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Press Release
Governor, Senate, House Reach
Historic Deal on Tax Reform
Raleigh, NC– Governor Pat McCrory, Senate President Pro Tempore Phil Berger
(R-Rockingham) and House Speaker Thom Tillis (R-Mecklenburg) announced late
this afternoon they have reached a historic agreement on tax reform.
North Carolina has the
fifth-highest unemployment rate in the country and needs tax reform to
compete with neighboring states for job creation.
“All of us were elected to change
the status quo here in Raleigh and address problems head on,” said Governor
Pat McCrory. “One of the biggest challenges we faced coming into office was
working to help create jobs in the existing environment. This tax reform plan
is a major step in restoring confidence in the economy so that employers
start hiring again, and it will help us continue to attract new employers.
Just as important, this tax reform will allow North Carolinians to put
more money in their pocketbooks so that they can spend and invest in North
Carolina.”
The tax reform agreement provides
fiscally-responsible tax relief to all North Carolinians. It will lower
income tax rates for all taxpayers to 5.8% in 2014, allowing North Carolina
families to keep more of their hard-earned dollars. The corporate tax will be
reduced to 6.0% in 2014 to make North Carolina more attractive to
job-creators.
“Reforming a state’s tax code is no
easy task in the face of a barrage of special interests fighting to preserve
the special treatment they receive at the expense of all taxpayers,” said
Senator Phil Berger. “We’ve seen several other states – Kansas, Louisiana and
Nebraska – give it their best shot but miss the mark. I’m proud of what we’re
achieving here in North Carolina – we are truly a positive model for the rest
of the nation.”
The tax reform proposal is fiscally
responsible and provides reasonable revenue growth every year to meet the
state’s budget needs. Since tax reform is expected to grow the state’s
economy and bolster the tax base, further rate reductions could be triggered
by revenue growth in 2016 and 2017. However, if for whatever reasons
the tax revenue does not grow, the further reductions will not be triggered,
ensuring that state revenue is preserved for public services.
“This plan will provide tax relief
for working families throughout North Carolina and will enable businesses to
create jobs for our citizens,” said Speaker Thom Tillis. “Our state
will become more competitive because of this tax reform legislation, and
North Carolinians will have more dollars in their pockets. I
congratulate everyone who had a role in this historic agreement, especially
Representatives David Lewis and Julia Howard, who led this effort in the
House.”
“This plan reducing both personal
and corporate income taxes combined with the General Assembly’s successful
efforts last session to repeal the temporary sales tax accomplishes broad
based tax relief that is unmatched in North Carolina’s history,” said
Governor McCrory. “No other state has accomplished this level of tax reform
this year and I would like to commend Speaker Tillis and Senator Berger for
their hard work and congratulate them on reaching this agreement.”
Tax Reform Proposal Highlights
Personal Income Tax:
· Reduces and simplifies the 3-tiered
state personal income tax from the current maximum rate of 7.75% and minimum
rate of 6% to 5.8% in 2014 and 5.75% in 2015.
· Increases the standard deduction
for all taxpayers, applied to the:
1.
First $15,000 of income for those
married filing jointly
2.
First $12,000 of income for heads of household
3.
First $7,500 of income for single filers;
· Retains the state child tax credit
and increases it for families making less than $40,000;
· Offers a $20,000 combined maximum
deduction for mortgage interest and property taxes;
· Makes charitable contributions
fully deductible;
· Protects all Social Security income
from state taxes.
Corporate Income Tax:
· Reduces the corporate income tax
from 6.9% to 6% in 2014 and then to 5% in 2015 a 29% rate reduction.
· If the state meets revenue targets
(i.e. if tax revenue grows due to a growing economy), the corporate income
tax will drop to 4% in 2016 and 3% in 2017.
Other Highlights:
· Caps the state gas tax;
· Eliminates North Carolina’s death
tax;
· Preserves the sales tax refund for
nonprofits.
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