North Carolina House Republicans have settled a dispute in the party's tax reform plan that brought debate to a halt Wednesday, according to a spokesman for Speaker Thom Tillis.
Lawmakers from both parties refused Wednesday during an Appropriations Committee meeting to adopt the latest version of the plan because it didn't contain an amendment passed by another committee that lifted a $25,000 cap on deductions for mortgage interest and charitable giving.
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 at a Tuesday hearing, 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 left out her amendment, which was adopted with wide support by the Finance Committee. She argued the change was necessary to help a fragile housing recovery and homeowners.
"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 44-34.
Tillis said after the vote that divisions existed within the party over Howard's amendment, which he said 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.
"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."
Republicans met privately Wednesday evening after the House's floor session to discuss the breakdown in the Appropriations Committee. The GOP controls both chambers of the General Assembly by wide margins.
Tillis spokesman Jordan Shaw said Republicans agreed to go back to the bill as it existed before Howard's amendment.
"It was a caucus decision," he said. "We decided to move toward the common goal of providing tax relief for all North Carolinians."
Shaw said the party isn't yet sure when the bill will resurface.
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.