DURHAM, N.C. (AP) — Incoming North Carolina Gov. Pat McCrory said Wednesday his top priorities include changing the state's tax system, and he's promising bankers and business leaders he'll push back if special interests try to protect their advantage.
McCrory, who will be sworn into office on Saturday, didn't offer a tax plan Wednesday and has committed himself only to reducing North Carolina's highest-in-the-Southeast income tax rates to compete with South Carolina and Virginia. But he said he believes North Carolina's corporate and personal income tax rates are holding back recovery from the Great Recession because they make the state less attractive to business executives seeking to create jobs.
North Carolina's unemployment rate of 9.1 percent in November was the country's fifth-highest and well above the national average of 7.7 percent.
Though business executives have sought to cut corporate and personal income taxes, McCrory said after details of his tax package are announced he expects lobbyists to work to protect the industries and executives who hire them. But the governor-elect says business leaders can expect a call from him if they seek to put their narrow interest before improvements in the state's long-term economic strength.
"I do think tax reform is one of the solutions, but it won't be easy. It's going to step on everyone's toes a little bit," McCrory told about 1,100 people at an event hosted by the North Carolina Bankers Association and the state's chamber of commerce. "I don't want to step on people's toes to cause pain. I want to step on people's toes to get them to stand up and recognize we've got a problem we've got to fix."
Lawmakers seeking to cut or eliminate the income tax paid by corporations should remember that while the listed rate of 6.9 percent is high compared to nearby states, tax breaks sharply cut the amount companies actually pay, said Michael Brown, an economist for Wells Fargo Securities in Charlotte.
"I think we are a lot more competitive from a tax-based standpoint than we think we are. That information is just not widely available enough for business decision-makers nationwide to look at our state and say, 'You know what? We can do business here. It's not as expensive as we thought,' " Brown said during a presentation before McCrory's address.
North Carolina, California and Kansas are three states highly likely to adopt significant changes this year to their systems of collecting the money used to pay for government services and other spending, said Douglas Lindholm, head of the Council on State Taxation, a Washington, D.C. association of 600 large companies.