RALEIGH — A cadre of Republicans in the North Carolina House broke ranks with their leadership Tuesday to vote down a sweeping economic incentives and tax bill they said violated core conservative principles.
More than two dozen GOP members joined with Democrats to defeat the bill 47-54, despite support for it from Gov. Pat McCrory, House Speaker Thom Tillis, Senate leader Phil Berger.
The multi-part bill included county sales taxes, tax benefits for a Haywood County paper mill, expanded tax breaks for new businesses and a proposed $20 million economic development fund to woo manufacturers with upfront cash.
The hour-long floor debate over the bill laid bare deep divisions within the House GOP caucus, with several Republicans criticizing the tortured process by which it had been negotiated behind closed doors. Republicans command large majorities in both legislative chambers.
The bill failed despite last-minute face-to-face lobbying from state Commerce Secretary Sharon Decker, who told lawmakers that there are several large projects in the pipeline that would require millions in incentives to land, potentially creating hundreds of well-paying jobs.
Opponents countered that most employers would still come to the state, with or without the incentives they derided as “corporate welfare.”
“The economists who study it say this kind of stuff just does not affect the overall economic well-being of a state,” said Rep. Skip Stam, R-Wake. “It doesn’t work.”
Rep. Nelson Dollar, a chief House budget writer, said the $20 million “Job Catalyst” fund included in the bill amounted to giving “walking around money” to Decker’s agency with few rules in place about how the cash would be used.
“We have criticized past governors for having walking around money and how we wanted to get away from that,” said Dollar, R-Wake. “This is just trying to shoot for some big fish out there, that may or may not be out there, under a scenario where it will basically be up to the secretary of commerce to decide what the regulations are, what the guidelines are, who gets the money, how much, and who doesn’t get the money.”
With the defeat of the incentives bill, two other pieces of legislation are also in jeopardy. Senate leaders had insisted the House pass the incentives measure before it would allow a vote restoring funding for hundreds of classroom teaching assistants that could be laid off as a result of the state budget McCrory signed last week.
Another bill would have extended until 2016 the period for local leaders in Wake County to ask voters to approve up to a three-quarters of a penny sales tax increase for transportation projects. If it had passed, the incentives bill would have placed a 2.5 percent cap on county sales taxes, with exceptions allowed four large urban counties to go up to 2.75 percent. Wake, with about 1 million residents, currently has a 2 percent sales tax.
Several rank-and-file House members from both parties objected that tying votes on the two bills to the passage of the third amounted to “extortion” and “blackmail.”
“When do we stand up and make a change?” asked Mike Stone, R-Lee. “Is today that day? Are we all tired of passing five things and getting four you don’t like? Or do you want to have each bill stand on its own?”