NC Budget Hole Grows Based On New Tax Cut Analysis
RALEIGH, N.C. — North Carolina income tax collections for 2014 are expected to fall $205 million short of earlier projections following Republican-backed tax cuts approved last year.
A memo from the legislature's Fiscal Research Division says the wages of North Carolina's workers haven't grown as fast as originally forecast, resulting in the projected cost of the 2013 tax cuts rising from $475 million to $680 million. The analysis did not include projected sales tax revenues, which could climb to offset the less than expected money from sales taxes.
The new estimate comes as Republican leaders are trying to negotiate an end to the state's budget impasse while searching for the millions needed to raise salaries for public school teachers. The 2013 reform plan lowered the individual tax rate for all earners to 5.8 percent, with the biggest cut going to the state's wealthiest taxpayers. Top income earners had paid 7.75 percent under the old tiered tax system, while working class taxpayers paid 6 percent.
Rep. David Lewis, chairman of the finance committee in the state House, said the changing projections should not be used to infer whether the GOP-backed tax cuts are working. When approved last year, Republican leaders confidently predicted the tax cuts would stimulate the state's economy, generating greater tax revenues in the long run.
"I think that eight months into tax reform is a little too early to judge," said Lewis, R-Harnett. "It's going to take some time."
Legislators were supposed to have a new budget in place by July 1, the start of the new fiscal year. But negotiations between GOP leaders in the House and Senate have dragged on for weeks with few indications of progress.
Speaker Thom Tillis dismissed the state House on Friday saying that the chamber was not expected to hold any sessions next week, a strong indicator no deal is imminent.
Many of the state's top GOP leaders are scheduled to attend the annual conference of the American Legislative Exchange Council that starts Tuesday in Dallas, Texas, and lasts into the weekend. North Carolina Gov. Pat McCrory is on the agenda to speak at the opening luncheon of the conservative group.