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Mon February 11, 2013
Business Brief: State Rep. Susi Hamilton prepares to make case for film incentives
North Carolina’s tax code is nearly a century old and state lawmakers are looking hard at options to bring the system up-to-date without triggering unintended and potentially negative consequences.
Tax credits and incentive packages are a likely target for elimination, and local legislative leaders will have to work hard to differentiate film incentives from other tax credits.
Democratic Representative Susi Hamilton of District 18 says she’s focused primarily on economic growth. And that’s evidenced, says Hamilton, by the bill she’s sponsoring that would restore 27 miles of a defunct railroad line between Castle Hayne and Wallace.
“So that’s been my focus since I’ve come back to the legislature this session. It doesn’t seem, however, to have been the focus of a lot my colleagues.”
Hamilton is referring to the recent unemployment insurance bill that reduces the maximum payment from $500 per week to $350. It also eliminates emergency benefits from the Federal Government. Passage of that bill by the House sparked a protest in Wilmington last week. But that’s not the only piece of legislation that has ignited Hamilton’s passionate opposition.
“The elimination of current members of certain boards and commissions that’s going to be extremely controversial as the week progresses…”
Senate Bill 10, also known as the Government Reduction and Efficiency Act, is sponsored by Brunswick County Republican Senator Bill Rabon.
“What concerns me most of all about this is a lack of any balance of power in state government. The utter domination of one party can be very detrimental to the process. Because there’s no checks and balances and it limits dialogue between the parties and it limits moderation. And I’m very concerned about it.”
In spite of the swift progress on those two bills, Hamilton says she’s encouraged by efforts from both parties in the State House to work together.
It’ll take cooperation to modernize the state tax code – which hasn’t been updated since the 1930s. At least six other bi-partisan committees have attempted it and failed, according to Governor Pat McCrory.
While there’s a great deal that’s not yet hammered out, Hamilton says it’s likely that corporate and individual income tax will be eliminated. Lawmakers will then have to replace that revenue other ways.
“ …such as increased sales tax revenue, taxing services in the state of North Carolina that currently have not been taxed… the idea is to broaden the base and not necessarily raise the amount of revenues that we’re collecting – but to collect revenues from a larger group of folks.”
Opponents of a consumption-based system say that lower-income state residents will spend a higher percentage of their income on taxes. This concern, says Hamilton, resonates throughout the legislature. Governor McCrory’s Budget Director has called the strategy “regressive”.
“That will probably be the first focus of debate – is how it’s impacting those that fall into the low income category.”
But it’s a long-term conversation, according to Hamilton.
“Senator Bob Rucho, who is leading this effort on the Senate side, has referred to this plan as not necessarily a plan yet – more of a concept of how to move forward.”
Incentives are also on the chopping block. That worries Hamilton because the uncertainty could make potential investors nervous, she says. It also means that Hamilton and her coastal colleagues – Representatives Rick Catlin and Ted Davis and Senator Thom Goolsby - will have to make the case that film incentives are not typical tax credits.
“$360 million worth of investment in 2012 in the entire state – not just Wilmington -- is nothing to be trifled with.”
Because the film industry doesn’t include capital investment – such as the building of permanent structures or the hiring of full-time employees or the establishment of a North Carolina company, they’re not paying state taxes. And that means filmmakers won’t benefit from slashing the corporate income tax. It also means, says Hamilton, that film companies are very nimble.
“So if the credit goes away, the industry goes away. It’s not like a Caterpillar or a Continental Tire where they have built a $500 million building and hired 1500 W-2 employees. It would take a little more time for a company of that magnitude to extract itself from the state based on the loss of any incentives. For the film incentive… if the film incentive goes, the film industry goes. And it will happen overnight...”
And so, says Hamilton, she’ll fight for it.