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.
Gov. Pat McCrory and the legislature have reached a deal that will cut corporate and personal income taxes. It also provides the foundation for a budget deal expected to be formulated later this week.
The House and Senate gave tentative approval Tuesday to a tax reform plan that top lawmakers and Gov. Pat McCrory rolled out Monday.
North Carolina real estate agents aren't thrilled with the tax reform plan that Gov. Pat McCrory could sign into law as early as the end of the week, but they admit it could have been much worse on their industry.
Republican backers say the measure will spark job growth. Democratic opponents say the measure will require service cuts in order to curb taxes for corporations and wealthy individuals.
Senators drafting a new tax plan for the state have adopted some House ideas in their latest proposal. However, the measure still contains big differences between the two chambers.
State Senate leaders rolled out the latest version of their tax reform plan Monday. The plan is closer to the House's proposal, but some key dfferences remain.
The tax bill now being hashed out between the House and Senate could abandon some of the key features many reformers expected to see before the legislative session began.
The House and Senate have both offered up tax and spending plans. Now leaders from the two chambers will negotiate over their differences largely behind closed doors.
The plan cuts corporate and individual income taxes but critics say it strips too much money away from state government.
A leading proponent of tax reform in North Carolina has resigned a key Senate chairmanship, saying "special interests" have forced other leaders to back off needed reforms. Senate leader Phil Berger refused to accept the resignation.
House Bill 998, sponsored by Rep. David Lewis, R-Harnett, would lower personal and corporate income taxes, but would expand sales taxes to labor charges, delivery and installation, electric bills and movie tickets. It was approved Thursday afternoon by the House Appropriations committee.
The tax reform plan House leaders are backing is on hold after caucus frictions surfaced in committee Wednesday morning.
A state tax credit for the film industry barely survived Tuesday as the House Finance Committee quickly approved a major overhaul of North Carolina's tax code.
State House and Senate lawmakers are weighing a trio of tax reform packages. Here's an overview of how the three plans compare on income and sales changes, deductions, and cost.
North Carolina is one of 35 states that doesn't tax Social Security benefits. Seniors and advocates have a message for Senate leaders: Please don't start now.
Senate leaders say their bill would expand sales taxes to many services as well as prescription drugs. Income taxes rates would drop, but some families would end up paying more in taxes.
GOP leaders say their tax plan will reduces sales, income and corporate taxes by curbing government spending.
A piece of the state Senate's tax reform package unveiled Wednesday would eliminate local and state privilege taxes in favor of a franchise tax system. Cities would not be able to charge the new tax.
Despite the reservations of his budget director, Gov. Pat McCrory said Thursday that he still wants to look at the possibility of eliminating North Carolina's income tax.
Art Pope, who was named last month as Gov. Pat McCrory's budget chief, said Wednesday that a push by Senate Republicans to eliminate North Carolina's income tax is misguided.
Republican legislative leaders are crafting a package of changes to North Carolina's tax code that they say will stimulate economic growth, including slapping a 6 percent sales tax on groceries.
The rough outlines of the Republican plan are clear enough: lower and eliminate corporate and individual income taxes. Replace that revenue through a flatter, simpler tax for businesses and broaden the sales tax base by taxing more items.
Advocates of tax reform says the state needs to get rid of tax breaks for special interests. But many "loopholes" in the state's tax code are breaks used by average citizens, nonprofits and small businesses.
Repeal Estate Tax