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GOP lawmakers look to slash individual, corporate income taxes in NC

Republican lawmakers rolled out a bill Tuesday that they say will cut individual income taxes in North Carolina by more than $1 billion a year.

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By
Matthew Burns
, WRAL.com senior producer/politics editor, & Laura Leslie WRAL Capitol Bureau chief
RALEIGH, N.C. — Republican lawmakers rolled out a bill Tuesday that they say will cut individual income taxes in North Carolina by more than $1 billion a year.

The proposal also would phase out state corporate income taxes by 2028 and provide grants to businesses affected by pandemic-related shutdowns over the past year. But it wouldn't allow people who lost jobs during the pandemic to deduct their unemployment benefits.

"The Republican philosophy [is] when government takes too much money from the people is to give it back in the form of tax relief," Sen. Paul Newton, R-Cabarrus, chairman of the Senate Finance committee, said at a news conference. "That's not the government's money. That's money North Carolinians earned and will keep, which, by the way, makes it the very best stimulus in the world."

Under the bill, the individual income tax rate would go from 5.25 percent to 4.99 percent, and the standard deduction – the "zero bracket" amount that people pay no taxes on – would increase from $21,500 to $25,500 for a joint return and from $10,750 to $12,750 for single filers. The proposal also calls for increasing the state tax deduction for children by $500 and expanding eligibility for the deduction to more families.

"Opponents of tax cuts usually try to paint every proposal, regardless of the details, as some sort of tax giveaway to the rich," Newton said. "The big winners of these tax changes are those near the bottom of the income scale."

A family of four with an annual income of $38,000 would see their annual state tax bill cut in half, he said, while a family earning the state median of $54,000 a year would see a 21 percent decline. Meanwhile, a family earning four times the median – about $216,000 – would get only a 6.9 percent cut.

The bill also would reduce the corporate tax rate by 0.5 percent a year from 2024 to 2028. After that, businesses would pay no state income tax.

"There's a reason major companies are moving to North Carolina," Newton said. "A favorable business climate involves a host of factors, but the tax structure is at the top of those factors."

The business tax cuts amount to less than $500 million a year – less than half the impact of the proposed tax cuts for individuals and families – he said, adding that the state isn't sacrificing education funding or other priorities with the planned cuts.

North Carolina has a budget surplus of about $5 billion.

But Senate Minority Leader Dan Blue said the tax cut plan adds up to a permanent state budget cut of more than 7 percent.

"That has long-range implications," said Blue, D-Wake. "We have great needs that weren't met. A lot of the stuff that we've been able to do over the last year we've done because of the aggressive funding by the federal government."

Senate Democrats said their budget priorities include investments in roads, broadband and water infrastructure. They said they want to use the state’s surplus to raise teacher pay and send more 4-year-olds to pre-kindergarten.

Republicans believe they can do both, Newton said.

"It's not an either-or proposition," he said. "We've cut taxes for the last 10 years, eight to 10 years, while simultaneously investing record amounts in our education system, and this proposal is no different."

The bill also would give grants of up to $18,750 to businesses that received assistance during the pandemic from the COVID-19 Job Retention Program, an Economic Injury Disaster Loan, the Paycheck Protection Program, the Restaurant Revitalization Fund or the Shuttered Venue Operators Grant Program. Newton said the state could issue those checks by Oct. 1.

But people who lost their jobs with those businesses – or others – during the pandemic would be out of luck when it comes to their unemployment benefits.

The House recently passed a bill allowing people to deduct their unemployment from their state taxes, but Newton said the Senate's tax cut bill rewrites the House proposal and would tax jobless benefits as the state has done in previous years.

"North Carolina offers the very best unemployment benefit in the nation, and that is a job," he said. "Businesses are pleading with us to encourage people to get back to work and fill empty slots."

Some have suggested that people are reluctant to look for jobs because they can make more in state and federal unemployment benefits than they could at many lower-paying service jobs. Gov. Roy Cooper last week signed an order requiring people to demonstrate they're actively searching for a job to continue receiving benefits.

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