Raleigh, N.C. – Tax policy leaders in the North Carolina House of Representatives praised their final budget agreement with the state Senate Monday night, touting a substantial increase in the zero-tax bracket as well as a reduction of the personal income tax rate to 5.25%, the lowest rate in the Southeast among states that tax earnings.
Senior House Finance Committee Co-Chairman Bill Brawley (R-Mecklenburg), pictured above, said, “After this plan is fully implemented, 95,000 more hardworking, lower income North Carolinians will not be paying any state income taxes.
“This plan continues along the path of reductions to personal income taxes for North Carolinians along with investing in our state by getting rid of taxes that make us less competitive, like repealing the mill machinery tax.”
The House Finance Committee leaders said their tax relief-and-reform plan in the 2017-2018 budget will continue to provide needed relief to all North Carolinians and foster a business-friendly environment.
“After a decade of rising taxes and seeing our competitive ranking falling, under Republican leadership we have reversed that trend and seen North Carolina become one of the most business-friendly states in the country,” Senior House Finance Committee Co-Chairman Jason Saine (R-Lincoln) said.
“This tax package continues our promise of sound leadership and fiscal responsibility.”
Under existing law, purchasers of mill machinery pay tax at a preferential rate of 1% of the purchase price with an $80 cap. The tax would be repealed in the proposed budget and given a sales tax exemption.
“Providing relief to business owners through a reduction of the corporate income tax rate to 2.5% and an exemption on taxes for mill machinery equipment will drive further economic growth in our state,” House Finance Committee Co-chair Rep. John Szoka (R-Cumberland) said.
“In the 21st century, fulfillment centers are a key component to economic development, and create hundreds of jobs. Increasing our competitive advantage in the region with a lower corporate tax rate will play a significant role in the years to come.”
The proposed budget also provides a sales tax exemption for distribution equipment purchased by large customer fulfillment centers under criteria similar to the current provision for “large manufacturing and distribution facilities.”
A “large fulfillment center” is a facility used primarily for receiving, inventorying, sorting, repackaging, and distributing finished retail products for the purpose of fulfilling customer orders. The facilities are increasingly critical for attracting economic growth in a 21st century marketplace.
The Republican-led North Carolina General Assembly has already cut billions in taxes for families and businesses since 2011, and the state has saved billions in reserves and reported hundreds of millions in budget surpluses this decade.
In 2011, General Assembly leaders resisted demands from then-Governor Perdue to permanently install a $1 billion annual sales tax increase. State taxpayers enjoy a lower and consistent 4.75 percent sales tax rate on all their purchases under Republican leadership, in addition to significant income tax reductions.
North Carolina’s estate tax – also known as the “Death Tax” – was repealed January 1, 2013.
Beginning in January 2014, the individual income tax fell from a top rate of 7.75 percent to a simplified, single 5.8 percent rate. Along with lowering rates, a larger standard deduction of $7,500 of income for singles and $15,000 for married filers was created.
In 2015 the North Carolina General Assembly cut personal income taxes for the second time in three years. Starting in 2017 North Carolina’s personal income tax rate dropped from 5.75 percent to 5.499 percent and the standard deduction increased by $500.
North Carolina’s corporate tax rate – formerly highest in the southeast at 6.9 percent – was reduced to 6 percent in 2014, 5 percent in 2015, 4 percent in 2016 and 3 percent in 2017. Among states that have a corporate tax, North Carolina now has the lowest in United States.