Tax Reform

A proposed rewrite of North Carolina's tax system could eliminate state income taxes but expand sales taxes. STATUS: The House and Senate have both passed a tax reform measure endorsed by Gov. Pat McCrory. McCrory has signed the measure so it is now law.


Gov. Pat McCrory and top legislative leaders have said that tax reform will be among the highest priorities for the legislative session. There is broad agreement that North Carolina's tax system, largely unchanged since the 1930s, no longer meets the need of a growing state where textile mills and tobacco farms are no longer the leading employers.

McCrory, a Republican, and Republican leaders who control the General Assembly have laid out reducing and/or eliminating the state's personal and corporate income taxes as a goal of their reform effort. To make up for that loss of income, the state would likely have to raise the sales tax and apply sales tax to more things such as services that are currently not taxed and grocery items, which are currently not subject to state sales tax.

Bills and status:

However, the House Finance Committee has looked at a bill that would repeal the state's estate tax, a measure that Gov. Pat McCrory included in his proposed budget. In the Senate, lawmakers have also discussed a measure rewriting the state's business franchise tax law. And while a Democratic senator has filed a tax reform proposal, the GOP has yet to file a sweeping tax reform measure.  

Other tax legislation includes:

House Bill 101: Repeal Estate Tax. This would repeal the state version of what many Republicans call "the death tax." 


Update (5/7/13): Senate leaders unveiled the outlines of a tax reform proposal on May 7. There is still no formal bill, but top leaders say they wish to cut sales, income and corporate income taxes. 


Update (6/23/13): House and Senate leaders have both put forward their own versions of tax reform. The measure that could ultimately pass, House Bill 998, has been passed by the House and been given tentative approval by the Senate. However, Senators have put the bill on hold in order to negotiate the differences between the two chambers.


Update (7/02/13): After negotiating with the House over two weeks, Senators decided to move ahead with its own tax plan. While the bill that was approved on July 2 does compromise with the House on some points, it is unlikely to be the final bill that passes the legislature this year. 


Update (7/18/13): The House and Senate have now passed a tax reform deal that was endorsed by Gov. Pat McCrory. The measure now awaits McCrory's signature so it can become law. 


Update (7/29/13): McCrory has signed the tax bill and it is now law. 

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