Senate tax cut plan lowers personal rates, phase out corporate tax by 2028 – The North State Journal

A Marine Color Guard enters the Senate Chamber during the opening session of the North Carolina General Assembly in Raleigh, NC on Wednesday, Jan. 13, 2021. (AP Photo / Gerry Broome)

RALEIGH – Republicans in the State Senate launched a comprehensive tax cut program last week that they said “would result in a 21% income tax cut for a family of four earning the income median of households ”.

“The state has had budget surpluses in six of the past seven years. We have billions of dollars in unreserved cash, ”Senator Paul Newton (R-Cabarrus) said in a statement. “The Republican philosophy when the government raises 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 body of work through Senate committees before it is supposed to reach the Senate floor.

Senate lawmakers said the proposal would “disproportionately benefit” low-income people, citing that the percentage of tax filers earning less than $ 50,000 a year would rise from 10% to 8.8% while those earning 200,000 $ would pay a larger share, ranging from the current rate of 43.4% to 44.9%.

The Associated Press reported that Gov. Roy Cooper’s spokesperson Ford Porter said, “The last thing we need is bigger tax breaks for businesses and the wealthiest among us, instead of investing in our hard working families and communities.

The North State Journal has contacted Governor Cooper for comment, but has not received a response.

“After a year of seeing inequalities exposed and exacerbated, North Carolina Republicans in the General Assembly still prioritize the rich and big business, as income inequality grows and public education – one of the most powerful engines of our economic future – suffers from it, ”he added. North Carolina Democratic Party Chairman Bobbie Richardson said in a statement.

Republicans argued they were able to increase spending on education while continuing to cut taxes. One example given is the 39% increase in spending per student.

“10 years of responsible Republican governance has left North Carolina in better shape than any state in the country. Our philosophy has always been that when the government has too much of your money, we owe it to you, ”Senate Leader Phil Berger (R-Eden) said of the package.

The tax cuts for individuals are identical to those in Senate Bill 337, which also increases the state’s standard deductions. The increase in deductions will match the federal deduction rates for 2022. For example, a married couple making a joint claim would see their deduction increase by $ 4,000 from the current $ 21,500 to $ 25,500.

The personal income tax rate will drop from 5.25% to 4.99%. For a family of four with a median income of $ 54,602, that means savings of about $ 325.

Standard child deductions have broadened eligibility and would increase as well. A family of four with a median income would see an increase of $ 1,000 from the current child deduction of $ 4,000 to $ 5,000.

The corporate tax rate would also be reduced by 0.5% starting in 2024. This decrease will continue each year until it reaches zero in 2028. Six other states currently have no corporate taxes .

The bill seeks to reduce the franchise tax obligation for corporations that own real estate in the state by removing certain tax bases used to calculate those obligations.

The package includes an “automatic grant” of $ 18,750 to businesses that have received funds from the COVID-19 job retention program, an economic disaster loan advance, funds from the Check Protection Program. pay, Restaurant Revitalization Fund money or Grant Program funds for closed site operators. .

According to the summary of the proposal, it also aims to:

  • Simplify and reduce the franchise tax for some taxpayers by eliminating the two alternative franchise tax bases that are calculated on a taxpayer’s real estate investments in the state.
  • Extend by two years the time delay applicable to factory rehabilitation projects from January 1, 2023 to January 1, 2025, and the time delay applicable to rehabilitated station projects from January 1, 2022 to January 1, 2024.
  • Improve the tax credit for rehabilitated station projects by modifying the conditions for an additional project to be eligible.
  • Limit the tax on gross premiums on sureties for sureties to the amount remitted by the guarantor to the surety insurer, in effect for tax years beginning on or after January 1, 2022.
  • Amend the excise tax on cigars to tax online sales in the same way as sales in person, and to cap the tax at 30 cents per cigar for all sales, in person or online, as of the 1st January 2022.
  • Impose national and local sales tax on short-term vehicle rentals by a peer-to-peer vehicle sharing facilitator, applicable to sales made on or after October 1, 2021.
  • End the transfer of the alternative road use tax imposed on short-term vehicle rentals to the General Fund, so that all revenues generated by the alternative road use tax are credited to the Road Fund.
  • Exempt vaccines and commercial property of cemeteries from the local property tax base, in effect for taxes imposed for tax years beginning on or after July 1, 2022.

According to The Tax Foundation, if the current tax proposal is enacted, the state would drop from its current ranking of 10 to No. 5 in the group’s ranking on the tax climate for companies. In 2011, North Carolina was ranked 46th in the country for business tax climate.

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