by Mitch Kokai
Senior Political Analyst, John Locke Foundation
Two years ago during the summer of 2013, North Carolina legislators passed historic tax reform that reduced income tax rates on individuals, families, and employers. This is considered by many to be the top policy achievement to date for North Carolina Republicans, who in 2010 took control of the state legislature for the first time in a century. However, Democrats in the legislature skewered the plan when it passed and continue to do so to this day, bemoaning the loss of revenue to government coffers.
This week, state officials announced that North Carolina will end its current fiscal year on June 30th with a $400 million surplus. North Carolina Republicans are pointing to the surplus as an indicator that the 2013 tax reform plan is working as intended and critics were wrong. …
… The surplus is a positive development for North Carolina employers and companies considering a move to the state, as it means the budget will meet the revenue triggers required for further corporate tax relief under the 2013 tax reform plan. The state corporate tax rate will now go from five to four percent. This corporate rate reduction will increase the job-creating capacity of North Carolina employers. Before passage of the 2013 tax reform plan, North Carolina had higher personal and corporate state income tax rates than all of its neighbors. Now Tennessee is the only border state with a lower rate.
That wasn’t the only significant fiscal news from the Tar Heel State this week. On Tuesday, Gov. Pat McCrory (R) announced that North Carolina has paid off ahead of schedule the $2.7 billion unemployment insurance debt to the federal government the state wracked up following the Great Recession. Paying off this debt four years early will reduce payroll taxes on North Carolina businesses by $280 million next year and as much as $700 million by 2017.
According to a National Bureau of Economic Research working paper, Congress’s decision to halt long-term unemployment benefits accounts for most of the employment growth in the U.S last year. North Carolina was ahead of the rest of the country in cutting long-term unemployment benefits, exiting the program in 2013. …
… If finding out the state has a surplus and businesses will save money due to early retirement of unemployment insurance debt weren’t enough good news, a bill that would reduce electric bills for North Carolinians cleared the state House of Representatives … by a vote of 77 to 32 and now moves to the Senate.