Yesterday while reading through the budget, my colleague and I ran across some interesting language in the latest version of the state’s two-year spending plan. Lawmakers are claiming that the corporate income tax will be lowered to 3%, but that isn’t necessarily the case. Below are some excerpts from a Carolina Journal story that explains the change and why the corporate rate will more than likely stay at 4%.
As part of the 2013 budget bill, the General Assembly inserted a trigger that — if General Fund tax revenues grew as projected — would reduce the corporate tax rate by 1 percent in two consecutive years. The trigger was inserted as a safeguard to protect state revenues in case of a recession or some other economic drain on tax collections.
The corporate income tax rate will drop to 4 percent on Jan. 1, 2016, because General Fund tax collections surpassed $20.2 billion at the end of the 2014-15 budget year, which ended June 30. For the rate to slip to 3 percent, General Fund tax collections for the current fiscal year ending June 30, 2016, would need to reach $20.975 billion. Failure to hit the target would leave the corporate tax rate at 4 percent.
The “money report” attached to the new budget bill projects net General Fund tax revenues, after applying newly enacted tax cuts, will be $20,900,300 — $74.7 million short of the target. On page 413 of the budget document, a provision repeals the June 30, 2016 deadline, so the 3 percent rate could take effect in a later year when revenues hit the target.
To read the entire article by Carolina Journal’s Dan Way, click here.