North Carolina's New State Budget is Set to Eliminate Corporate Income Tax

North Carolina's state budget for the next two years will include a plan to eliminate the state's corporate income tax rate, the Associated Press reported.

Governor Roy Cooper announced that he would sign the Republican-written budget bill, despite many of what he calls "missed opportunities." He said during a press conference that he would sign the bill because the good inside the bill "outweighs the bad."

"I will sign this budget because of its critical and necessary investments," Cooper said during the press conference, "and I will fight to fix its mistakes."

The bill would end the current corporate tax rate of 2.5 percent, already significantly lower than the national average. However, the phaseout plan would begin at the end of Cooper's run as governor in 2025.

More bipartisan legislation was also approved of in the budget. According to AP, the new funding will allow the average pay for teachers across the state to increase up to 5 percent over the next two years. Public school staff will also make at least $15 per hour starting in the fall of 2022.

The budget is expected to spend $25.9 billion this year and $27 billion next year. Additionally, $5.9 billion will be set aside for higher education buildings and state agencies, while $800 million will go into public school construction lottery funds.

"This is a time that the state must move ahead," Cooper said. "Too many important investments in this budget are overdue."

For more reporting from the Associated Press, see below.

Roy Cooper
North Carolina Democratic Governor Roy Cooper holds a news conference in the state Administration Building on November 16, 2021, in Raleigh to announce his plan to sign the General Assembly’s two-year budget bill into law when he receives it. AP Photo/Bryan Anderson

Cooper held the news conference at the same time the Senate prepared for floor debate on the budget plan. He said the state needs a comprehensive budget plan in place to address the needs of students, small businesses and taxpayers as North Carolina emerges from the COVID-19 pandemic.

Cooper already had last week signaled his willingness to sign the bill after he, Senate leader Phil Berger and House Speaker Tim Moore held serious negotiations for nearly two months. With a spending plan that's 4 1/2 months late, North Carolina is currently the only state in the nation without an enacted budget, according to the National Conference of State Legislatures.

The Senate planned to hold the first of two required votes Tuesday, with the House to follow on Wednesday. Cooper's announcement likely will free up more Democrats to support the measure without taking criticism from within their own party.

Before now, Cooper had never signed a traditional, comprehensive state budget into law, vetoing them in 2017, 2018 and 2019. There was no such budget bill in 2020.

While Republicans lack veto-proof majorities this year, Cooper, Berger and Moore signaled things could be different. With massive state revenue surpluses combined with over $7 billion in federal COVID-19 relief aid, Republican budget-writers were able to win over many Democrats with financial and policy sweeteners benefitting their communities.

During Cooper's first two years in office, Republicans overrode his budget vetoes because they held veto-proof majorities. In 2019, after Democrats gained seats, Cooper's veto couldn't be overturned by Republicans, leading to a stalemate with GOP leaders that was never fully resolved.

This year, Republicans managed to win "yes" votes on earlier versions of budget legislation from over a dozen Democrats—more than enough for an override if they stuck with Republicans. All 13 were added to the negotiation teams for a final budget, and all of them signed the "conference report" that lawmakers will vote on.

Cooper said Tuesday he still believed Senate Democrats would have been able to uphold a budget veto, but he said he was worried that Republican lawmakers would simply walk away from budget negotiations had that happened.

Rank-and-file state employees also will see 5 percent raises over two years and at least $1,000 bonuses. And all retirees will see one-time bonuses of 5 percent over the same period.

Cooper also will have to swallow a provision contained inside that would limit his emergency powers, such as during the pandemic.

The language says a governor would have to receive support from a majority of Council of State members to expand an emergency declaration beyond 30 days. The General Assembly would have to act for one to go beyond 60 days. The governor vetoed a separate bill with somewhat similar language two weeks ago, complaining in part that it would have taken effect immediately. The budget provision delays the start until January 2023.