The North Carolina House of Representatives and Senate are considering significantly different state budget and taxing proposals.
The state Senate approved a budget bill on May 12 to increase state spending by approximately 2.5 percent more than the Fiscal Year 2016 budget while reducing state personal and corporate tax rates and increasing tax deductions for individuals.
The state House approved its version of the state budget on June 1, sending the bill to the state Senate for consideration.
Tax Relief Now and Later
Mitch Kokai, a senior political analyst with the John Locke Foundation, says the Senate bill offers taxpayers significant relief, both now and in the future.
“The Senate budget plan would cut taxes by nearly $1 billion over the next two years while building the state’s savings reserve to its highest level in history and keeping government spending growth in check,” Kokai said.
Kokai says the Senate bill would lower taxpayers’ burdens and allow people to keep more of their hard-earned money.
“Within the tax-cut proposal, senators would continue to lower the personal income tax rate from 5.499 percent to 5.35 percent, and the corporate rate would fall over two years, from 3 percent to 2.5 percent. At the same time, working-class families would benefit from an increase in the standard personal income deduction. Married couples could write off the first $20,000 of income before paying the new, lower rate on the rest of their income.”
Patrick Gleason, director of state affairs at Americans for Tax Reform, says North Carolina has become much more taxpayer-friendly in the past five years.
“North Carolina has been the national leader in tax reform,” Gleason said. “Since taking control of state government for the first time in over a century back in 2012, North Carolina Republicans have significantly reduced income tax rates, both personal and corporate. Prior to the GOP takeover in North Carolina, the state had the highest personal and corporate income tax rates in the Southeast. Now, North Carolina has the lowest income tax rates in the region, with the exceptions of Tennessee and Florida, which do not tax income.”
Keeping Spending Under Restraint
North Carolina lawmakers’ efforts to restrain government’s growth is also paying off for taxpayers, Gleason said.
“While enacting pro-growth tax reform, North Carolina lawmakers have also made sure to keep spending in check,” Gleason said. “North Carolina lawmakers have kept the growth rate of state spending below the growth rate of population and inflation over the last four years.
“This conservative approach to budgeting and tax policy has made the Tar Heel State one of the most attractive places in the world in which to live, work, and invest,” Gleason said. “After passing multiple rounds of tax relief since 2013, the state continues to realize budget surpluses and has had economic and job growth outpacing the national and regional averages.”