NC lawmakers begin talks on income tax cut

Leaders of the legislative committee responsible for recommending changes to North Carolina tax laws say they are likely to ask fellow lawmakers to consider an income tax cut this year.

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Barry Boardman presents to Revenue Laws
Mark Binker
RALEIGH, N.C. — Leaders of the General Assembly committee charged with recommending changes to tax laws say lawmakers should cut the income taxes North Carolina residents pay when the legislature returns in April.

The potential cut, which is not yet a formal proposal but is being discussed by top leaders, would likely lower the taxes people pay on money earned this year when they file their returns in 2017.

Specifically, the Revenue Laws Study Committee is looking at expanding the standard deduction, the amount of money on which each person pays no income tax. For the 2016 year, the standard deduction is $7,750 for those filing as individuals and $15,500 for those who are married and filing jointly.

"I will say we're seriously looking at this," said Rep. Bill Brawley, R-Mecklenburg, a chairman of both the Revenue Laws Study Committee and the House Finance Committee.

"We're talking about it," said Sen. Bob Rucho, R-Mecklenburg, who is both a Revenue Laws chairman and a chairman of the Senate Finance Committee. "It is something I would like to see done."

Barry Boardman, the legislature's chief economist, gave lawmakers an overview of how tax rates would change if they followed a set of cuts put forward in a state Senate bill last year. That measure would have raised the standard deduction to $8,750 for individuals and $17,500 for married couples.

As an example, a married couple earning $43,916 per year would pay taxes on $28,416 of that under current law. Raising the standard deduction as Boardman outlined would mean that person would pay taxes only on $26,416. That hypothetical couple's taxes owed would dip by about $115, from $1,634 to $1,519 per year.

The changes would cost the state somewhere between $195 million and $205 million per year, according to Boardman. That's money that would either have to be offset by cuts to the state's $21 billion budget or increased tax collections from other sources. If tax returns filed this April give the state more money than expected, however, lawmakers could push forward with a tax cut without cuts to the budget.

If the changes that Boardman outlined go into effect, roughly 70,000 people who currently make just enough money that they have to pay some tax would end up paying nothing in taxes for the year.

"That really benefits the lower- to middle-income folks," said Rep. Mike Hager, R-Rutherford.

No member of the committee spoke out against the proposal, which is only in its nascent stages. Brawley said the committee would review, and likely vote on, a fully drafted bill in March. That would send the measure as a recommendation to the General Assembly.

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