NC House budget plan reveals tax cut and pay increase for state workers

North Carolina

RALEIGH, N.C. (WNCN) – Republican leaders in the state House of Representatives unveiled their plans Monday to cut taxes and increase pay for state workers as they try to reach an agreement on a final two-year budget plan with the Republican-controlled Senate and Democratic Gov. Roy Cooper.

The House proposal keeps overall spending in line with the version of the budget the Senate passed in June but makes a variety of changes, including how much to cut taxes and how much to pay workers.

“It controls spending while at the same time addressing a lot of the critical needs we have in our state,” said House Speaker Tim Moore (R). “It does take care of North Carolina.”

The House plan would reduce the personal income tax rate from 5.25 percent to 4.99 percent. The Senate version of the budget committed the state to lowering it further in the years ahead to 3.99 percent. With increases to the standard deduction as well, Rep. John Szoka (R-Cumberland) said the median household would save about $330 on their tax bill.

The House also proposed to cut the corporate income tax rate from 2.5 percent to 2.25 percent in the first year and then 1.99 percent in the second year. The Senate budget would phase the tax out entirely by 2028.

The two chambers agreed earlier this year that spending would not exceed $25.7 billion, a 3.45 percent increase in spending, in the current fiscal year and would not exceed $26.7 billion next fiscal year.

Democrats are raising concerns about attempts to commit the state to cutting taxes further in the years ahead.

“We don’t want to lock ourselves into tax cuts that are really going to hinder our ability to fund our government in the future,” said Rep. Wesley Harris (D-Mecklenburg).

The House budget also includes a variety of policy changes, such as requirements for schools to post learning materials online for the public to review, eliminating the requirement that educators pay $50 to help pay to hire a substitute teacher when they use a personal day and restoring master’s pay for newer teachers.

The Senate budget also included some policy changes, including limits on the power of the governor.

Harris described some of those changes as “things that simply do not belong in a state budget.”

He added, “And, we just want to make sure that we’re not connecting that to corporate tax giveaways and a partisan policy wish list that includes making it harder to vote, taking powers away from our governor.”

House Republicans are calling for one-time bonuses for state workers and pay raises that would be higher than what the Senate included.

Most state workers would receive an average pay raise of 5 percent over two years.

For K-12 teachers, it would be 5.5 percent on average. The Senate had called for 3 percent for them, while Gov. Cooper called for 10 percent.

Bonuses would be higher for state employees making under $75,000 and those in certain front-line positions during the pandemic.

Retirees would receive a 2 percent bonus each year but not a permanent cost of living adjustment.

The House budget also includes tax forgiveness for businesses that received loans through the Paycheck Protection Program and for people who received unemployment benefits last year. The House passed a separate bill earlier this year calling for those steps, but the Senate has not acted on it.

In June, state leaders learned North Carolina will take in about $6.5 billion more than expected over the next two years.

That prompted Democrats to call for greater spending in areas like education. Republicans did not want to increase spending any further than what they’d already agreed upon.

In response to the budget announcement Monday, House Democratic Leader Rep. Robert Reives (Chatham County) said, “We should be using this once-in-a-lifetime financial opportunity to build a North Carolina that works better for everyone. This budget proposal falls short of that, but this is just the beginning of the process and I look forward to working with all the stakeholders, including Gov. Cooper, to craft a budget that truly reflects the needs of our state.”

Copyright 2021 Nexstar Media Inc. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

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