- Burial plots offered for sale or rent would be exempt from property taxes.
- Excise taxes on cigars would be capped at 30 cents per cigar.
- Millions would be spent on museums in Cumberland and Onslow counties.
Do North Carolinians want a tax cut for cemetery owners and cigar shops? Do they want tax increases for other cigar vendors and for some car rentals that previously were tax-free?
What about the cancellation of income taxes for corporations, while workers would still have to pay 3.99%? And do voters want the state to devote nearly $765 million to special projects and groups like museums, water and sewer systems, dams, airport facilities and private nonprofit organizations?
Those are some of the things the Republicans who control the state Senate said would be good for the state of North Carolina when they voted in late June to spend $25.7 billion of the public’s money in the next 12 months and $26.6 billion over the following 12 months.
The Senate sent the budget to the GOP-controlled state House, which has been reviewing the Senate plan and and drafting its own vision for how the government should spend the taxpayers’ money over the next two years.
In addition to making allocations for public education, the courts, public safety, parks and recreation and other typical government spending, here are some things of note or interest about the Senate’s proposed budget:
Income tax cuts
► Corporate taxes eliminated — The GOP’s long plan to do away with the corporate income tax would occur in steps between now and 2028. Corporations have paid 2.5% since 2019. The Senate wants to lower the corporate rate to 2% in 2024 and phase it down to 0% in 2028.
► Individual income taxes — While corporations would see their income taxes eventually repealed, their employees would still have to pay. The personal income tax rate, 5.25% now, would become 4.99% on Jan. 1 and drop in steps to 3.99% in 2026.
Individuals would further see their tax bills reduced because the standard deduction would be increased, as would the size of the child deduction. Further, more taxpayers would be eligible for the child deduction, a legislative staff report says.
Cigars, cemeteries, rental cars and vaccines
► Cigar tax cut — North Carolina has a wholesale excise tax of 12.8% on cigars. If a box of 20 cigars wholesales for $141 and retails for $282, the cigars have an excise tax of $18.05 (slightly more than 90 cents per cigar). The Senate budget would cap the cigar excise tax at 30 cents per cigar, so the excise tax on that $282 box would be $6 instead of $18.05.
► Cigar tax increase — Out-of-state cigar vendors who ship cigars to customers in North Carolina have not been paying the North Carolina cigar excise tax. The Senate budget would start making them pay.
► Cemetery taxes cut — Commercial property for sale for use as burial plots would become exempt from paying local property taxes under the Senate budget. Owners of other commercial property for sale would still have to pay. And if the owners of cemetery ultimately use it for something other than burial plots, they would have to pay five years’ worth of taxes.
► New tax for car sharing rentals — Just as services like Airbnb and VRBO have made it easy for people to rent out their homes, services such as Turo have emerged in recent years to help car owners rent their vehicles to fellow drivers seeking short-term rentals. This is called peer-to-peer car sharing or peer-to-peer vehicle sharing.
Traditional care rental companies like Hertz, Avis and Enterprise have been required charge taxes of 9.5% to 16% on their sales (depending on the taxes imposed locally), a legislative report says, while the peer-to-peer rentals have been tax-free.
The Senate budget imposes local sales taxes on peer-to-peer car sharing rentals. The local sales tax varies from county to county, and is from 6.75% to 7.50%.
► Vaccine taxes cut — North Carolina laws requires private medical facilities and doctor offices to pay local property taxes on their vaccine inventories. The N.C. Senate’s proposed budget would exempt their vaccines from property taxes.
The Senate budget has nearly $765 million in earmarks — allocations for specific projects across the state — according to an analysis by The Insider, a political newsletter that closely covers the state capital.
For example, the largest single special project item in the budget is $31 million for repair and renovation of the Hoke County courthouse in Raeford, a town near Fayetteville. The Hoke courthouse and jail are in such poor shape that a judge in 2019 had a grand jury investigate. The grand jury concluded that the county needed to replace its courthouse and its jail.
Read all about it:Judge asks Hoke County to replace decrepit courthouse
Some other items:
► $15 million this year for Montreat College, a private college about 30 miles east of Asheville, for cybersecurity programs. And it would get another $15 million next year.
► $10.5 million to build a parking deck at the Mountain Area Health Education Center in Asheville.
► Gastonia, west of Charlotte, would get $10 million for water and wastewater infrastructure, while Shelby would get $7.4 million. And Burlington, between Greensboro and Raleigh, would get $15.9 million.
► Projects for the Fayetteville area include $5 million to renovate the privately owned Cape Fear Regional Theatre, $3 million for updates and additions to the U.S. Army Airborne & Special Operations Museum, $10 million for a new fire training center at Fayetteville Technical Community College, $15 million for a Medical Education & Research Center at Cape Fear Valley Health System, and $2.5 million for the Martin Luther King Jr. Park.
► $12.5 million to build an aircraft hangar for Lenoir Community College, which offers aviation and aerospace training at the airport in Kinston. In Onslow County on the coast, $13 million would be used to build the Carolina Museum of the Marine near Marine Corps Base Camp Lejeune. The Marines museum would get another $13 million in the budget’s second year.
Previous effort:Veto in 2019 kept Marines museum from getting $26 million
Lawmakers are late
The state budget is supposed to take effect on July 1 for the start of the new fiscal year and the start of the 2021-2023 biennium. It’s late.
The legislature got behind this year because the Republicans who control the Senate and the Republicans who control the House were slow in deciding how much to spend over the next two years. They announced an agreement June 8. This left little time before the June 30 deadline to hash out how to spend nearly $52 billion over the next two years.
Unlike the federal government, the North Carolina government isn’t at risk of shutting down when its leaders fail pass a budget on time. Instead, the state continues to use the previously approved spending plan.
In 2019 and 2020, the legislature and the governor failed to pass a comprehensive budget for the 2019-2021 biennium. The governor vetoed the budget the legislature approved and a compromise was never reached on matters including public health care services, teacher raises and tax cuts.
But some decisions had to be made to ensure the smooth operation of the state going forward and then in response in 2020 to the COVID pandemic. In lieu of a single budget, a number of smaller spending plans, “mini-budgets,” were enacted.
The state House has received the Senate’s budget and is writing an alternative proposal.
Then House and Senate budget writers will confer and develop a compromise to send to the governor.
Gov. Roy Cooper, a Democrat, will either sign the budget, let it become law without his signature or veto it. If his fellow Democrats in the legislature stick with Cooper on a veto, his veto will be sustained and he and the lawmakers will either work out a compromise or allow the state to go two more years without a complete spending plan.
Senior North Carolina reporter Paul Woolverton can be reached at [email protected] and 910-261-4710.