everything else I own, employee that many people and provide them a good paying job. Provide health insurance. I pay $30,000 a month in health insurance for my employees, $30,000 a month. And with the Affordable Care Act about to kick in, my folks have been telling me that's going to go up another $10,000 a month. So I've got to try to figure that piece of it out here shortly. And yet I hear this and a business guy is talked about like I'm just such a bad guy. You know? We're just a bad guy's because we might get a tax break. I've never had one. Matter of fact, my business contributes to recruiting other businesses to this State today. Because I've never gotten a tax break as a small business owner. But I pay taxes, a lot of taxes that go to recruit other businesses to this State. And yet we're crucified as business owners when I've got everything I own at risk every single day to stay in business. Senator McLaurin, you've got the same thing. Senator Walters, same thing. Us small business owners risk it all. Take all the chances like all business owners do and yet we're the bad guys. And trying to recruit businesses to this State is not easy. And yet if you want to give them a tax break to get them here and let them come in here and invest hundreds of millions of dollars, in most cases is what we're talking about. Put everything they have on the line, risk it all. That's a bad thing. I just don't get that. And you know if my business wasn't in place in Jacksonville and those 115 people didn't have jobs and if Senator McLaurin's business wasn't in place and he probably employees, I don't know, 15 or 20 people probably, 30 people. I don't know where they would work. You know, us business guys, I tell you, we get beat to death to be quite honest. And I think we do a whole lot for this State and I just, you know, I just get so tired of hearing the negative on business people. And Senator Jenkins, you're one. You understand it. We offer a lot to this State and we don't mind paying our fair share, but you know, to be crucified in a lot of cases as the bad guy because, you know, we may try to get a break for somebody, it just gets tough around here, to be quite honest. [SPEAKER CHANGES] Mr. President? [SPEAKER CHANGES] Senator Stein, for what purpose do you rise? [SPEAKER CHANGES] Speak a second time. [SPEAKER CHANGES] Senator Stein, you have the floor to speak a second time. [SPEAKER CHANGES] Senator Brown, I am utterly sincere when I thank you for doing what you do. I know you work hard. I know a lot of families depend on the success of your business. And a lot of you, Senator Tucker, you're in the same spot.

Senator McLaurin, Senator Jenkins. Y’all do great work. I never crucified anybody. What I said was, the way you all have shaped this tax plan, is you are giving 50% of the benefit to the top 1%. The out-of-state, the corporate income tax rate, which you’re drawing down to zero, 90% of that benefit goes to out-of-state corporations. I am all about supporting North Carolina businesses. But to take a corporate income tax rate that has oh, it’s at six-something, and take it to zero, there’s a lot of numbers between six and zero, that can make North Carolina more competitive. But you all are choosing to go to the most extreme. And for whose benefit? These out-of-state corporations? It’s not for you. Well, enjoy it. Thank you. [SPEAKER CHANGES] Senator Nesbitt, for what purpose do you rise? [SPEAKER CHANGES] Thank you, Mr. President, to speak on the bill. [SPEAKER CHANGES] Senator Nesbitt, you have the floor to speak on the bill. [SPEAKER CHANGES] Thank you Mr. President and members of the Senate. Two or three things that have struck me today and with a little trepidation, I’m going to try to bring us back to reality a little bit. Sometimes we get into one little area of what we do up here and we just get myopic and we forget what the big picture is, and I think Senator Ford tried to bring us back to reality a little bit, but I haven’t seen the numbers lately. But for ten years, for a ten year period, as recently as I believe last year or the year before, we were ranked by Forbes Magazine as one of the best places to do business in this country. Or we were ranked in the top five. And it’s because of a lot of things. And we’ve always had this tax rate problem. That’s why we were trying to solve it five years ago and so was everybody else. And still we were ranked as one of the best places in this country to do business. Now if you all tell me that today we’re 48th in the country and whether people want to come here and do business or not, I want to know what you did in the last three years to get us there, because that’s when it occurred. And I think you’re going to find you’re still one of the best places to do business. I’m not blaming anything on you at this point, because I haven’t seen the latest rankings that are comprehensive rankings on this state. Second thing, I heard, I’ve heard a couple of things said this week that were a little bit disturbing to me, and Senator Hise mentioned a little while ago that the largest employer is public employees. Second largest is non-profits. I don’t know if that’s true or not, but I believe that was what he said to us. And apparently we’ve declared war on both now. Now I’ve known for some time we’ve been after the public employees, and we’ve gotten rid of a lot of those. But now we’re after non-profits? And we went after cities, and that was public. I mean, we, you all acknowledged you were after cities. Now you’re after non-profits? They employ 450,000 people in this state. They run our hospital systems. Exactly what is your plan to replace them? Well, let’s see. The public can’t do it because we don’t want public employees. And they can’t do it. What are we going to do? What are we going to do for rural hospitals? And while we’re after non-profits, it’s the churches too. Who’s going to do that? I guess we’ll have businesses that go into business to run churches? Strange model to me, maybe it’ll work. We’ve got to get back in touch with reality. This whole thing is about a lot of things. And if Senator Hise, if we do away with the community colleges, where there are public employees, you’re going to lose businesses coming into this state because you won’t have any job creation, and some of the people in this room

And they're gonna lose their job. That's public employees. If we get rid of the public schools those are public employees, and if we get rid of police and fire protection those are public employees. Who's gonna do it? And we need to get a grip and try to figure out what piece of this pie each of us needs to do. We cannot destroy one another. And Senator Brown, I promise you - and I listened closely today on this business piece. I don't think anyone has vilified business in here. if they have on the back [??] I apologize for them and I will tell you they didn't intend to. We've talked about in our caucus about this bill in great detail and one of our chief concerns is if we're not paying any attention to small business, we're paying all of our attention to big business. They will tell you in recruiting, this has been knowledge for 20 or 30 years up here, the elephant hunts where we go out and get people to come to this state, we are lucky if we replace the ones we lost. You do not get job growth by going out and recruiting somebody to move to North Carolina, period. That is a fact. At least I've been told it's a fact as long as I've been here. We create job growth with small business. North Carolina people creating jobs, just like your business. And that's who we want to try to help. It's the farmers, it's the contractors, it's the car dealers. And when I walk down my Main street I don't see a CEO from some major company talking to me about what he's gonna do to move here. What I see is people who are in Seabo up my way, they don't even like our Chamber of Commerce, they've got their own Chamber of Commerce. They're small business people. Firebrands if you will. and those people need help. They couldn't get loans for the last four or five years, if they had one it was called on them. They did need some help with regulation, and there are lots of ways we can help these people. The problem is this bill doesn't do that. If you look at where the burdens under this bill are, small business will have to absorb some. I hate to tell you this, some of you may think you're bigger than this, small business is middle class America. That's who they are. They're just regular people out there doing regular things trying to get along. trying to raise a family, educate their children, it's the middle class. I was sitting in here looking at this bill, we're gonna tax Social security, that's gonna hurt seniors. I got to thinking, well they're middle class too. Most seniors are middle class people, working class people, people who have worked for a living all their lives. They might get a little pension, but when you're 75 years old and you've only got so much money coming, you can't absorb this stuff. Probably the only thing that was mentioned earlier than us increasing their taxes is property taxes. I've had seniors that I have tried to help for nothing to appeal their tax revaluations because they had to sell their house because they couldn't pay their taxes when it was revalued. That's another piece of this bill that we're not paying attention to. We're taking away mortgage interest deduction. For middle America that's probably the number one thing that they have, and it allows them - it helps a little bit to have a home and that home creates most of the wealth that they have. For most middle America that's where they accumulate what little they have to show for life after they're done. They may get a pension if they have a good employer, but they can pay for a house and live in it and own it. And then when we get into the housing market, we're going up 300% on the tax...

…want to charge on mobile homes and modular homes, some of us 300, some of us 100. What in the world are we thinking? Now, I don’t know where you all come from if you have mobile homes. I’ve got them all over the mountains up there. All of a sudden, if you go buy a house you pay that little transfer tax, it’s one or two percent, I can’t even remember what it is, but if you’re down on the bottom end and you’re going to get a mobile home then you’re going to pay five-and-a-half, I guess under this Bill, whatever the going rate for sales tax is. You don’t even have to pay that much for a car. What is possibly in our thinking that we’re going to do this to people? As I mentioned before, we’re going to put a burden on the churches and the hospitals. Up until today, I thought we were doing it kind by accident, that we were just saying, “Well, we’ve got to cut out some of these deductions and we’ll just start here and I know it will be painful but we’ll work it out.” But now we’re finding out there’s some theory floating around here, “They’re rich and we can go get them because they’ve got reserves, and they can spend all their reserves.” You get your hospitals in a fiscal crisis, and that’s where we’re headed, make no mistake about it. When we don’t expand Medicaid and they cut off all the money that’s going to these hospitals to cover indigent patients, you’re going to have a crisis out there. Then we’re going to go after the nonprofit status that allows them to raise money on their own. You’ve got to remember they raise a lot of money on their own because they have charitable deductions and that kind of stuff. We’re going to take that away, make them spend their reserves, and then what? Then what we’re doing, we’re estimating revenue in the out years, as I understand it, at only inflation and growth in population. We’re saying that we’re anticipating the revenue will increase only enough to cover inflation and population growth. But then we’re going to pass this Bill that’s going to require us to take a billion dollars out of that, actually it’s more than a billion, three, four and five years from now. Where’s that going to come from? Everybody’s trying to say, “It won’t really come from anywhere because we just won’t grow as fast.” No, when you’re estimating growth at inflation and population that is zero growth already. You’re just simply able to repeat what you were doing this year next year. When you build in… [SPEAKER CHANGES] Mr. President. [SPEAKER CHANGES] Senator Rucho for what purpose do you rise? [SPEAKER CHANGES] Will Senator Nesbitt yield for a question? [SPEAKER CHANGES] Senator Nesbitt, do you yield? [SPEAKER CHANGES] Yes sir, I yield. [SPEAKER CHANGES] Senator Nesbitt, you talked about mortgage deductions earlier. Do you know how much under this plan, on the state level because I’m sure this plan, like any does not compromise the Federal level where there’s provision, do you know how much money is actually saved by a taxpayer on $1,000? [SPEAKER CHANGES] Well, let me explain it to you this way. That’s not the way you need to look at it. [SPEAKER CHANGES] Yes, it is. [SPEAKER CHANGES] No. Let me tell you. It’s not going to be $100,000. It’s not going to be $10,000. But whatever it is is very important to that little person on the bottom. When you can take that as a deduction, it depends on your income, our income rates are staggered now, it’ll be anywhere from…What’s our lowest rate, five? [SPEAKER CHANGES] It’ll be five. [SPEAKER CHANGES] To seven-and-a-half. [SPEAKER CHANGES] It’ll be $50. [SPEAKER CHANGES] Yeah. [SPEAKER CHANGES] All right. Follow-up question. [SPEAKER CHANGES] So you just took $50 out of somebody’s pocket that owns a home that’s earning $30,000 a year or $20,000 and trying to stay in that home. [SPEAKER CHANGES] Senator Nesbitt, do you yield for a follow-up question? [SPEAKER CHANGES] Yes sir. [SPEAKER CHANGES] Senator Nesbitt, I’m sure like yourself and I, we give money to charities because, well, I think we do it because of the merit and the mission of that charity. Wouldn’t you say, “Yes,” to that? [SPEAKER CHANGES] I would say that’s part of it. But I…

Say part of it is you get a credit for doing it, a tax credit for doing it. And that's what encourages you to help a good cause that helps them raise money. [SPEAKER CHANGES] Follow up? [SPEAKER CHANGES] Senator Nesbitt, do you yield? [SPEAKER CHANGES] Yes, sir, I'll yield for one more, but I think we've about had enough of this stuff for one day, but I'll be glad to yield for one more. Or, if you want me to, I'll stay here and yield to all of you. [SPEAKER CHANGES] Well, I, you know, Mr. President, a follow-up question? [SPEAKER CHANGES] Senator. [SPEAKER CHANGES] You talked about churches earlier, and I'm sure, if you'll let me know, I'll be ready for the sermon next time so that we know that we've got it. But you talk about only $50 out of that money. Do you think having the opportunity for a job would be more valuable than the $50 that may come from that tax deduction? [SPEAKER CHANGES] Senator Rucho, that argument is about as bad as the one that said if you cut a penny on the sales tax it'll create a job. Neither one of 'em creates a job. $50 doesn't create a job, nor does a penny on the sales tax. Thank you, Mr. President. I'm just about through. You know, Senator Rucho got us on point. It's only $50 to somebody who only paid $1000 in interest. We're down here thinkin' $50 ain't important. Well, it's that deduction, it's another deduction, it's another deduction that add up to a little bit of money for a family that ain't got anything. They're workin' people that don't have enough to make it. And people end up having to depend on, they have to get subsidized day care. We created the CHIPS program so that people could insure their children that couldn't afford to do it when they were workin' and makin' money, but they couldn't afford $500 a month for a health insurance policy. These things matter to people. And all of 'em aren't going to be like the people that benefit from this bill. And what you're doing with this bill is you're taking $50 from every one of those little ones to give 50% of it to the top five percent in income in this state. And you're taking it, in my opinion, from these small businesses -- now, Senator Brown, you're almost gettin' big, because you own more than one dealership. I think the Federal definition's 140 employees, so you better be careful, 'cause you're gonna become big business. But small business in this state, that corporate tax cut? They're not gonna get it. Most of 'em are not corporations. They're under some other entity, and as has been pointed out to you, 90% of that tax break's gonna go to people outside this state. And that's what we're tryin' to tell you. This bill misses the mark. It's not helping the people we need to help, and the cuts, in my opinion, will not bring jobs to this state. I don't think anybody has found the formula to where they can bring more jobs to this state than we're losing to outside the state. We are going to have to build our economy with small business, creating jobs all over this state, in every little nook and cranny of this state so that, hopefully, Senator Apodaca, people can stay in the mountains and can stay in the east and live there and have a job. We have some fantastic things, and out in Franklin, we have the largest filer of income taxes on the internet. I said, how in the world did he find Franklin? Well, he was an accountant out there and he sent his son off to college and he had a brainstorm and knew how to work computers. Next thing you know, they're huge. They had to lay fiber optic cable through five counties to figure out how to do it from there, but they do it. That's how you build North Carolina. Now, I don't know how many people they employ... [SPEAKER CHANGES] Mr. President? [SPEAKER CHANGES] Senator Davis, for what purpose do you rise? [SPEAKER CHANGES] I'd like to ask Senator Nesbitt if he'd yield for a question. [SPEAKER CHANGES] Senator Nesbitt, do you yield? [SPEAKER CHANGES] I yield. [SPEAKER CHANGES] Senator Nesbitt, how long have you been in the legislature? [SPEAKER CHANGES] Since 1979. [SPEAKER CHANGES] Follow-up? [SPEAKER CHANGES] Senator, do you yield for a follow-up? [SPEAKER CHANGES] Yes, I'll yield. [SPEAKER CHANGES] I've been here for two and a half. When I arrived here, the unfunded liability for retiree health care was almost $33 billion. [SPEAKER CHANGES] Senator, is this a ques-

It is a question. Thank you. We owed two and a half billion to the federal government for unemployment compensation. We had seven billion dollars’ worth of debt. We had robbed the highway trust fund about two billion dollars over the last fifteen years. We were under water in the consolidated judicial retirement system about forty million dollars. Were underwater about forty million dollars for the National Guard retirement system. Our employee healthcare was underwater and you've been here for that long. Why should we listen to you about economics? [SPEAKER CHANGES] Well, for what it’s worth I didn’t expect you two to start with and you’re afraid not to listen to me but for instance the retirement system prior to this great depression we just had. When you got here we were in a depression. We were about to lose this entire country. Prior to that the retiree system was funded at 105%. That’s what happened, we had a depression. Everything in this country went to hell in a shoebox. Excuse me, I'm not sure that's proper Mr. President but it’s just an old mountain phrase. It doesn’t really mean anything. That’s what happened to this state and we're trying to build out of it. It's not that the state was a failed state. By everybody’s definition we are a great state and I hope you all still believe that. I do. But at the end of the day we get down to where the benefit is to these large corporations. It’s for the wealthiest among us. That’s where the tax breaks are going and I thought I was going to add seniors and small businesses to my list of who we were hurting but I realized they were all the same people. it’s the middle class and the working people in this state that are going to pay the piper and this is not tax reform it is a tax shift where we’re just giving. The old bill we had was a tax shift where you were actually taxing them with sales taxes to get it. Now it's a tax cut for these wealthy that will be paid for out of services like public education like the community colleges like Medicaid for the seniors that will have to be cut as we move in these out years in order to pay for this thing. This is not the way to go. It’s just as backwards as the last one that we looked at and we would recommend that you not send this forward. [SPEAKER CHANGES] Senator Berger for what purpose do you rise? [SPEAKER CHANGES] to speak a second time on the bill. [SPEAKER CHANGES] Senator Berger has the floor to speak a second time. [SPEAKER CHANGES] Thank you Mr. President. There are several things I think we can take away from the discussion today and actually from discussions we've had over this session. One is there is some things were just going to disagree about and we have a different view of things we see the world in a different way. Some people think that the health of government helps or insures the prosperity of the people and others think that the prosperity of the people is derived from their own initiative from the private sector from private business from individual achievement. We're just gonna have to disagree about that. there are several other things that apparently we're just gonna have to disagree about and I think it's interesting in connection with this reform debate or discussion that the initial bill that cam e out , the bill that Senator Rucho had worked on and introduced. The bill that was based on the traditional broaden the base lower the rates initiative was one that the folks on the back row told us that we can’t support that because it taxes food. We can’t support that because it taxes prescription medicine. We can’t support that because it puts tax on services. So we come up with a bill that doesn't tax food. It goes one better than that

And it takes the local tax on food off. Doesn’t tax prescriptions, and doesn’t, impose tax on services. Now, I know you’ll be astonished because I was not astonished that there’s some folks that are still opposed to it. Because sometimes it doesn’t matter what you propose, there are for reasons that you see the world differently. You’re just going to see, have people that are going to disagree. I think there’s one thing that we can all agree on and that is if you don’t have employers, you’re not going to have employees. And if you don’t make your state attractive to employers, you’re not going to attract those employers and you’re not going to have employees. We all say we’re interested in jobs. We all say that we want to create jobs. Now some would say that the only jobs that count are the jobs that are created by government. Well, we disagree. The jobs that create prosperity in our economy and in our state, our private sector jobs. This bill will encourage private sector job growth. Now, are there some entities in the state that would be better off if we did nothing? Yep, they would. And there are. They ‘re the ones that currently have a special set aside, a special carve out, something that makes it better for them. Let’s talk about the non-profits. Under this bill, there’s a phase-out. Well actually it’s a partial phase-out. Of the non-profit refund on the sales tax. When that is fully implemented, better than 97%, 97% of the non-profits in this state will still get their full refund. So who are those 2.5% of non-profits that won’t get the refund? For most part, they are business enterprises that are organized as non-profits. Business enterprises that pay their executives millions of dollars a year. Business enterprises that have reserves of millions of dollars. Business enterprises that still don’t pay property tax. Business enterprises that still or currently don’t pay income tax. Business enterprises that are receiving a tax break at the expense of everybody else. Now, are they upset because we’re doing this? Yes, I’m sure they are. As we’ve all said, I’m fine if you cut my taxes but if you raise my taxes I got a problem with that. Well that’s where they are. Let’s look at this question of social security. Because we asked the AARP to give us some scenarios where they were concerned. And I will tell you that they gave us ten different scenarios. In each instance, in each instance, the taxpayer either paid less or still paid zero in North Carolina income tax. Let’s take the example of a single individual with 33,000 dollars in total income. 18,000 dollars of that is social security, 15,000 is pension. I’d say that’s not uncommon in North Carolina for retirees. That person will end up paying less in state income tax under this plan. And that person will pay even less because of the repeal of the food tax at the local level. Let’s take that same, let’s take a married couple filing jointly with 47,000 dollars of income. 32,000 dollars in social security income and 15,000 dollars in pension income. Again, for a retired couple, that pretty ordinary I would say. That couple will pay zero North Carolina income tax. Currently, under the current code.

$120 in North Carolina income tax. Senator Nesbitt’s right. $120 is a lot of money for some people. $50 is a lot, $120 is better than twice that. Those people, somebody like that will get a cut under this plan. And again, that’s not counting the reduction in the food tax elimination. They’ll save even more for that. Now, we can come up with an example of somebody that’s going to pay more. It won’t take long, be creative enough. But most people at all levels of income will pay less. Most people will pay less. And we’ll make North Carolina more attractive to those businesses that we want to attract. We’ll make it possible to create what really is the best cure for the social ills that we have. And that is more jobs for our people. And that’s what we want to do. You know, if you like where we are, vote no. But if you want to make some changes, positive changes, move North Carolina forward, I urge you to vote for the bill. [SPEAKER CHANGES] Is there any further discussion or debate? Hearing none, the question before the Senate is the passage of the Senate Committee Substitute to House Bill 998 on its second reading. All in favor will vote aye. Opposed will vote no. Five seconds will be allowed for the voting. The clerk will record the vote. [PAUSE] 30 having voted in the affirmative and 17 in the negative, the Senate Committee Substitute to House Bill 998 passes its second reading and it will remain on the calendar. [SPEAKER CHANGES] Mr. President. [SPEAKER CHANGES] Senator Apodaca, for what purpose do you rise? [SPEAKER CHANGES] Mr. President, I move that the rules be suspended and that the bill we just handled be put on Tuesday’s calendar for ?? [SPEAKER CHANGES] Without objection, so ordered. [SPEAKER CHANGES] Thank you, Mr. President, an additional motion if I may please? [SPEAKER CHANGES] You have the floor, Senator. [SPEAKER CHANGES] Since we haven’t done anything controversial, House Bill 937, amend various firearms bills. I move that it be brought before us for immediate consideration. [SPEAKER CHANGES] Without objection, so ordered. [SPEAKER CHANGES] Mr. President. [SPEAKER CHANGES] Senator Newton, for what purpose do you rise? [SPEAKER CHANGES] Before we begin on 937, I’d like to send forth a Committee Report out of order. [SPEAKER CHANGES] Senator, you can send forward your Committee Report out of order. [PAUSE] The clerk will read. [SPEAKER CHANGES] Senator Newton for Judiciary 1 Committee submits for passage House Bill 147, Committee Substitute number 1, amend adoption laws. Unfavorable as to Committee Substitute Bill number 1 but favorable as to Senate Committee Substitute Bill. House Bill 132, Senate Committee Substitute number 1, amend ?? appeals family law. Unfavorable as to Senate Committee Substitute Bill number 1 but favorable as to Senate Committee Substitute Bill number 2. [SPEAKER CHANGES] House Bill 147 and 122, calendar. [PAUSE] House Bill 937, third reading, Public Bill, clerk will read. [SPEAKER CHANGES] House Bill 937, amend various firearms laws. [SPEAKER CHANGES] Mr. President? [SPEAKER CHANGES] Senator Kinnaird, for what purpose do you rise? [SPEAKER CHANGES] To speak on the bill. [SPEAKER CHANGES] Senator Kinnaird has the floor to speak on the bill. [SPEAKER CHANGES] Thank you. Yesterday we heard that law abiding, God-fearing, upright citizens who are permitted to carry concealed weapons can be trusted where alcohol is concerned, presumably because they are good citizens. An investigative report revealed that 900 concealed carry weapon permit holders were being convicted of a DUI, a DWI, over a five-year period. Alcohol and guns do not mix. Thank you. [SPEAKER CHANGES] Senator Bryant, for what purpose do you rise? [SPEAKER CHANGES] To send forward an amendment, Mr. President. [SPEAKER CHANGES] Senator Bryant, you can send forward your amendment. Senator Bryant, could you approach the dais please, to officially sign that amendment?

Speaker: The clerk will read. Clerk: Senator Bryan moves to amend the bill. Speaker: Senator Bryan is recognized to explain the amendment. Representative: Thank you Mr. President and members. In section 12 of this bill of the concealed permit information application information is no longer a public record and is made confidential, which I support. What is important, I think, is to provide some level of information about the activity this permit process. This amendment provides that without revealing any personal, identifying information the statistical reports can be made available for permits applied for permits granted by county and zipcode and permits denied are revoked by county. This is a minimal amount of information. It’s easily provided in the database of records, which I have reviewed, that are kept based on the application process by the sheriff and SBCI can be easily provided. It also provides that costs will be paid for providing that information. I think that some level of public information will be healthy from this process without revealing any kind of confidential information on the permit holders. I would request your positive consideration of this. Thank you. Speaker: Senator Newton, for what purpose do you rise? Representative: To speak to the amendment. Speaker: Senator has the floor to speak to the amendment. Representative: Thank you Mr. Speaker, colleagues, thank you Senator Bryan. I appreciate your effort to work on this. Senator Bryan and I had a conversation about this, and I have looked at the language. In all honesty, I think the language we have in the current bill is perfectly appropriate for what we have before us. I would also, with respect to Senator Bryan, ask her if we passed this amendment, would it encourage her to vote for the bill? She stated she still will not support the bill. I prefer to leave it like it is. So I would ask you to vote against the amendment. Speaker: Is there any further discussion or debate? Representative: To speak a second time on the amendment. Speaker: Senator Bryan you have the floor to speak a second time on the amendment. Representative: I just wanted to make it clear that I do support the confidentiality of the permit information and worked on that bill in my committee and would have voted for that. It is just a lot of other stuff in this omnivous bill that it will be difficult for me to vote for. I just wanted to clarify that. Speaker: Is there any further discussion or debate? Hearing none, the question before the senate is the passage of amendment 4. All in favor… excuse me senators, before we vote here we have excused absences for Senators Jenkins and Barringer. So the question before the senate is the passage of amendment 4. All in favor will vote aye, all opposed will vote no. Five seconds will be allowed for the voting and the clerk will record the vote: 14 having voted in the affirmative and 31 in the negative, amendment 4 fails. The bill as amended is back before the body. Is there any further discussion or debate? Hearing none, the question before the senate is the passage of house committee substitute to house bill 937 as amended, on its third reading. All in favor will vote aye, all opposed will vote no. Five seconds will be allowed for the voting and the clerk will record the vote: 31 having voted in the affirmative and 14 in the negative, house committee substitute to house bill 937 as amended passes its third reading. The amendments will be [xx] and sent to house in concurrence in the senate committee substitute. Senator Apodaka for what purpose do you rise? Representative: Mr. President a motion please. Speaker: Senator Apodaka to the floor with a motion. Representative: Mr. President, I move that everything left on today’s calendar be moved to Monday, June 17’s calendar. Speaker: Without objection, so ordered. The chair is happy to extend courtesies of the floor – house will come to order, the chair is happy to extend courtesies of the floor to former Senator Formshaper of County. Senator we thank you for being here with us today. Thank you for your service. [clapping] Speaker: Senator Lanford for what purpose do you rise? Representative: To send forth a committee report out of order. Speaker: Senator you can send forth a committee report out of order.

him as an set at committee submits a facet Hospital three three three sex offenders, residency, read, read registration amendments favourable out of five thirty three may substitute number one detention of Mid vale facility favourable possibility ninety one may substitute number one exportation are senior three defendant assets favourable [SPEAKER CHANGES] house bill at one thirty seven one twenty two calendar with any notices, announcements soon as the verbal jaws. I can espouse the amount of sodium floor, [SPEAKER CHANGES] Democrats will caucus for about five minutes at such rates [SPEAKER CHANGES] and any other notices,announcements, by this time, so we like soon as we like to thank our pages for the week pages. thank you for your service to the Senate and watching democracy in action this week we appreciate what you've done here. thanks so much him to his relief of the businessman presented him recognizes and promotion [SPEAKER CHANGES] service for that motion away. I will send you do now adjourn. subject to the receipt of messages from the house and got a receipt for new and Catholic militants. the ratification and the referral and we were for bills and resolutions reconvene on Monday June seventeen two thousand thirteen at seven p.m.. motion is not a savage stipulation stated by Thunder bird reconvened Monday June the seventeenth at seven p.m. second is that I have everything I know the Sabbath incentives and I and