An N.C. Department of Revenue report shows that until the 2000 tax year, banks were getting an excessively sweetheart deal when it came to corporate income taxes in the form of a complicated set of loopholes. Last year, the General Assembly took action to close some of those loopholes, and now the banks, saying they stand to pay excessively high taxes, want the annual tax bills of individual bank companies capped at $11 million.
The legislature should do no such thing until and unless it is clearly shown that banks will be saddled with a tax liability that puts a disproportionate burden on them. So far, that has not been demonstrated. Even if future Department of Revenue figures indicate that some downward adjustment of bank tax bills is in order, lawmakers should take no such action until the state, strapped with its worst budget crisis since the Great Depression, gets out of the red.
The department’s latest report showed that all 85 banks doing business in the state paid far less in taxes in 2000 than the state’s 10 largest manufacturers, 10 largest transportation companies, 10 largest communications firms and 10 largest utilities. Eight banks with $1 billion in total assets paid $5.5 million in taxes combined in 2000. During the same year, the state’s top 10 transportation, communications and utility companies paid $100 million.
Faced with those jarring inequities — and saddled with a budget shortfall of almost $2 billion — the legislature last year quite understandably and quite appropriately reduced some tax deductions that banks and some other companies could take. And it should be remembered that at the time of these changes in the tax code, the banks went along with them.
Now, however, the banks are claiming that the Department of Revenue wolf is at their door. They contend that the tax bills of a few banks have been driven unreasonably high by the closing of loopholes. The implication is that without some relief, the poverty-stricken banks will have no choice but to move jobs out of North Carolina and into more friendly states. They’ll have few choices of places to go. Until the legislature reduced the deductions, North Carolina was one of only three states that offered the loopholes. Even so, budget negotiators in the General Assembly are saying they will accommodate the banks by giving them the $11 million corporate income tax cap.
Not so fast. The legislature and the Department Revenue should undertake a careful study of North Carolina’s entire tax code, starting with the next sets of numbers from the tax bills of banks and other corporations. Based on that study, lawmakers should make whatever changes are necessary to ensure that the code places a fair share of the tax burden on everyone — including banks, other businesses and individuals. All taxpayers have a role to play in rescuing North Carolina from its economic plight.
