While defenders of North Carolina’s status quo moan, groan, complain, and sign up to be arrested, legislative reformers are keeping their noses to the grindstone on a tax reform package that will provide relief to millions in our state. JLF’s John Hood writes about the status of the plans – and their impact – as legislators near a deal to provide true tax relief to North Carolina families.
The House tax bill is a good first step towards a simpler, fairer, pro-growth tax code. It cuts marginal tax rates on work, savings, and capital formation, and provides net tax relief to most North Carolina households. As a net tax cut, it has a fiscal impact equal to about 1 percent of the state’s General Fund revenue in the short run and about 2 percent in the long run.
The Senate’s new tax bill is an even bigger step towards a kind of tax code North Carolina needs. It establishes a 5.25 percent flat tax on personal income and eventually eliminates the corporate income tax, which is responsible for a disproportionate share of the complexity and economic damage imposed by the state’s entire tax code. If the Senate tax bill became law, North Carolina would go from having one of the nation’s worst tax climates for business to having one of the nation’s best.
The entrenched beneficiaries of taxpayer dollars will always fight reformers. Thank goodness the GOP-led reformers are willing to take the arrows and insults in order to help put the state back on a path toward prosperity and competitiveness.
