What Could Be Wrong with SB 817 Limiting Income Tax to 5.5%

Representative Paul Stam

July 2016

The NC GOP platform (Article II) states, “The government should tax only to raise money for its essential functions. We support a thorough review of expenditures each year, and we support a tax payer’s bill of rights.” “Tabor” is the usual acronym for a “Taxpayer Bill of Rights.” A goal I share with proponents of Senate Bill is a mechanism that will restrain state government from overspending.

But does SB817 proposing a constitutional amendment to limit the rate of state income taxation effectuate these principles? Does it expand taxpayer rights or constrict them? And why is it a constitutional amendment?

Let’s See HERE

What do these 24 states have in common?

Each of them has filed suit against the United States of America because of President Obama’s bizarre interpretation of the word “sex” in Title VII (employment) and Title IX (education funding) relating to “discrimination.” The first was North Carolina Governor McCrory and Secretary Perry v. USA and U.S. Department of Justice and Senator Berger and Representative Moore v. U.S. Department of Justice, 23 other states have joined the battle. In addition, G.G. v. Gloucester County School Board of Virginia in on appeal in the Supreme Court, whose issue is the same. We now have 24 states plus North Carolina, to total 25.

Be sure to read this newsletter HERE from North Carolina Family Policy Council.

For more information on this issue see Legends 2, 6, 12, 14, 15 in Legends v. the Truth about HB2.

The “Bill of Particulars” Refuted

Gene Nichol, a “Distinguished Professor” at UNC Chapel Hill, recapitulated his published rants against the Governor and the General Assembly on June 25, 2016, in The News and Observer. He refers to actions of the Governor and the General Assembly as “insanity,” “tragic,” “cruel and indefensible,” “Foundational un-American,” “stealing,” “Totalitarianism,” “threatening,” “coercion,” “degradation.,” and perjury.” He is quite a wordsmith. His charges are so many that to answer them all would take a book. A sample of his charges will demonstrate his reckless disregard for the facts and the law. Read more HERE.

Legends vs. the Truth about HB2

By: Rep. Paul Stam, Speaker Pro Tem

The narrative of the mass media is that HB 2, (Session Law 2016 – 3, “Public Facilities Privacy and Security Act”) was a big change, an outrageous overreach which denies rights and is unenforceable. Let’s take these 16 legends one by one and explain the law.

Read it HERE.

Read below to see:

No Loss of Federal Funding

Title 9 Myths & Facts

The Impact of G.G. v. Gloucester County School Board

Gaming the System: Lottery Ticket Discounting

Read the entire memo here: Lottery Ticket Discounting for Committee April 14

If you heard that one person had won 85-90% of the major-prize-value lottery tickets purchased at a specific convenience store, a red flag would likely go up. If you were then told that this extremely “lucky” person is the owner of that convenience store, another red flag would go up. Every time someone wins any significant-value prize, that person is beating the odds stacked drastically against them. But when one person is winning such a large majority of the significant prizes, there is cause for concern.

Such scenarios are not imaginative, but have actually occurred frequently across the US. In California, there have been several store owners who have been the holders of around 90% of the winning tickets purchased from their stores.^[1] Investigators are highly suspicious of this, as these store owners would have had to personally spend millions on tickets to get these sorts of results by chance.^[2] An NBC report points to this phenomenon happening nationwide, stating that:

“In Pennsylvania, a Philadelphia retailer cashed eighteen lottery tickets in three months for a total of $45,000. In New Jersey, a retailer cashed 105 lottery tickets for more than $236,000. In New York, another retailer has cashed 120 winning tickets for more than $500,000. In Illinois, we found one store where four employees and five of their relatives cashed a total of 556 winning tickets, for more than $1,600,000.”[3]

If it seems too good to be true, then it likely is. A Dayton, Ohio news source offers an explanation of a practice that could explain why some retailers seem to beat the odds so drastically and win so often:

“In the most obvious form of abuse that the Lottery Commission seeks to curtail, retailers have at times stolen prizes for themselves. In another method, not illegal but against Lottery Commission rules, store employees have at times turned in tickets for the actual winners when the real winners do not want it known that they have won in order to avoid paying child support or other debts. Those individuals can make a small profit by paying a discount for the ticket, allowing the real winner to avoid paying child support, taxes-owed or other debt. The practice is referred to as “discounting” by the lottery commission.”^[4]

Other news sources indicate that ticket discounting is a widespread practice, occurring in various states such as New Jersey[5], Georgia[6], and North Carolina[7]. This practice of ticket discounting is harmful for two obvious reasons. First, it enables players to avoid paying child-support and taxes. Second, ticket-discounting actually rewards retailers with monetary incentive for helping dishonest players avoid paying debts.

The NC Lottery Commission contractually prohibits ticket discounting. The Commission does investigate instances in which it suspects it is occurring. Sometimes lottery investigators catch the perpetrators and sometimes they do not. But this points to a significant problem in our state: the prohibition is simply contractual. Violators would typically be subject to some sort of temporary suspension from selling lottery tickets. If the Commission so chose, it could permanently prohibit the retailer from selling lottery tickets. This type of enforcement is the common practice across various State lotteries.

The State of Indiana, however, is different:

From the Indiana Code: Discounting Tickets

IC 4-30-13-1 Violation; misdemeanor      Sec. 1. A person who knowingly:         (1) sells a lottery ticket and is not authorized by the commission or this article to engage in such a sale;         (2) sells a lottery ticket to a minor; or         (3) sells a lottery ticket at a price other than that established by the commission; commits a Class A misdemeanor. As added by P.L.341-1989(ss), SEC.1.

The State of Indiana has made it a Class A misdemeanor to sell tickets at any rate other than the established one.

There are a couple advantages to Indiana’s system. First, having ticket-discounting specifically classified as a misdemeanor provides further deterrence so retailers will avoid using this practice to make extra money off customers’ winnings. Second, making it a misdemeanor opens up the issue to law-enforcement. The Lottery Commission on its own has been unable to prevent ticket discounting and properly enforce its contractual agreements. Law enforcement agencies have much more resources and investigative personnel. Ticket discounting is a significant problem that compromises the integrity of the NC Lottery and intra-state commerce. This would be a clear and effective first step in addressing the problem. A second possibility is to make the perpetrating ticket retailer secondarily liable for the child support and taxes owed by the original ticket buyer.

[1] See http://losangeles.cbslocal.com/2014/10/30/cbs-2-investigates-lottery-retailers-cashing-in-at-surprising-rates/

[2] One owner would’ve had to spend about $2 million on tickets in order to get his reported $304,000 in prizes; and another owner would’ve had to spend about $600,000 in order to bring in their $59,000 in prizes.

[3] See http://www.nbcnews.com/id/30550956/ns/dateline_nbc-the_hansen_files_with_chris_hansen/t/how-lucky-can-you-get/#.VwUePpwrLIV

[4] See http://www.daytondailynews.com/news/news/frequent-lottery-wins-defy-odds-prompt-suspicion/nhLnW/

[5] See https://www.lotterypost.com/news/232537

[6] See http://www.myajc.com/news/news/state-regional-govt-politics/lottery-overlooked-highly-improbable-win-patterns/nhPr8/

[7] See attached report

I WANT TO HELP PAYPAL

Find a Suitable Place of Service

On March 16, PayPal announced that it would gladly receive $3.6 million from the state of North Carolina to locate a new facility near Charlotte. Then on April 5^th, PayPal President & CEO, Dan Schulman, announced that it would not move to North Carolina because of the passage of SL 2016-3. Certainly, this was not because of the bathroom/locker-room situation since the bill did not even apply to private business facilities. PayPal was incensed at the so-called failure of the legislation to include extra special protections for sexual orientation, gender expression and gender identity. Read my response HERE.

Liberal groups have been claiming that North Carolina schools and universities will lose around $4.5 billion in Title IX funding due to SL 2016-3, Public Facilities Privacy & Security Act. This claim is false.

Title IX ensures that “no person in the United States shall, on the basis of sex, be excluded from participation in, be denied the benefits of, or be subjected to discrimination under any education program or activity receiving Federal financial assistance.”20 U.S.C. §1681(a).

Under current law, neither states nor school districts will lose Title IX funding for enacting laws and policies that require students to use the restrooms and locker rooms of their biological sex. Find out why HERE.

Liberal groups have been circulating the claim that SL 2016-3, Public Facilities Privacy & Security Act, discriminates against Veterans. CLICK HERE to see a list of benefits, protections, or preferences that the State and federal government offers for active military and veterans.

Deceptive Advertising in the North Carolina Education Lottery

By: Representative Paul Stam

Speaker Pro Tem

March 10, 2016

Table of Contents:

“No Advertising may be Misleading, Deceptive…”

“Fools will play the lottery and now if we can attract more fools to play the lottery and they choose that, I’m not sticking a gun to their head.”NCGS § 18C-114 Powers and duties of the Commission

8 Little Rules the House had to Break to Pass a Lottery

Deception in the NC Education Lottery

8 pages previously presented to members of the Lottery Oversight Committee on February 11, 2016, featuring Powerball and its advertisements

Memo by the Fiscal Research Division addressing the Powerball jackpot of January 2016.

Memorandum from Rep. Stam on October 24, 2014, “New Lottery Ad is Extremely Misleading: “All or Nothing.”

Exhibits of the “All or Nothing” logo and advertisement

“What is N.C. after? Bucks, bucks, bucks!” Charlotte Observer, May 27, 2011

Advertisement revealing the top prize of $200,000 with the odds of winning at 1 in 3.9.

Letter to Senators Brown, Harrington, Hunt and B. Jackson on July 14, 2014 concerning SB 744/Lottery Advertising Component

Specifically responding to statements from the transcript of the Senate hearing on June 12, 2014.

Transcript of the Senate Appropriations Committee Meeting on the Lottery on June 12, 2014

Lottery Studies

Selling Hope State Lotteries in America, by Charles Clotfelter & Philip Cook

Do Lotteries Hurt the Poor? Well, Yes and No By: Charles Clotfelter

Transcription of the National Gambling Impact Study Commission Meeting, March 19, 1999.

Duke Professors’ contact information

Honest Lottery Act

House Bill 156 (Second Edition) and Fiscal Note

Internal Memoranda

Memorandum from Dylan Finch (Legislative Intern) to Representative Paul Stam on December 3, 2013 concerning “An examination of Lottery Funding and Sales for Six Counties in North Carolina.”

Memorandum from Brian Miller (Legislative Intern) to Representative Paul Stam on February 24, 2016 “Lottery Corruption” concerning Eddie Tipton.

Memorandum from Brian Miller (Legislative Intern) to Representative Paul Stam on February 24, 2016 concerning “NC Lottery: A Case of Subtle but Sure Injustice”- picking a winner before paying for the ticket.

Attached Report: Investigation by NCEL

Click HERE to see a condensed version of the handout.

Thursday, February 11, 2016, the Staff of the Lottery Commission made a pitch to the Joint Legislative Oversight Committee on the North Carolina State Lottery to increase lottery advertisement in an effort to increase profits payable to the State. Please see HERE and HERE for some of the negative consequences of this action.

For further information, please contact Rep. Paul Stam at 919.362.8873.

Lottery Officials Talk State Proceeds via Time Warner Cable RALEIGH — Lottery numbers in North Carolina continue to be on the rise. Last year contributing over $520 million into education in the state. But when compared to neighboring states, North Carolina makes substantially less in profits per capita.

“I am determined from North Carolina, to hit these numbers,” says Alice Garland, executive director of the NC Education Lottery. “I mean Virginia is 26 years old, they are older than Georgia. I am determined we are going to hit these numbers way before Georgia and Virginia did.”

Lawmakers questioned the reason for the lower proceeds.

“When I go down to Virginia, I notice that they are substantially higher in their advertising and produce a pretty significant difference in their operating profits,” says Sen. Rick Gunn, a Alamance County Republican.

Lottery officials say advertising does have a lot to do with sales.

“A lot of that goes to marketing, our budget’s restrictive and what we can say in our ads is restrictive,” says Garland.

“They would get more people to gamble,” says Rep. Paul Stam, the House Speaker Pro-tem. “But why do you want to hoo-doo your own citizens?”

But some lottery opponents say they believe lottery advertising is deceptive, and that is what should be changed not how much money is given toward.

“You could have a lottery that’s honest and bring in about 400 million a year,” says Stam.  “Or you could have a lottery that is dishonest and bring in about 500 million.  So why not just bring in the 400 million.”

Meanwhile, lottery proceeds are likely to be on the rise again this year. That is following the record jackpot for Powerball earlier this year, which already exceeded proceed expectations from that game, as well as how much is contributed to the education fund.

Remarks to the Civil Justice Reform Study Group on April 20, 2010 By Rep. Paul Stam, North Carolina House Republican Leader

I hate joint liability. By joint liability I mean making a person possibly pay all the damages when that person was only partially at fault. Excluded from this discussion of joint liability is a case where two people are consciously acting together.

Issues of joint liability or vicarious liability have been around for a long time. Let’s start at about 5,000 years ago with the Code of Hammurabi from Mesopotamia.

“If a builder build a house for someone, and does not construct it properly, and the house which he built fall in and kill its owner, then that builder shall be put to death (Sec. 229)”

“If it kill the son of the owner the son of that builder shall be put to death (Sec. 230)”

“If it kill a slave of the owner, then he shall pay slave for slave to the owner of the house (Sect. 231)”

Hammurabi was engaged in tort reform, but failed to remember justice.

Some think that the Mosaic law “evolved” from the Code of Hammurabi. I think that is nonsense. While some of the subjects of the Mosaic law are understandably the same, in many instances the Mosaic law is an emphatic rejection of the Code of Hammurabi. For example Deuteronomy 24:16 repudiates the sections quoted above: “Fathers shall not be put to death for the sons nor shall sons be put to death for their fathers. Everyone shall be put to death for his own sins.”

At Nuremberg Count Three of the Indictment charging War Crimes included this specification:

“(F) The Exaction of Collective Penalties – The Germans pursued a systematic policy of inflicting, in all the occupied countries, collective penalties, pecuniary and otherwise, upon the population for acts of individuals for which it could not be regarded as collectively responsible; this was done at many places, including Oslo, Stavanger, Trondheim, and Rogaland.”

Similar instances occurred in France, among others in Dijon, Nantes, and as regards the Jewish population in the occupied territories. The total amount of fines imposed on French communities add up to 1,157,179,484 francs made up as follows:

A fine on the Jewish population 1,000,000,000

Various fines 157,179,484

“These acts violated Article 50, Hague Regulations, 1907, the laws and customs of war, the general principles of criminal law as derived from the criminal laws of all civilized nations, the internal penal laws of the countries in which such crimes were committed and Article 6(b) of the Charter.”

Through the ages bad people have wanted to be reimbursed in full even when they cannot find the real culprit.

Justinian had codified (through Trebonius and Corpus Juris Civilis – 529 AD) the Mosaic law on this subject in Institutionum Sive Elementorum. The very first title of the first book states:

“Iustitia est constans et perpetua voluntas ius suum cuique tribuens. Iurisprudentia est diuinarum atque humanarum rerum notitia, justi atque iniusti scientia.”

“Justice is the constant and perpetual wish to render everyone his due. Jurisprudence is the knowledge of things divine and human; the science of the just and the unjust.”

In latin “scientia,” from which we presumably obtain the word “science” was then used as a term to distinguish justice from injustice.

“The maxims of law are these: to live honesty, to hurt no one, to give everyone his

due.”

Since about 529 A.D. in this Corpus Juris Civilis, (with Tribonium as the editor and Ulpian as the source), Emperor Justinian thus codified the learning of the Roman World.

This phrase from Corpus Juris Civilis is the first principal of justice – that the goal is that each individual be treated as an individual and not as part of a group.

Dietrich Bonhoeffer in his Ethics noted:

“The most general formulation of rights given with the natural is, in the words of Roman law, suum cuique, to each his own.”

But in a footnote Bonhoeffer noted the irony that in the Third Reich this phrase, “to each his own” is translated in German “Jedem das Seine” and was part of the wrought-iron inscription on the gate of the Buchenwald concentration camp.

Those who wish to distort justice need to deal with the innate knowledge of all people that treating individuals as a group is wrong.

This was not just known in the Eastern Roman Empire. The Spanish epic work of Las Siete Partidas, (The Seven Parts) Part 3, Title One, Law III:

“What Justice Means, and How Many Precepts She Has.

According to the precepts of the ancient sages justice means something in which are included all rights of every description whatsoever. The commands of justice and law are three in number; first, that every man should live honestly, so far as he himself is concerned; second, that he should not do wrong or injury to another; third, that he should give to each one that to which he is entitled. He who complies with these precepts performs his duty to God, to himself and to the men with whom he lives, and renders and maintains justice.”

This principle passed from Roman law through the Middle Ages and has been adopted as the motto of the North Carolina Supreme Court. The question arises whether the North Carolina Supreme Court adopted “cuique suum tribuere” from Justinian, or directly from Revelation 22:12:

“Behold I come quickly and my reward is with me, to render to every man according to what he has done.”

In a lecture by Russell Kirk (1993 Heritage Foundation Lecture #457) the preeminent philosopher of conservatism elaborates. “This is a species of “distributive justice” as in the Book of Romans:

“Render to all their dues; tribute to whom tribute is due, custom to whom custom, fear to whom fear, honor to whom honor, owe no man anything but to love one another.”

Russell Kirk tells us that this Christian concept of justice (which came through Moses) comes to us through Plato, Aristotle, Saint Ambrose and Saint Augustine of Hippo and notes that Aristotle gave a specific slant on it:

We know it is unjust to treat equal things unequally. But it is also unjust to treat unequal things equally.

Application: North Carolina has doctrines in tort of joint and several liability – that is all those who help cause the harm are jointly liable for it all. So if the main culprit, the one who is 90% at fault, can’t pay, (he is insolvent or has flown the coop), the one who is 10% at fault gets to pay all the damages. This is unjust and wrong. Reminds me of Babylon or of Oslo.

Note: This is not a verbatim recount but by memory, and as revised for clarity.

HB 4 (Extra Session 2007)

PAUL STAM’S SPEECH – GOOD YEAR INCENTIVES

September 11, 2007 – edited for clarity

I opposed the $40 million bill (HB 1761 and vetoed by the Governor) and I certainly oppose this $60 million bill and I would like to give a few of my reasons.

First of all there are no additional safeguards in the bill to speak of. All of the safeguards talked about can be imposed by the Governor’s Economic Investment Committee as part of the contract.

Secondly, the underlying argument here for most of the proponents is that people will suffer if we don’t pass the bill. Of course they can’t know that because that is an unknowable, and a predicate to that assumption is that this bill is actually enough to change the behavior of these firms and corporations. Within a reasonable degree of certainty (maybe 99%) we know that is not true for a couple of reasons:

First reason, Firestone. We were told in committee that a couple of years ago Firestone was turned down for this type of grant and they made the investment anyway. The bill is retroactive to pick up the investments they have already made of $60 million. How a grant to Firestone can possibly induce an investment that is already in the ground just boggles the imagination. I don’t fault the people from Wilson who got Firestone in the bill because Firestone was being treated unfairly, as are all other businesses in this state that are being treated unfairly by the resulting bill. Read full speech.

Lawyers Group Proposes Innovative Incentive Program

March 2, 2007

The Lawyers Improvement Association of Beltline Legal Experts proposed a new economic development tool for the state.  It is guaranteed to boost the economy by creating and retaining high paying jobs.

First, a little background:  Historically North Carolina had the fewest attorneys per capita of any state in the nation.  But a strong and vibrant legal community is absolutely necessary to the 21^st century litigation economy.  In December, 2003 the General Assembly spent $214 million (or $214,000 per job) to induce Merck to bring 200 jobs to the distressed areas of Treyburn in Durham and for RJR to bring 800 jobs to distressed areas of Winston-Salem (after RJR had just laid off 2,500 workers).  That deal was criticized by some Neanderthal Troglodytes who were unenlightened as to modern American business practices.  Now we realize that this incentive package for RJR/Merck in December should have been twice as rich when we found out that RJR reduced its tobacco buy by 50% for 2004.  And just last month Google responded to our states offer of $260 million to place 210 wonderful jobs in Caldwell County (only $1,200,000 per job – a steal at half the price).  Apparently, the more we spend on each job the better the economy will be. Read the full proposal.

For a look at the 1989-1990 Biennium in the North Carolina General Assembly, see this report from my first term in office.