There are several tax reforms being considered during the short session.  Whether it’s increasing the standard deduction (aka zero tax bracket), capping the personal income tax rate, moving towards a consumption tax, repealing the capital gains, changing the way expenses are deducted, there are lots of ideas to think about.  Recently I was asked about the policy implications of repealing the 1%/$80 mill machinery privilege tax.

Repealing the 1%/$80 excise tax is consistent with the Locke Foundation’s long held position on state sales tax policy. Scholarly research shows us that lower taxes, along with other conservative ideas, lead to greater economic growth. Fewer taxing options available to a government entities result in a lower tax burden. Repealing the mill machinery privilege tax does both.

And repeal is a strong step in the right direction of eliminating business to business taxes. With 40% of the state sales tax base representing business to business sales, repeal of this tax is a positive direction to go. A report from the Legislative Analysis Division calculates the fiscal impact of an exemption to be $45 Million.

In order to remain competitive, all of our neighboring states, Virginia, Georgia, South Carolina and Tennessee have complete exemption for the state sales tax on this equipment. North Carolina should do the same.