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Morning Memo: Is the Senate's tax plan a tax hike for many?

TAX PLAN COULD MEAN TAX HIKE IN LONG TERM: The majority of taxpayers likely would see a tax increase after the plan is fully implemented, according to early long-term projections from legislative fiscal researchers who analyzed the potential legislation – not a tax break as Senate Republican leaders suggested when announcing the plan this week.

A taxpayer with a federal adjusted gross income below $51,000 could pay an average $100 to $200 more in the 2017 tax year. Based on current tax brackets, 2.3 million taxpayers would fit that category, according to the analysis, while 1.8 million taxpayers could expect an average $300 to $3,000 tax cut that year. In announcing the plan Tuesday, Senate leader Phil Berger, an Eden Republican, emphasized that the legislation was not yet finalized, but said the “vast majority,” or roughly two-thirds of taxpayers, would initially get a tax cut as a result of the legislation. (More below.)

***This is the Dome Morning Memo -- the source for North Carolina political news and analysis. Send tips to dome@newsobserver.com. And read more new details about the tax plan below.***

TAX PLAN INCLUDES TEMPORARY MIDDLE CLASS TAX BREAK: The draft fiscal analysis, obtained by The News & Observer, is still a working document, said Barry Boardman, the legislature’s economist. “The details pertaining to 2017 have not been worked out at this stage,” said Amy Auth, a Berger spokeswoman.
For the first three years, most North Carolinians would pay less, the analysis shows. But it won’t last. The plan includes a temporary “working families” tax break for middle-income households that will sunset in 2016. A calculator Senate leaders created to allow taxpayers to estimate their tax savings ends in year 2016 and doesn’t take into account what could amount to a tax increase for families making $30,000 to $75,000 the next year.

NOT FAMILY FRIENDLY:Even in the first years, the tax plan produces mixed results.
The Senate’s projections show lower-income families and those with three or more children likely would get a tax increase, while taxpayers making more than the state’s $46,000 median household income, particularly those without children, would save money. “The plan is not family friendly,” said Sabra Faires, an attorney at Bailey & Dixon in Raleigh and the former assistant secretary for tax administration at the state Department of Revenue. “You pay more tax for every child you have. ... This plan favors people with no children as opposed to families.”

TAXPAYERS TAKE A TEST DRIVE: Senate leaders say the tax overhaul is necessary to create a more stable and fair system and they encouraged taxpayers to test drive the plan by using an online calculator to personalize the results. Over two days, The N&O took the calculator into the community, from Chapel Hill to Smithfield, to let software engineers, retirees, stay-at-home mothers and others see how it would affect them. In more than two dozen conversations, most people expressed reservations about the plan and lawmakers’ intentions, regardless of whether they would save money. Full story.

TODAY IN POLITICS: The N.C. General Assembly went home to rest ahead of the flurry expected next week before the May 16 crossover deadline, in which most bills must pass one chamber or they are considered "dead." Gov. Pat McCrory will deliver remarks at the Campbell Law Schools' graduation ceremony at 10:30 a.m. The State Ethics Commission meets at 9 a.m.

A HAIRY END TO THE LEGISLATIVE SESSION: General Assembly sessions have a tendency to drag out. Month to month. Winter to summer and sometimes beyond. Here's a clue for anybody wanting to know when this session will end. Watch the beard, writes Jim Morrill. That would be the beard of House Speaker Thom Tillis. He plans to stop shaving the second week of June. Specifically, June 7. The Cornelius Republican says it will be his own silent statement that a session that runs longer is too long. He wants the state budget, one of the legislature's final tasks, wrapped up in time for local governments to know where they stand by the time they do their own budgets in June.

STEPHEN COLBERT RENOUNCES SOUTH CAROLINA CITIZENSHIP -- DECLARES: 'I AM FROM NORTH CAROLINA': Frustrated by his sister's loss to Appalachian Trail hiker and former Gov. Mark Sanford, Comedy Central's Stephen Colbert has had it his native South Carolina. "I feel so betrayed by South Carolina. Well, if they're going to turn their backs on my family, I'm turning my back on them. From now on -- and I never thought I would ever say this -- I am from North Carolina." Watch the video here.

FIRST LADY STEPS OUT, THEN BACK AGAIN:First lady Ann McCrory claimed her first legislative victory Thursday, watching the N.C. House pass a “puppy mill” bill she lobbied for. But McCrory continued to keep the low profile she’s maintained over four months. After the vote, she walked past a scrum of reporters and cameras outside the House gallery and into a waiting elevator without comment. Full story.

ETHERIDGE SPEAKS OUT ON GOP LEGISLATURE: An advocacy group called Public Schools First NC will hold an event with former Congressman Bob Etheridge in Cary to critique the state legislature's path on education. "State lawmakers are putting the squeeze on elementary schools," the group said in a statement. "They want to jam 30 or more students into a classroom. They want fewer teacher assistants. And they want voucher money drained from public schools. Students will have less one-on-one time with their teacher. And teachers will have fewer resources like technology and text books to make up for it." Others at the event will include N.C. Association of Educators President Rodney Ellis and former Congressman Tim Valentine. A report from a similar event Thursday in Charlotte.

A LOOK INSIDE THE NEW PROTEST WAVE: The historians, doctors, preachers, lawyers, raging grannies, students and others gathered around the second-floor fountain inside the Legislative Building and belted out “This Little Light of Mine” and other songs. They were diverse in age and backgrounds but united in voice as part of a protest movement gaining numbers in recent weeks.

In the four months since North Carolina Republicans took control of both General Assembly chambers and the governor’s mansion, the lawmakers have proposed rapid and sweeping change to the state’s electoral processes, health care policies, welfare management and publicly-funded education systems. Full story.

AT ALEC CONFERENCE, A FAMILIAR FEEL: Three N.C. state lawmakers -- including House Speaker Thom Tillis -- attended the ALEC conference in Oklahoma City last week. It was greeted by protesters, according to this report from a watchdog group, so the N.C. Republican legislators would have felt right at home. Full story.

SWEEPSTAKES LAW DOESN'T PREVENT NEW PARLORS: t’s been three years and five months since the state General Assembly banned sweepstakes Internet cafes and five months since the state Supreme Court upheld the ban, yet some of the parlors remain open. A Winston-Salem attorney who represents the New Jersey company that makes the software the parlors use says the businesses are not violating state law because the software has been updated. Full story.

LAWMAKERS TRY TO STOP NEW ELECTRIC CAR: To date, 80 North Carolina residents have squeezed their savings for the bragging right of owning the Tesla Model S electric car, some paying more than $100,000 for their g-force ride, but they may be among the last. A legislative proposal, backed by the N.C. Automobile Dealers Association, would make it illegal for Tesla, or any other car maker, to bypass dealerships and sell directly in the state. The proposal cuts at the heart of Tesla’s business model: selling luxury cars over the phone or Internet and then delivering them to the front door of high-net-worth customers.

Still, the proposal was unanimously approved by the state Senate’s Commerce Committee on Thursday, despite concerns about the state dictating who should be allowed to sell an automobile. North Carolina is the latest forum for the clash as auto dealers around the country have mobilized, mostly without success, in legislatures and in the courts to block Tesla’s direct car sales. Full story.

HOSPITALS STILL PLAYING DEFENSE: Hospital representatives flooded the halls of the General Assembly this week to lobby for more funding and against a proposal that would allow same-day surgery centers to sidestep the state’s certification process. Members of the N.C. Hospital Association told lawmakers they have been hit hard by federal and state cutbacks and that losing surgery patients to stand-alone centers could cost them as much as $400 million a year. Full story.

OUCH: From ABC 11/AP -- Members of the North Carolina Legislative Black Caucus got turned away Thursday while trying to meet with Governor Pat McCrory. The Democratic lawmakers wanted an unscheduled talk with McCrory about several Republican backed policies. Early Thursday morning, the group marched from the state legislative building to the governor's office at the old capitol building. Full story.


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