RALEIGH, North Carolina — A bill that lowers North Carolina's gasoline tax immediately but opens the door to higher tax rates in the years ahead cleared the Senate on Thursday, but not before there was more sniping from Republicans and Democrats.
The measure given final chamber approval by a 35-15 vote reduces the rate by 2.5 cents per gallon to 35 cents March 1 through the rest of the year. The tax formula would be changed after that.
On the second day of floor debate — the bill received initial approval Wednesday— Republicans continued to portray the measure as a tax cut that also provides stability for road-building revenues so projects in the pipeline are completed.
But Democratic speakers point out the tax would actually fall further come July 1 — possibly to 30 cents — if the current formula based partially on wholesale gas prices remained in place. Projections show the tax rate under the proposal also could be 7 cents higher in 2019 compared with the current rules, creating another $352 million annually by then.
"If this is a tax increase, just say it for what it is," said Sen. Erica Smith-Ingram, D-Northampton. Other Democrats said they'd be willing to consider more taxes for infrastructure but that a more thoughtful, bipartisan approach was needed.
The bill's next stop is the House, where changes are expected in the gasoline tax provision.
GOP Gov. Pat McCrory, who would be asked to sign any bill into law, said in a news release that the Senate bill would stabilize transportation revenues but the effect "workforce decisions will have on the safety and maintenance of our transportation network" needed to be evaluated fully. The bill directs the state Department of Transportation to eliminate 500 full-time jobs to make up part of the $33 million decline in gas-tax revenues caused by the 2.5-cent reduction.
Senate Democrats also complained about an unrelated portion of the bill that would prevent several federal tax changes from applying to state tax filers when determining their income.
One federal rule exempting the value of cancelled debt from income during certain home sales would cost the state $14 million if it applied to state income, too. State tax rules don't match that provision in the Senate legislation. It would take $71 million to comply with all of the Internal Revenue Service provisions avoided in the bill, requiring cuts elsewhere, a key Republican said.
"Where are you going to take the money from?" Senate Majority Leader Harry Brown, R-Onslow, asked a Democratic colleague.
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