Senate leaders announced a plan to include roughly $1 billion in tax cuts in its 2017-19 biennial budget plan at a press conference at the legislature on Thursday. Sponsors of the proposal say the plan would include changes to the state personal income tax system aimed at relieving the tax burden on the middle class that would ensure that an additional 94,000 pay no income taxes.
The plan also includes changes for married couples and those with children as well as a cut to the corporate income tax rate.
Sen. Tommy Tucker (R-Union), who chairs the Senate Finance, announced the tax plan that would include tax cuts for both individual filers and businesses, continuing the Senate’s pattern of tax cuts over the last few years.
“What we are proposing today is a Senate tax plan that continues the majority party’s proven strategy of reducing taxes and putting more money into the pockets of North Carolina taxpayers,” he said. “What we’re doing today, we’re proposing a $1 billion middle class tax cut, that’s right, a $1 billion middle class tax cut. And under this plan, 99 percent of taxpayers in North Carolina will either receive a tax cut, or pay zero income tax.”
Getting into specifics; the Senate plan would cut the state personal income tax in the next fiscal year and reduce the corporate income tax in a two-stage process over the next two fiscal years.
“The plan will decrease the personal income tax from 5.499 percent to 5.35 percent and that will be one of the lowest in the Southeast, and it will help working families and small businesses, all those S-Corps who file and have to pay personal income tax,” he said. “Furthermore this plan increases the standard deduction from $17,500 to $20,000 married, filing jointly, returns which provides an additional significant tax reduction for all North Carolina families and small businesses when coupled with the rate decrease.”
Tucker said that the Senate expects to see the same types of growth in the state and job creation coming from this plan as in past tax cut plans enacted over the last five years.
“With this continued plan we expect the economy to continue to move forward as having reducing taxes in the past,” he said.
In addition to the cuts the Senate plan would increase the cap on itemized deductions for mortgage interest and property taxes by $2,000, bringing it to $22,000, and would eliminate the cap on medical expenses and charitable deductions.
“It will increase the cap on the itemized deduction for mortgage interest and property taxes by $2,000,” Tucker said. “It increases it from $20,000 to $22,000. It will eliminate the unfairness of the marriage penalty that currently exists in the mortgage interest and itemized deduction by adjusting the maximum cap based on taxpayers filing average. It also allows for unlimited medical expense deductions and unlimited charitable deductions.”
Another change for North Carolina families would come in the form of eliminating the state child tax credit and replacing it with a new, larger, tax deduction that would range from $2,500 to $5,000.
Tucker said that the tax plan is aimed at benefiting families that make $50,000 or less a year.
Looking at the corporate side of the tax code, the plan would drop the state corporate income tax from 3 percent to 2.75 percent in the next fiscal year and again to 2.5 percent in the following year.
“That will make North Carolina’s rate the lowest in the U.S. for those states that have a corporate income tax,” he said.
Tucker said that the state has seen a surplus in recent years from the current tax cuts and that surplus should be used to return money to the pockets on North Carolinians.
“The people have sent us additional money, and now is not the time to be timid,” he said. “We need to give that money back to those taxpayers, which will go directly into the economy which will grow the sales tax base, which will grow the income tax base, and give people the opportunity to spend their own money instead of having the state spend it for them.”
The House also announced its own tax plan this week in a bill, the Tax Reduction Act of 2017.
The House’s plan would only raise the standard deduction for married, filing jointly, couples by $1,000 to $18,500 and would add an additional $500 for single filers bringing it to $9,250.
The House plan is expected to save about $500 million over the next two years, compared to the Senate’s plan that is projected to save $1 billion for personal and corporate taxpayers over a two-year period.
Rep. John Szoka (R-Cumberland), who chairs the House Finance Committee is running the bill in the House.
Of the bill, Szoka said, “The House tax plan for 2017 continues the good work that has been done over the last few years. Because of responsible budgeting and spending, and job growth spurred by solid economic policies, North Carolina is projected to have a budget surplus of over a half billion dollars. The House’s tax plan incentivizes good paying manufacturing jobs and continues to lower personal income taxes, setting the stage for increased economic growth.”