Senators float tax cut idea
Three key senators are floating what they say is a $1 billion tax cut plan, but it's unclear how this measure would fit with finance bills already making their way through the General Assembly.Posted — Updated
"This is more money in people's pockets," said Rucho, who said the bill amounted to an extension of 2013's state tax reform effort.
But they were less clear about how to pay for cutting $1 billion from a $21 billion state budget.
"That's not the issue," Rucho said of the potential hit to revenue.
Lawmakers, he said, would have the option of replacing it with a change to other taxes – perhaps by widening the state's sales tax base or closing tax loopholes. Also, he argued that the tax cut wouldn't really represent a $1 billion loss because it would spur economic growth, which would lead to more taxes being collected.
However, when the three senators held a hastily called gathering with reporters to discuss the bill, they did not offer any fiscal memos or other material that explained how the bill would work.
The signature piece of the bill exempts a portion of all taxpayers' income – whether they earn $10,000, $100,000 or $1 million per year – from income tax. Those thresholds are:
- Up to $17,500 of income in 2016 and the first $20,000 of income in 2017 for those married filing jointly
- Up to $8,750 of income in 2016 and first $10,000 of income in 2017 for single filers
Taxpayers would be able to decide whether to take those exemptions or itemize deductions available for things such as mortgage interest and property taxes.
The bill would also lower the top personal income tax rate, which is also paid by many small businesses, from 7.75 percent to 5.625 percent next year and 5.5 percent in 2017. It would lower corporate income taxes and move to a system of corporate taxation known as single sales factor apportionment, where taxes are based solely on in-state sales. It's unclear how much of the bill's $1 billion in benefits would accrue to businesses and how much would go to individuals.
This is one of several bills related to taxes moving through the General Assembly. At the same time Rucho and the others were discussing their bill, the state House was pushing forward with a measure to reinstate North Carolina's historic preservation tax credit for rehabilitating buildings. Other bills would allow seniors to deduct some of their medical expenses and would shift how sales taxes are distributed in the state.
It's worth noting that when lawmakers rolled out their major tax reform bill in 2013, several different versions were debated in committee before a single plan was settled upon.
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