“We are encouraged by (Wednesday’s) announcement of a tax reform plan that will allow North Carolinians to keep more of their hard-earned money,” said Civitas Policy Director Brian Balfour. “The plan is projected to result in a net tax cut of $1.9 billion over the next five years, which will make our state even more competitive for job growth and investment.”
In a joint Commerce Committee meeting, Senate leaders introduced significant changes to House Bill 117, known as the “NC Competes Act.” The changes include reductions in the state personal income and corporate taxes and a modest expansion of the sales tax base to include items such as veterinary services and installation and repair of tangible personal property.
“Reducing income taxes and broadening the sales tax base to keep those rates low are keys to state economic growth,” Balfour added.
The 2013 reform boosted North Carolina’s state business tax climate ranking by the Tax Foundation from a dismal 44th to 17th, and the results ever since have been promising. North Carolina’s rate of job growth (2.6 percent) over the last year has exceeded the national and Southeast regional averages (2.2 each), in part thanks to the 2013 tax reform laws that mostly took effect in 2014.
The Senate has also insured that lower-income workers will see a proportionally larger cut in income taxes by increasing the standard deduction in 2016 by almost 17 percent ($1,250-$2,500, depending on filing status) and increasing it yearly through 2020. They also reinstated several itemized deductions to follow federal tax laws. These changes will tend to most help lower-income workers and retirees.
The main premise driving the tax reform was reducing income taxes and shifting the state to a more broad-based consumption (sales) tax, based upon research showing the income tax to be more harmful to state economic growth than the sales tax. The tax changes discussed today take North Carolina further down that path.
Civitas does, however, express disappointment with the crony capitalist aspects that remain in HB 117, such as millions of taxpayer dollars for the corporate-welfare JDIG program.
The Civitas Institute is a policy institute based in Raleigh, N.C. Founded in 2005, it is “North Carolina’s Conservative Voice.” The vision of the Civitas Institute is of a North Carolina whose citizens enjoy liberty and prosperity derived from limited government, personal responsibility and civic engagement. The mission of the Civitas Institute is to facilitate the implementation of conservative policy solutions to improve the lives of all North Carolinians.