It has been four years since the legislature last passed a significant tax reform. Key senators hope to get back on track this year.
Senate Finance Chairs Paul Newton, Bill Rabon, and Warren Daniel discussed their plan in a press conference this morning.
The biggest item would distribute $1 billion in grants using federal money from the American Rescue Plan Act (ARPA) to businesses that received earlier rounds of COVID relief. So as not to come afoul of a questionable provision in ARPA, Newton emphasized, “the tax cuts [in the rest of the bill] have nothing to do with federal money.”
Personal Income Tax
The most noticeable change for most people would be a personal income tax reduction of $587 million.
- Cut tax rate from 5.25% to 4.99%
- Increase standard deduction “zero tax bracket” from $21,5000 to $25,500 for a married couple filing jointly
- Expand per-child deduction amounts by $500 and income eligibility limit
Corporate Income Tax
Between 2024 and 2028, the corporate income tax would phase out in 0.5% increments. This would eliminate what Roy Cordato called “a deceptive tax because it is invisible to those who are paying it.” My colleagues Brian Balfour and Jon Sanders have often written on Gov. Cooper’s eagerness to pay large companies to locate in North Carolina and his opposition to broad tax relief that includes companies already in the state.
Corporations would be able to calculate their franchise tax burden without concern about their property in North Carolina, shifting the burden from companies with a large physical presence to companies outside the state. Companies would save at least $150 million beginning in FY2022-23.
Proceeds from taxes on peer-to-peer car-sharing and short-term rentals would go to the Highway Fund. The bill would impose higher excise taxes on cigars shipped from outside North Carolina, exempt commercial cemeteries and vaccines held by private medical practices from local property tax, extend the time to complete Mill Rehabilitation projects, and make other changes.