Burnt Orange Report

Changes to HB 3, Debate Begins on HB 2

By Andrew Dobbs

Yesterday it was revealed that there was a $1.2 billion gap in HB 3- the panopoly of new taxes would not pay for the massive property tax cut. So the bill was sent back to Ways and Means who spent all day looking for ways to make up the money. Here are the changes made:

1. The payroll tax was increased from 1.1% to 1.15% and the cap on income subject to the tax was raised from $80,000 to $90,000. So the job killing tax is even higher now- great job guys. Seriously, when you tax something, you make people less likely to do it- simple economics. So why would you tax jobs? Every business in this state, particularly small businesses and labor intensive businesses, will know that every job they create is an extra tax burden for them. Now that burden will be even higher to pay for a huge tax cut for the wealthy.

John Smithee, a rural Republican who apparantly has some sense about him, asked some tough questions of this section (before voting for the bill). He asked why there was a cap at all, since that makes the tax regressive. Committee Chair Jim Keffer explained that he didn't want to discourage businesses from hiring high-salaried employees. So upper class people should be able to get jobs, but poor folks shouldn't? Great policy, Jim.

2. The new tax on newspapers was left out of the drafting of the bill by mistake, so they've made sure to correct that error.

3. Snack foods will now have a 3% sales tax increase, higher than everything else. So those of us who read newspapers, smoke, eat junk food and have cars that like to break down are really screwed. Thank God the strip club tax didn't make it into the bill or I'd be getting really hard.

4. Tobacco companies who aren't a part of the tobacco settlement will be taxed at a rate to bring them up to the level of state contributions that settlement-included companies are. This is actually good policy, as some manufacturers (American Spirits come to mind) charge extra money from consumers but don't pay into the settlement. Cigarettes are bad for you, everyone knows that, and they should all pull their fair share.

So those are the big changes to HB 3. HB 2 is on the floor today and where there was once a move to unite rural Republicans and urban Democrats, now there is a move to get urban and suburban Republicans on our side as the carrot used to lure the rural Republicans onboard- an increase in transportation funding- actually short changes suburban and urban districts. So no one knows what will happen, but it looks like HB 2 will likely pass, but HB 3 won't. In other words, we'll have a whole host of new funding requirements without any bill to provide the money. Trainwreck, here we come...

Watch the debate yourself and see what happens here, and stay tuned to BOR for your news on the legislature.