In a press conference this morning, chairmen of the Senate Finance Committee unveiled a tax cut plan projected to save taxpayers more than $1 billion over the coming biennium. Following are the highlights from the plan:
- Personal income tax changes: Lower the rate from 5.499 to 5.35 percent effective 2018. Also, increase the standard deduction from $17,500 to $20,000 for married filing jointly, and $8,750 to $10,000 for single filers. Changing the existing child tax credit to a sliding scale that falls as income rises. For those with family income under $40k, the credit would rise to $2,500 per child, and drop by $500 per every $20k increase in income; up to $120k when it falls to zero. For those who itemize, the mortgage interest and property tax deductions are increased.
- These changes are estimated to save taxpayers nearly $300 million in their first year, and $600 million the following year.
- According to a press release, the increase in the standard deduction will remove about 94,000 families from state income tax liability. Together with increasing child tax credits, families of four earning less than the federal poverty level of $24,600 would be exempt from NC state income tax.
- The removal of these additional families, according to the release, would “move North Carolina closer to the goal of phasing out state income taxes.”
- Corporate tax cut: the corporate tax rate would fall from 3% to 2.75% in 2018, then to 2.5% in 2019. This is estimated to save those taxpayers nearly $120 million over the next two years.
- Simplify and reduce franchise tax on small businesses: would create a flat $200 franchise tax on the first $1 million of a businesses’ net worth. This is projected to save businesses nearly $20 million a year once implemented.
- Move to market-based sourcing: this would include a change in how service-based revenue is apportioned for tax purposes, moving to where the income-producing activity is performed. This change is estimated to increase taxes on net for those affected by $15 million over the coming biennium.
Sponsors of the legislation claim that 99 percent of NC taxpayers would pay less or no state income taxes under this plan, with the majority of benefits going to families earning less than $50k per year.
Overall, the plan is projected to generate total tax savings of $324 million in the 2017-18 fiscal year, and $710 million in FY 2018-19.
These changes will no doubt help to further improve North Carolina’s business climate, and stimulate continued economic and job growth. One area of concern, however, is how the plan strays from a main principle guiding recent tax reforms: broaden the tax base to help lower rates. By expanding the standard deduction and bringing more people off the tax rolls, and by failing to expand the sales tax base, the tax base becomes narrower and thus rates remain lower than they could otherwise be.
Cut the rates and expand the sales tax! Push expenses to the local level!! “Hooray” shout NCCivitas. Nothing is better than a State, Nation, and Planet full of haves and have nots. NCCivitas’s narrow and shallow views are void of experience and reality.
As a new business owner, I feel safe in remarking that new business start ups face an uphill battle just to survive. Tax policy that promotes new businesses and encourages success would do much to stimulate economic growth on the local level and financial security at the state level. Many out there don’t realize some basic realities of starting a corporation. You have to survive for 2 years before you are recognized as a viable entity by financial institutions. That means typically that growth is painfully slow, and must constantly be financed from the pocket of the shareholders. That means owners who work for the business and usually make almost nothing for those two years. If the government accepted this reality and adjusted the tax laws appropriately, we might see small businesses start to thrive again. Overtaxing and overregulating are the bane of the mom and pop businesses. It’s time to turn things around to get back to what made this nation successful to begin with.
I believe nc shouldn’t tax retirement pensions like Pennsylvania! That would help a lot?
Taxation is theft. Especially the personal property tax which is nothing more than taxing an item over and over again. Who came up with that hair brained scam.
NC is piling up debt on its retirement promises. This cut will only make the debt worse. Our law makers are kicking the can down the road!! The lawmakers are not telling the public of the problems affording the retirement promises to those who left industry to teach in public schools.
Mark Brewer.who came up with that tax.Same ones that came up with all taxes.People like George.Democrats.
Can we take off the Republican and Democrat goggles. Seems that is the only method issues get analyzed today. Can we just take off the goggles!
Look at it from the functions of government, and the resources needed to perform tasks. From there a simple tax method should be established to gather the funds necessary.