RALEIGH, N.C. — North Carolina Gov. Roy Cooper said Wednesday that he’d keep trying to block pending state tax cuts for corporations and top wage-earners that Republicans approved last summer, a long-shot effort that could become a key 2018 election-year issue.
The GOP-controlled General Assembly voted to lower both corporate and individual income tax rates again in January 2019, halfway through the next fiscal year’s two-year budget that lawmakers will adjust when they return for their regular work session in May.
Cooper has blasted other tax cuts approved by Republicans since 2013 because he said they benefited the rich and out-of-state corporations the most. The latest round of cuts was approved over Cooper’s veto of the two-year budget containing the rate reductions.
In a year-end interview, Cooper said there’s still time to talk with GOP leaders and persuade them to halt some of the tax cuts — using the money for public education — and shift some of the beneficiaries.
“They should be on the table to make sure that just the middle class gets tax breaks and that we have funding for investments in education,” Cooper told The Associated Press at the Executive Mansion. “And I think a lot of business leaders would agree with that.”
Republicans, who hold veto-proof majorities in both chambers, are unlikely to veer from the plan in the budget law, which directs that the individual income tax rate fall from 5.499 percent to 5.25 percent in 2019 and the corporate income tax rate fall from 3 percent to 2.5 percent. They see these and two previous rounds of tax cuts as fuel for the state’s growing economy and low unemployment rate.
With an unbending GOP, Democrats will have to focus on winning several seats in the House or Senate next November to end the supermajorities so Cooper could wield more influence in the second half of his term. The governor is likely to harp on the tax changes when he campaigns for his party’s legislative candidates next year, as he did on previous tax cuts in his 2016 gubernatorial election win over incumbent Republican Pat McCrory.
The latest round of changes will affect the next fiscal year starting July 1, meaning $522 million less in tax revenue than if there had been no changes, according to legislative analysts.
Combined with hundreds of millions of dollars in other pressing spending needs such as education, job training and Hurricane Matthew relief, the upcoming tax cuts “will only compound these problems and create a self-inflicted budget shortfall,” State Budget Director Charlie Perusse told reporters earlier Wednesday.
In a separate interview Wednesday, Senate leader Phil Berger downplayed concerns, pointing out that Democrats have warned in the past that tax cuts would blow large holes in the budget, only to see three consecutive years of revenue surpluses. Nearly all tax filers would pay less or pay no state personal income taxes thanks to the 2019 plan, which also increases standard deductions.
“I don’t know if they’re going to be wrong this time or not, but I think the policies we’ve adopted are a major reason why North Carolina” is at or near the top of the states’ rankings when it comes to job creation and business and tax environment, Berger told the AP. “Even with reduced rates, we’ve seen revenues continued to be robust, and much more robust than the naysayers predict.”
Cooper said he was pleased his first year as governor was marked by recruiting thousands of jobs to the state, signing a law that partially repealed the state’s 2016 “bathroom bill” and pressing legislators successfully to restore a scholarship program for future teachers.
But he and Berger both expressed disappointment with the other. For Cooper, he said he wanted more cooperation with GOP legislative leaders on public education. Berger said he was unhappy that Cooper vetoed the budget bill. Their lawyers also spent 2017 in court arguing over litigation that Cooper had filed seeking to overturn laws.