RALEIGH — N.C. Senate Republicans would continue to move the state’s tax policy in the right direction, cutting rates and returning money to the families and business owners who propel North Carolina’s economic growth.
That’s the initial assessment John Locke Foundation Senior Vice President Becki Gray offers of the proposed Billion Dollar Middle Class Tax Cut Act. “This plan would continue the bold leadership legislators have shown on tax policy since 2011,” Gray said. “If lawmakers enact this plan, North Carolina will continue to position itself well for economic growth and prosperity.”
Cuts in the individual and corporate income tax rates continue momentum started four years ago, Gray said. “Remember that North Carolina had a top marginal tax rate of 7.75 percent just a few years ago, while this plan would drop the rate down to 5.35 percent,” she said. “Plus our old three-tiered income tax is gone, replaced by one flat rate that applies to everyone. Those at the lowest end of the income scale benefit even more. The amount of income exempted completely from state income tax jumps from $17,500 to $20,000 for a married couple filing jointly.”
The proposed corporate rate tax cuts would move North Carolina closer to the worthwhile goal of ending the corporate tax completely, Gray said. “Businesses don’t really pay this tax: It falls instead on customers, employees, and shareholders,” she said. “Lowering the rate from 3 percent to 2.5 percent over the next two years moves the state in the right direction.”
The plan offers additional tax relief for families with children, Gray said. “Converting an existing child tax credit into a new deduction, families making up to $40,000 in income will see more relief,” she said. “Plus the new deduction will cover more people. It takes in families earning up to $120,000 a year.”
The Senate plan raises no taxes or fees. That includes no change in the state’s sales tax base. “It was nice to see Gov. Cooper promise no tax or fee increases,” Gray said. “It’s even nicer to see Senate Republicans go beyond that admirable goal and actually allow people to spend and invest more of their own money.”
Senators estimate that their plan will generate almost $200 in additional annual savings for a family of four making the state’s median income of just under $47,000. “Add that additional savings to the tax cuts enacted since 2013, and this family will pay almost $320 less in taxes in 2018 than it did in 2012.”