In her State of the State address, Governor Bev Perdue proposed lowering the state's corporate income tax rate from 6.9 to 4.9 percent as a way to attract new business and new jobs to the state.
Perdue said the cut would make North Carolina's rates the lowest in the Southeast.
"This change will push North Carolina to the forefront in growing jobs for our people. And that, my friends, must be the number one priority for every one of us in this chamber tonight," she said.
The proposal earned a standing ovation from her largely Republican audience. But what would it cost?
- According to the U.S. Census Bureau, North Carolina's current rate yielded $901 million in corporate taxes in 2009 (the last tax year for which data is available).
- Lowering the rate from 6.9 to 4.9 percemt would be about a 29 percent cut.
- 29 percent of $901 million is a little over $261 million.
$261 million is a chunk of money – more than half of what Perdue promised she could hold back if the legislature would give her emergency budget management power this year. So how's the state going to cover that loss, on top of the $2.7 billion shortfall?
Supporters argue that the lower rate will attract more businesses, who in turn will pump more taxes into the state's coffers, helping to offset the loss. That may be, but it won't happen in time to help balance the budget that's due June 30.
We'll see more details in the governor's budget proposal, expected to be released Thursday.