However, a central sticking point in the negotiations will be the tax side. Cooper has proposed a $ 366 million package consisting of an Earned Income Tax Credit and a Child and Dependent Tax Credit. For its part, the Senate is reportedly considering a further cut in income taxes in the form of a lower rate (4.99% vs 5.25%) and an increase in the standard deduction. The total annual cost of the Senate proposal is estimated at $ 1.25 billion.
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I am only speaking as a minor clerk, and I don’t think either of the two tax cut options is sufficiently responsive to the present moment. While I have advocated adding or expanding child tax credits in the past to compensate larger families for the loss of personal exemptions, the federal incentive law just passed by Congress already contains gigantic – and often fully refundable – tax credits for families in North Carolina.
A further quarter point in income tax cuts is a welcome relief for many households and will give a little boost to economic growth. But given the circumstances, I think there is a better lever: corporate tax.
Haven’t legislators cut the corporate rate many times over in North Carolina? Yes. Our state now has the lowest rate of any state taxing corporate income. This is good news because when it comes to making states more attractive to invest and create new jobs, the economic benefit of corporate tax cuts per dollar is likely greater than any other type of tax break.