Friday, June 19, 2015

Tax Code Reform Works : North Carolina Leads?

Okay, now, what reason could the other states have, that are in economic trouble, and that's most states, to not adopt this plan for economic recovery now and well into the future. To ignore this plan, and it's many  proven benefits, will ensure the demise of prosperity for the states that cannot make the important decisions to rescue themselves from default or bankruptcy.

Why is this so hard to understand? If something works, why not use it? I wonder how well sitting on ones hands has worked for the years? How about Illinois, California and many more that are on the brink.

Is North Carolina Setting the Tax Code Standard?
Source: Scott Drenkard, "North Carolina Proposal Builds on Landmark 2013 Reform," Tax Foundation, June 15, 2015.

June 17, 2015

In 2013, North Carolina policymakers accomplished fundamental tax reform, implementing overhauls in multiple areas of the tax code. The multi-bracket individual income tax was replaced with a flat 5.75 percent tax with a generous standard deduction. The corporate tax rate was cut from 6.9 percent to 6 percent in year one, with trigger reductions to bring the rate to 3 percent by 2017.

The sales tax base was broadened to offset some of the revenue reductions.

The state improved its ranking in the State Business Tax Climate Index from 44th to 16th and tax revenues exceeded projections by $400 million this year.

In recent months, the North Carolina House has responded to calls from Governor Pat McCrory to renew tax incentive programs with a bill that allocates $45 million to Job Development Investment Grants.

On June 10th, the Senate responded with a broad-based reforms bill that includes:
  • A reduction in the individual income tax rate from 5.75 percent to 5.5 percent by 2016;
  • The reinstatement of federal deductions;
  • An increase in the standard deduction from $7,500 to $9,250 by 2020;
  • A decrease in the franchise tax rate from 0.15 percent to 0.1 percent;
  • A reduction in the corporate rate to 3 percent by 2017; and
  • Moving the state to a single sales factor corporate tax apportionment method.
The North Carolina Senate's proposed tax reform package improves further on the fundamental tax reform the state made in 2013. Though the package has been sold as an economic incentive plan, it is much more than that ― it provides broad-based tax relief across the income spectrum while broadening tax bases to offset some of the rate cuts.

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