North Carolina House lawmakers refused Wednesday to debate the latest version of a tax reform plan because it removed an amendment that adds an estimated half billion dollars in deductions aimed at helping the housing industry.
The House Appropriations Committee voted 44-34 against adopting the bill, which was changed Tuesday to lift a $25,000 cap on deductions for charitable giving and mortgage interest.
The amendment from Rep. Julia Howard, R-Davie, also restored an exemption for property taxes. Rep. David Lewis, R-Harnett and the bill's lead sponsor, opposed the amendment, arguing it would add an estimated $525 million in costs that could require raising overall rates.
Howard, a real-estate agent, objected to hearing the bill because it removed her amendment, which was adopted with wide support by the Finance Committee.
"This is not the bill that came out of Finance (Committee)," she said.
Appropriations Committee Chairman Nelson Dollar, R-Wake, initially refused to acknowledge Howard's objections. He then declared a voice vote against Howard's objection, which prompted outrage from lawmakers. They called for an individual tally and won.
The House plan is one of three proposals aimed at lowering corporate and personal income taxes in exchange for a broader array of sales taxes.
The House plan replaces the state's multi-tiered income taxes with a flat 5.9-percent rate and reduces corporate taxes from 6.9 percent to 5.4 percent over five years. The plan also lowers sales taxes from 6.75 to 6.65 percent in most parts of state but adds services to physical personal property such as cars. By contrast, the Senate plan that is seen as a more far-reaching overhaul eventually adds more than 130 sales taxes, which are viewed by critics as disproportionately harmful to the poor.
There's wide agreement that the state's tax system is outdated, but lawmakers disagree about how to implement reform. Democrats argue the proposals, all of which come from Republicans in control of the General Assembly, benefit the rich at the expense of the poor. Republicans argue they'll help bring about a better business climate that helps everyone prosper.
The debate Tuesday drew criticism from lawmakers of both parties, who objected to holding only an hour of amendments in Finance Committee hearings. They argued the chamber should take more time before bringing the bill to the floor.
Speaker Thom Tillis, R-Mecklenburg, said lawmakers disagree about how to proceed with Howard's amendment.
"There's a difference in one of the amendments," he said. "The (proposed committee substitute) was trying to deal with one of the amendments that would throw the budget out of balance by a half a billion (dollars)."
Rep. Mike Hager, R-Rutherford, took exception to the handling of Howard's amendment, noting it passed Tuesday with wide support.
"We have a process to go by, and the process should be that that bill should come to the floor to be voted up or down," he said. "I believe in that process."
Tillis' spokesman and other lawmakers said they're not sure yet how the bill will proceed.