GOP finds tax reform hard to accomplish

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If modernizing North Carolina’s Depression-era tax code was an easy task, it would have been accomplished decades ago.

Republican lawmakers have found that out the hard way this year.

Republican leaders in the N.C. Senate rolled out their second tax overhaul package of the legislative session last week, after the N.C. House and Gov. Pat McCrory panned their first reform plan. The Senate rejected the plan approved by the House earlier this month.

All three proposals seek to lower personal and corporate income rates, an effort pushed by McCrory and GOP legislative candidates during the 2012 campaign.

But the major sticking point so far has been finding a way to make up for the revenue losses that will come from lowering the income tax rates.

Architects of the first Senate plan sought to expand the sales tax on more than 100 services to make up for that lost revenue, an idea that not only was rejected by McCrory and House GOP leaders but came under scathing criticism for its regressive nature. One of those architects, N.C. Sen. Bob Rucho, R-Mecklenburg, resigned as co-chairman of the Senate Finance Committee over the failure of his plan to win support from other Republicans.

House Republicans had their own dust-up over details of their plan, which briefly became derailed due to disagreements over the future of mortgage interest and charitable giving deductions.

All three plans seek to replace the state’s three-tiered personal income tax rates with a single, lowered rate. The House proposal would lower the corporate income tax rate from 6.9 percent to 5.4 percent by 2018. The newest Senate plan would gradually eliminate corporate income taxes by 2017.

The Senate’s latest plan provides no details on how the estimated $1 billion to $1.3 billion in lost revenue each year would be dealt with – either through cuts or other taxes and fees. The House plan also leaves a $1.7 billion shortfall through 2018.

It may turn out to be a long, hard summer for GOP tax reformers..