If Proposed Tax Cut Passes, NC Would Move to #5 in Tax Foundation Business Climate Rankings
NC ranked 46th before Republicans took control of legislature
Reminder: Under proposed cut, higher earners would pay even bigger share of state’s total income tax take than they do today, though every taxpayer will see a cut
Republicans have upped per pupil education spending by 39% while simultaneously cutting taxes
Raleigh, N.C. — The Tax Foundation announced today that if the Senate Republicans’ proposed tax cut becomes law, North Carolina would move to #5 on the group’s state business tax climate rankings. North Carolina ranked 46th when Republicans took control of the General Assembly in 2011.
Sen. Paul Newton (R-Cabarrus) said, “The Republican philosophy for the past 10 years has been to cut taxes to make it more affordable for families and job creators to come to North Carolina. That’s working, and it’s smart policy to keep doing what works.”
The proposed cut would slash personal income tax rates by 21% for the median North Carolina household.
Democrats constantly say that the wealthy should “pay their fair share.” By that logic, every Democrat should support this tax plan because higher earners would pay a higher share of the state’s income tax collections.
The proposal drops the flat income tax rate from 5.25% to 4.99% and increases the standard deduction (zero-tax bracket) from $21,500 to $25,500 for joint filers. It also increases the child tax deduction by $500, bringing the total deduction to $3,000 for families that earn less than $40,000 per year.
The result is a family of four earning less than $40,000 will pay zero income tax on the first $31,500 of earnings.
The proposal disproportionately benefits lower earners. Those earning less than $50,000 per year would comprise an even smaller share of the state’s tax collection (8.8% vs. today’s 10%), while those earning more than $200,000 would comprise an even larger share of the state’s tax collection (44.9% vs. today’s 43.4%).
The proposal also phases in a corporate income tax reduction over the next seven years. At the end of the seven-year period, North Carolina would join the six other states that have no corporate income tax.
Over the past 10 years of Republican-led tax reductions, people and businesses have flocked to North Carolina in droves. There are many factors that weigh into a state’s business climate, and tax structure is one of the top considerations.
Earlier this month, the world’s largest company announced it was building its first new campus in many years.
Some have alleged that tax cuts result in lower education spending, but the past 10 years disproves that theory. Even as Republicans enacted historic tax cuts, they increased state-funded per-pupil education spending by 39%.