A Marine Color Guard marches into the Senate Chamber during the opening session of the North Carolina General Assembly in Raleigh, NC, Wednesday, Jan. 13, 2021. (AP Photo / Gerry Broome)
RALEIGH – Republicans in the state Senate last week launched a major tax cut package that they say would “result in a 21% income tax cut for a family of four on the median household income.”
“The state has had six budget surpluses in the past seven years. We have billions of dollars in unreserved cash, ”Senator Paul Newton (R-Cabarrus) said in a statement. “The Republican philosophy, if the government is collecting more money than it needs, is to give it back through tax breaks, and that’s what we’re doing here.”
The new tax proposals, House Bill 334 / Senate Bill 112, are part of a package that goes through the Senate committees before it is expected to reach the Senate.
Senate lawmakers said the proposal would “disproportionately benefit” low-income earners, citing that the percentage of applicants earning less than $ 50,000 a year would decrease from 10% to 8.8%, while those who do Earning $ 200,000 would pay a larger stake based on the current rate of 43.4% to 44.9%.
The Associated Press reported that Governor Roy Cooper’s spokesman Ford Porter said, “The last thing we need is broader tax breaks for businesses and the richest among us instead of investing in our hard-working families and communities.”
The North State Journal reached out to Governor Cooper for comment but received no response.
“After a year of exposing and exacerbating inequalities, North Carolina Republicans are still prioritizing affluent and big business in the General Assembly, while income inequality grows and public education – one of the most powerful drivers of our economic future – suffers.” North Carolina Democratic Party chairman Bobbie Richardson said in a statement.
Republicans argued that they had managed to increase spending on education while further cutting taxes. The example given was the 39% increase in spending per student.
“Ten years of good Republican governance have left North Carolina in better shape than any other state in the country. Our philosophy has always been, if the government has too much of your money, we should give it back to you, ”said Senate Leader Phil Berger (R-Eden) of the package.
The tax cuts for individuals are identical to those in Senate Act 337, which also increases the state standard deductions. The increase in deductions will match the federal deduction rates for 2022. For example, a married couple filing an application together would increase their deduction by $ 4,000, from $ 21,500 now to $ 25,500.
The income tax rate will increase from 5.25% to 4.99%. For a family of four with a median income of $ 54,602, that translates to a saving of around $ 325.
The standard deductions for children have expanded eligibility and would also increase. A middle-income family of four would experience a $ 1,000 increase from the current $ 4,000 child allowance to $ 5,000.
The corporate tax rate would also be reduced by 0.5% from 2024. This decrease will continue annually to zero in 2028. Six other states currently have no corporation tax.
The bill aims to reduce franchise tax liability for businesses with real estate in the state by eliminating certain tax bases that are used to calculate those liabilities.
Included in the package is an “automatic grant” of $ 18,750 to companies, funds from the COVID-19 job retention program, an advance loan for economic injury, funds from the Paycheck Protection Program, funds from the restaurant – Have received a revitalization fund or funding from the Shuttered Venue Operators Grant Program.
According to the summary of the proposal, it should also:
- Simplify and lower franchise tax for some taxpayers by eliminating the two alternative franchise tax bases charged on a taxpayer’s real estate investment in the state.
- Extension of the process for mill rehabilitation projects by two years from January 1, 2023 to January 1, 2025 and the process for renovated train station projects from January 1, 2022 to January 1, 2024.
- Extend the tax credit on refurbished train station projects by changing the terms to include another project.
- Limit the gross premium tax on security deposits to the amount that the surety pays to the bond insurer, effective for tax years beginning on or after January 1, 2022.
- Change in excise duty on cigars to tax online sales in the same way as in-person sales, and cap the tax to 30 cents per cigar for all sales, whether in person or online, with effect from January 1, 2022.
- State and local sales tax levied on short-term vehicle rentals by a peer-to-peer vehicle sharing intermediary, applicable to sales beginning October 1, 2021.
- End of the transfer of the alternative motorway use tax levied on short-term vehicle rentals to the General Fund, so that all income from the alternative motorway use tax is credited to the motorway fund.
- Vaccine and commercial cemetery property exemptions from local property tax base, applicable to taxes levied for tax years after or after July 1, 2022.
According to The Tax Foundation, if the current tax proposal goes into effect, the state would move from its current ranking of 10 to number 5 in the Group’s state corporate tax climate ranking. In 2011, North Carolina was ranked 46th in the country for corporate tax climate.