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Supporters of Sen. Kay Hagan, D-N.C., say giving tax breaks to yacht and jet owners is one way that her opponent has shown he is out-of-touch with the state’s average families.
In the North Carolina race for U.S. Senate, much of the debate has focused on Republican candidate Thom Tillis’ actions as a state leader.
In 2013, the North Carolina government received national attention for a wave of conservative legislation. The Republican-dominated General Assembly -- with Tillis as speaker of the House -- passed laws increasing voter ID requirements, lowering business regulations, upping restrictions on abortion providers, tightening education spending, trimming unemployment benefits and changing the tax code.
In another fact-check, we found that the controversial tax code changes reduced taxes for everyone -- but much more for wealthier people than lower-income people.
Most recently, we heard it in an ad from Senate Majority PAC, a liberal political action committee.
"When it comes to education, Thom Tillis is gambling with our future," the ad’s narration says. "As speaker, he cut nearly $500 million from education, eliminating 9,000 teaching positions and overcrowding classrooms. Now he’s promising more lottery money for education? We’ve heard that broken promise before. Meanwhile, Tillis gives tax breaks for yacht and private jet owners."
Some of the other ads said Tillis "protected" tax breaks for yacht and jet owners, but others -- including this one -- say he gave them the tax breaks. We decided to look into the claim a little more closely.
N.C. tax code
In 2013, under Tillis’ leadership, North Carolina lawmakers passed legislation to overhaul the tax code -- which hadn’t had comprehensive reform since the 1930s.
The primary change was switching the income tax from a progressive rate to a flat rate. The law also eliminated tax holidays, sales tax exemptions and the State Earned Income Tax Credit, which is a refundable tax credit for low-income workers.
So what did the law do for yacht and jet owners? Well, nothing, really. It preserved the tax breaks that were already in place.
Since 1991, boats and aircraft -- a broader category than just yachts and jets -- have had a sales tax rate of 3 percent, with a $1,500 cap. This means that anyone who buys a boat or plane worth $50,000 or more pays exactly $1,500 in taxes.
The rate had been 2 percent from 1969 to 1991, and the cap was $300 until 1989, according to a document prepared by the North Carolina General Assembly research division.
While Tillis and other Republican state lawmakers did not create tax breaks for plane and boat owners, they left the prior tax breaks in place.
According to the News and Observer in Raleigh, the law only cut 48 of the more than 300 tax breaks included in the tax code. Additionally, the legislature did not include the boat and airplane tax breaks in a bundle of loopholes that received additional scrutiny in a study committee.
It’s also worth noting that Tillis, though he was speaker at the time and supported the bill, was not an author or primary sponsor of the tax code legislation.
The cap on boat and aircraft sales taxes amounts to $10 million in lost annual revenue, according to the N.C. Budget and Tax Center, a liberal advocacy group.
A Senate Majority PAC ad said, "Thom Tillis gives tax breaks to yacht and jet owners."
North Carolina lawmakers, under Tillis’ leadership, overhauled the state’s tax code in 2013. But they left in place a 23-year-old tax break for boats and aircraft. By using the word "give," the statement suggests Tillis created the tax breaks, which he didn’t.
Because the ad turns inaction into action, we rate this claim False.
Senate Majority PAC, "Gambling," Aug. 20, 2014
N.C. General Assembly, "Overview of North Carolina Sales Tax," Nov. 3, 2009
N.C. General Assembly, House Bill 998, accessed Aug. 25, 2014
N.C Department of Revenue, "Sales and Use Tax," accessed Aug. 25, 2014
PolitiFact, "Liberal PAC says Senate candidate Thom Tillis’ tax plan will 'overwhelmingly benefit the wealthy,'" July 22, 2014
PolitiFact, "Did Republican Senate candidate Tillis cut $500 million from the North Carolina education budget?" June 16, 2014
News and Observer, "On NC state sales tax, some get a special deal," April 29, 2013
News and Observer, "New Senate ad attacks Tillis on education funding," June 30, 2014
Email interview, Daniel Keylin, Tillis spokesman, Aug. 23, 2014
Email interview, Sadie Weiner, Hagan spokeswoman, Aug. 23, 2014
Email interview, Ty Matsdorf, Senate Majority PAC spokesman, Aug. 23, 2014
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