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Tax Reform Bill Clears the Senate - Taxing Social Security Off the Table

By Mary Bethel and Helen Savage

The N.C. House of Representatives was not in session this week, but there was still plenty of activity going on in the General Assembly. The state Senate was in session and took up several controversial bills including House Bill 998, the Tax Simplification and Reduction Act.

On Monday, the Senate rolled out another committee substitute for this tax reform bill which included significant changes to the version presented several weeks earlier.  Senate Speaker Pro Tem Phil Berger said that this new version was the result of “intense but productive” negotiations with the House and was the final Senate offer at a compromise with the House.  After debate in the Senate Finance Committee on Monday and on the Senate floor yesterday and again this morning, the bill was approved today.  It is now up to the House and Senate to iron out their continuing differences with the bill.

A provision in the original Senate committee substitute called for the taxing of Social Security benefits of some persons.  We are pleased to report that this provision has been removed from the bill.  In addition to that, proposals in the bill to tax prescription drugs and food were also eliminated.

Thank you to each of you who made calls or had other contact with your legislators to express your concern about taxing Social Security, prescriptions, and food.  Many legislators received hundreds of calls.  Speaking up and making your voice heard was critical to these items being removed from the original Senate proposal.

Other Key Parts of the Senate Tax Reform Plan

The Senate tax plan would also:

  • Set a flat personal income tax rate of 5.75% in 2014.
  • Set standard deductions at $15,000 for married taxpayers filing jointly, $12,000 for heads of household, and $7,500 for single filers, but would eliminate the $4,000 retirement income exemption.
  • Allow unlimited charitable contribution deductions.
  • Cap the deduction for mortgage interest plus property taxes on real estate at $15,000.
  • Eliminate the corporate income tax by 2018.
  • Eliminate the estate tax.
  • Cap the state gas tax for two years.
  • Phase down sales tax refunds to non-profits over several years to a maximum of $2.85 million a year in 2017-18.
  • Bring in $3.3 billion less revenue than the current tax structure over five years.

Over the last month, AARP has been very active in talking with legislators, communicating with the media, and engaging in other advocacy efforts to make sure the interest of our members are protected in tax reform discussions.  Although we are excited that proposals to tax Social Security, prescription drugs, and food have been taken off the table, we remain concerned that the revenue loss resulting from the tax reform plans will result in major cuts, or in some cases total elimination, of essential core state programs and services.  For example, programs for seniors such as home delivered meals and in-home aide services already have thousands on the waiting list and this number is only going to grow as the population of older adults in the state almost doubles over the course of the next 20 years.

We also remain concerned that tax reform proposals under consideration could result in significant loss in revenue to local governments which might result in increases in local property taxes.  Seniors who are “house rich and cash poor” could be especially impacted if property taxes go up.

Stay tuned as a final tax reform measure is crafted.  Once this is done, legislators from both the House and Senate will move forward in negotiating a consensus budget for the state for the next two years.

Duke Energy Evidentiary Hearing Coming Up Next Week

As we reported in our last update, the Public Staff of the North Carolina Utilities Commission has proposed a settlement of the Duke Energy rate request that would provide the company with an additional $235 million in revenue over the next two years. AARP is concerned that this will amount to a rate increase of over 11 percent for residential customers. In addition to keeping rates affordable, AARP is also concerned that the company is only providing $10 million over the next two years to assist low-income customers.

Next Monday, July 8, at 1:00 p.m. is the final public process to the Duke Energy rate case.  This is an evidentiary hearing where there will be testimony and cross examination of witnesses by Duke Energy, the Public Staff, and interveners.  The hearing will be at the Dobbs Building (room 2115) located at 430 N. Salisbury Street in Raleigh.

AARP and other partner groups are planning a big press event before the proceeding to highlight why we are against the rate increase.   If you are available to come to this press event (need to be there by 12:00 noon), please contact Leo Scarpati with the AARP North Carolina state office at (704) 707-6981 or









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