Partisan tensions apparent in Senate debate over gas tax

Published February 18, 2015

photo by Asheville Citizen-Times

by Mark Barrett, Citizen-Times, published in USA Today, February 16, 2015.

This year's session of the state General Assembly began with promises of bipartisanship and cooperation — but that was a month ago.

Democrats and Republicans in the state Senate attacked the other side's tactics during debates Wednesday and Thursday on the first major policy issue subject to a floor debate in either legislative chamber this year: A measure to change the state gas tax and to keep taxpayers from claiming certain tax breaks in federal law on their state tax returns.

One of the breaks would have removed a significant tax burden from people in financial distress selling their homes for less than the value of their mortgage. The other would make the first $4,000 of university or community college tuition tax deductible for people under income limits.

The gas tax part of the bill surfaced in a Senate committee only a day before reaching the Senate floor. Democrats said they had been left out of the process, that Republicans were shading the truth by calling the bill a tax cut and complained that GOP senators were using strong-arm tactics to push the bill through.

Senate OKs gas tax cut for now, probable increase later

Republicans did not like Democrats' complaints about the process or being put in the position of feeling compelled to vote down Democratic motions to allow two of the income tax breaks.

Votes went mostly along party lines with the GOP winning each time. Republicans supported passage without changes while Democrats offered amendments and opposed the bill.

The bill would cut the state's gas tax from 37.5 cents a gallon to 35 cents March 1-Dec. 31 but provides that it could never fall below 35 cents. It would also increase a rate used to calculate a portion of the tax, possibly further boosting rates starting in 2016.

The initial tax cut in the bill would result in letting go 500 state Department of Transportation workers.

Down then up?

Because it's adjusted periodically based on the cost of gas and gas is cheap these days, legislative staffers say the gas tax would probably be lower than 35 cents over the next few years if the General Assembly did not put a 35-cent "floor" under it and might have fallen to 30 cents or less this summer. The law approved by the Senate means motorists will pay $1.2 billion in gas taxes over the next five years they would not otherwise, a staff report says.

When Democratic senators said that is a tax increase, not a tax cut, Sen. Tom Apodaca, R-Henderson, and other Republicans responded by saying transportation money is needed and listing the amounts of road money that would not be spent in Democratic senators' home counties without the bill.

"Are you going to vote down a $6 million advantage or contribution to your road system in your district?" Sen. Bob Rucho, R-Mecklenburg, asked one opponent.

Minority Leader Dan Blue, D-Wake, called the tactic "extortion" and "not the way we should be operating in this body."

The speed with which the bill moved through the Senate undermines any chances of a comprehensive solution to the state's transportation funding needs, he said. Blue recalled bipartisan support for a major increase in road funding in 1989 and said he is willing to work with Republicans "in any way that makes sense to come up with a plan to address this overwhelming infrastructural challenge that we have."

The state should look at other proposals to raise road money as well, he said, but Senate Republicans' support of a partial solution under false pretenses will make the the job harder.

"People are going to be mad because you've raised the gas tax and it hasn't been part of an overall solution," he said.

Republicans said projections of gas prices can be unreliable, but it's certain the tax will be lower than it would be otherwise for at least a few months.

"Thirty-five is lower than 37.5," said Senate President Pro Tempore Phil Berger, R-Rockingham. "By voting no ... in essence what you're saying (is), 'We don't want to do anything.'"

GOP senators did not directly address concerns about the speed the Senate moved on the proposal, which will now be considered by the House. But they said the projections of lost money were simply read from a list provided by the state Department of Transportation and were not attempts to target individual Democrats. A loss of revenue would be felt statewide, they said.

Referring to Blue, an attorney, Apodaca sneered at his complaint Thursday.

"People around me know how much I appreciate lawyers and their turn of a phrase. Well, being called an extortionist by a lawyer is kind of hollow," he said.

What to deduct?

Democrats' efforts Wednesday to restore some tax deductions and Republican votes against them could provide fodder for campaign ads attacking GOP candidates next year.

North Carolina's income tax code is largely based on the federal code, meaning the state must take action if it wants to avoid impacts from federal law. A section of the bill would preserve differences between state and federal tax law by disallowing for state tax purposes certain deductions that the federal government grants.

Sen. Joel Ford, D-Mecklenburg, offered an amendment Wednesday to provide that the amount of a home loan that is forgiven as part of a short sale, a transaction commonly used for homeowners to get out of a mortgage they can no longer pay, would not be counted as income for state tax purposes.

In other words, if someone owes the bank $200,000 on their home but has to sell it for $180,000 as part of a deal in which the bank forgives the remaining $20,000 of the debt, North Carolina tax law would treat that $20,000 as taxable income. Federal law levies no taxes on the forgiven amount.

Ford said that without the amendment, "We will treat our residents worse than they are treated by the IRS. We will also impose a heavy tax burden on those least able to pay, those who have lost their houses and are trying to rebuild their lives."

That "amounts to kicking a person when they're down," he said.

Approval of a procedural motion Apodaca made killed Ford's proposal.

Sen. Terry Van Duyn, D-Buncombe, offered an amendment to reinstate a tax deduction for college and technical school tuition as provided in federal tax law, saying tuition costs are up significantly and getting a degree after high school is becoming "the only path to the middle class."

After Van Duyn spoke, her amendment was tabled on a motion by Apodaca that allowed no further discussion.

Republican senators didn't debate either amendment when they were offered.

But the next day, Senate Majority Leader Harry Brown, R-Onslow, said no one had said how they would make up for the loss of the more than $70 million in revenue the state would absorb if it allowed all of the federal tax deductions the bill addresses to become part of state tax law.

"It's easy to say I can spend it, but tell me where you're going to find it," he said.

The impact of the two deductions debated last week would actually be much less than $70 million, according to a legislative staff analysis: $14 million for the tax break affecting forgiven mortgage debt and $1 million for the higher education tuition credit.

The bill does preserve a break allowing teachers to deduct up to $250 of the cost of classroom supplies they pay for out of their own pockets. That costs the state $1 million a year.