RALEIGH — Republicans at the North Carolina legislature have started rolling out their tax cut ideas, and Senate finance chiefs offered more income tax rate reductions and other breaks they estimate would save the public about $1 billion over two years.
The Senate plan, along with a plan filed earlier this week by House Republicans that would cost about $380 million through mid-2019, would build on the GOP tax overhaul laws that began in 2013.
Republicans say tax rate cuts and simplifications since then have contributed to a stronger economy and what’s looking like a third consecutive fiscal year of having a revenue surplus.
“The people have sent us additional money and now is the time not to be timid,” Sen. Tommy Tucker, R-Union, co-chairman of the Senate Finance Committee, said at a news conference Thursday. “We need to give that money back to those taxpayers to go directly into the economy.”
Democratic Gov. Roy Cooper’s and his allies say the GOP tax cuts have benefited the wealthiest taxpayers too much and meant billions of dollars that could have gone to public education, health care and infrastructure were unavailable. Cooper’s budget proposal this month offered a smaller tax break — reviving a child and dependent care tax credit that would cost $53 million in its first full year.
In addition to individual income rate cuts and higher standard deductions — the amount of a wage-earner’s income would be subject to income taxes — the Senate plan would cut the state’s 3 percent corporate income tax to 2.75 percent in 2018 and 2.5 percent in 2019. The corporate rate this year is already the lowest in the nation among the states with such a tax, according to the Washington-based Tax Foundation.
“We cannot sacrifice education at the altar of even more corporate tax cuts or giveaways that are mostly for the wealthiest,” Cooper said in Monday’s State of the State address. “Changes to our tax code need to focus on relief for working families — not corporations and millionaires.”
But Tucker said the lower corporate tax rate is attracting business to come to North Carolina, where the rate was the highest in the Southeast at 6.9 percent when Republicans took over the General Assembly in 2011.
The Senate plan would reduce the state’s individual income rate of 5.499 percent to 5.35 percent in 2018, which also applies to many small businesses. Other business tax changes are designed to extend the tax-favored status for manufacturers who invest and employ in North Carolina to cover serviced-based companies.
Cooper spokesman Ford Porter said late Thursday any individual income tax cuts should benefit middle-class families who are “really feeling the squeeze right now.” The individual rate decline in the Senate plan would apply to all tax filers.
Still, Senate Republicans provided charts and maps showing their tax proposal would shift the overall tax burden more to those making at least $100,000 and help people in economically struggling rural areas. About 94,000 additional families would be removed from the tax rolls, according to the office of Senate leader Phil Berger, R-Rockingham. The Senate plan would also rework the tax break for families supporting children.
Under the plan, a family with two children making the state’s median income of just under $47,000 would see their tax bill decline by another $190 in 2018 compared to this current tax year, Senate Republicans said.
The House Republican plan also would raise the standard deduction, although by not as much as the Senate plan. Both proposals would provide tax relief surrounding the franchise tax that corporations pay.
Tucker said the Senate’s revenue proposal will be inserted into the chamber’s two-year state budget plan. The House will then offer their budget proposal. They would like to present a final compromise budget to Cooper before the new year begins July 1. With veto-proof majorities, Republicans can pass what they want if GOP legislators are united.