North Carolina House Passes Its Version of the Budget in Bipartisan Vote
Last night, the North Carolina House passed its version of the budget in a bipartisan 93-20 vote and now heads to conference, where House and Senate leaders will work out the differences between the two chambers' proposed budgets. Notably, several Democrats voted for the House’s version of the budget, including Minority Leader Robert Reives, after Governor Josh Stein (D) encouraged them to support it. Click here to read the previous coverage about the House’s priorities in this budget.
Republican Speaker Destin Hall said, “The NC House GOP just voted for the most conservative, pro-family budget in decades. No handouts to illegals. No woke propaganda. Just RESULTS. We are committed to Carolina and putting America first.”
Democrat Minority Leader Robert Reives said, “I voted for the House Budget today understanding that there are a lot of policies I disagree with and hope to see removed during the conference period. The House is serious about governing this state and it is up to the Senate to come to the table in good faith.”
Republican sponsored tax hike?
While the House Republicans tout their bipartisan cooperation with Governor Stein, several conservative groups have raised concerns over changes to North Carolina’s tax policy.
The current law, passed in 2023, lowers taxes based on revenue triggers. The House budget changes the revenue triggers, which, according to the fiscal note, would lead to at least $1.1 billion in new state tax revenue. There is an increase in the standard deduction, and the bill allows for a small deduction on tips. However, the net revenue increase would be $976 million in fiscal year 2026-2027, and according to the fiscal note, the total tax revenue would increase to slightly over $8 billion. In contrast, the Senate’s version of the budget cut personal income taxes.
Fiscal note analysis of the House Budget’s changes to North Carolina’s personal income tax.
Here is what conservative groups who deal with tax policy are saying about the House’s budget.
Carolina Partnership For Reform, a North Carolina-based nonprofit focused on economic issues, said, “But with House Republicans releasing and planning to vote for a budget proposal that increases personal income taxes on North Carolinians by over $2 billion dollars, the policy principle is in peril, and House Republicans are suddenly in grave danger of being attacked politically for raising income taxes in upcoming primary and general elections. Income tax increases are a litmus test for groups like the Club for Growth and AFP that play outsized roles in Republican congressional primaries. A vote for a $2 billion income tax increase is certain to paint a target on the back of any House Republican with congressional aspirations.”
Brian Balfour, a research analyst with the conservative John Locke Foundation, said, “Likely the biggest fight over the NC state budget will be on taxes. Let’s compare: House: tax increase of $8 billion over 5 years. Senate: tax cut of $6.4 billion over 5 years.”
Club for Growth, a national conservative group that is highly active in Republican primaries, said, “Anyone who votes for the S.B. 257 tax increase in North Carolina should expect to be held accountable on election day, and kiss their political future goodbye. Club for Growth PAC will not endorse anyone who votes for it.”
The NC Chamber put out a strong statement of support for the Senate’s budget, specifically praising the tax cuts. In contrast, the Chamber's response to the House’s budget was to put out a post urging North Carolina to think bigger when it comes to fiscal policy, specifically urging the lawmakers to operate on a growth trajectory, not in fear.
Political implications
The House and Senate will now go to conference to work out the differences between the two budgets. Senate Republicans have signaled that they do not support the House’s plans to increase tax revenue.
This will likely become a key issue in the Berger-Page primary. Senator Berger’s primary challenger, Sam Page, publicly declared his full support for the House’s proposed budget, including the tax increases.
The Club for Growth’s statement about the political future of House Republicans is telling. In recent years, the Club for Growth has played a major role in Republican primaries for the U.S. House and Senate, notably playing a prominent role in helping Sen. Budd defeat former Governor McCrory. The state legislature is often a launching pad for Congressional careers, but with the Club’s vow to oppose them in future primaries, those dreams may become practically impossible.
For example, sadly, Congresswoman Virginia Foxx cannot serve forever, and Speaker Destin Hall would likely emerge as a likely candidate. But with the Club for Growth’s opposition to him, someone like former State Senator Deana Ballard, who went on the record opposing the House’s tax plan, could defeat Hall in a Republican primary with the Club for Growth’s generous support.
