As you know, we have been working on a tax reform plan in the NC House. Our goal is to modernize an outdated tax code and reduce overall tax rates. Most importantly, we are working to create a better business environment, which will promote job creation.
Here is an overview of our plan...
HB 998 - The Tax Simplification and Reduction Act
Under this plan, working families of North Carolina will keep more of the money they earn. This will make our State more competitive for job creation. In fact, Americans for Tax Reform predicts that this plan would result in our State going from the 7th worst business climate to the 19th best in the nation.
INCOME TAX RATE
This plan would cut the personal income tax by $1.7 billion over the next five years, giving all North Carolinians an income tax reduction. The three-tiered tax bracket system would be eliminated and replaced with a flat rate of 5.9 percent. This is a much more equitable method of applying income taxes to our citizens.
There would be no tax on Social Security, and the deductions for mortgage interest and property tax would remain in place with a $25,000 maximum.
Moving to a flat tax on personal income is a major development in reforming our tax code. It will make our State much more conducive for economic growth, and it will benefit all of our citizens.
CORPORATE TAX REDUCTION
North Carolina's corporate tax rate would be reduced from 6.9 percent to 5.4 percent. This would make our corporate tax rate the second lowest in the Southeast, just behind South Carolina. Reducing this particular tax is pivotal, because corporate taxes are typically passed to consumers. Reducing this tax would also make North Carolina more attractive for businesses, which will result in more job creation.
STREAMLINE SALES TAX
Currently, our sales tax applies primarily to goods and not to services. Over the last couple of decades our State has moved from more of a goods-based economy to a service-based economy. As a result, our government is generating less revenue from the sales tax, which has caused income and corporate taxes to increase.
In order to get these rates down, we must expand the sales tax to include some, but not all, services. This plan would expand the sales tax to services that already collect and remit part of the sales tax, such as warranties and service contracts. Doing this allows us to lower our overall tax rates, which will help to spur economic growth.
Exemptions from state sales taxes on food and medicine would be kept in place. This would ensure that citizens are not paying taxes on the most essential necessities.
Tax reform is a process, and this plan is a positive step toward creating a sensible tax structure. I believe this is an excellent plan. Not only will it ease the tax burden on our citizens, it will also help to achieve the objective of creating a better economic environment. This plan also sets us on course to implement further tax reform measures in the future.
Stay tuned for more updates on tax reform, and let me know if you have any feedback. Your thoughts are always welcome.