Raleigh, N.C. – The state House of Representatives approved legislation on Thursday to increase the zero-tax bracket for working families and reduce the franchise tax on businesses, reforms that build on North Carolina’s boom decade of economic success amid pro-growth Republican policies.
“No state’s economy is on more solid ground than the Tar Heel state,” according to rankings released by CNBC this year that named North Carolina the best economy in the nation following major tax relief continued by the General Assembly this week.
Senate Bill 557 Various Finance Law Changes raises the standard deduction by 7.5%, increasing the zero-tax bracket for married families filing jointly from $20,000 to $21,500 effective after January 1, 2020.
The North Carolina General Assembly has already tripled the standard deduction for working families this decade, saving low-income taxpayers a higher percentage of their earnings.
North Carolina also reduced its top income tax rate from 7.75% to a flat rate of 5.25% this decade, and capped the maximum income tax rate at 7% through a constitutional amendment approved by voters last Fall.
North Carolina also levies a lower sales tax this decade under Republican leadership, which let the rate fall from 5.75% to 4.75% in 2011, saving state taxpayers billions of dollars.
“Tax relief for families and job creators has transformed North Carolina’s economy to make us the best state for business,” said Rep. John Szoka (R-Cumberland), a senoir co-chair of the state House Finance Committee.
“The General Assembly’s successful commitment to increasing take-home pay for working people and attracting investments in our workforce continues to draw rapid population growth and cutting-edge industries to North Carolina.”
The bill also contains tax reforms that require single sales factor apportionment for multi-state corporations in North Carolina, implement ‘market-based sourcing,’ and obligate a ‘marketplace facilitator’ to calculate, collect, and remit sales tax on a third-party seller’s behalf.
Those reforms level the playing field between local brick and mortar businesses and large, out-of-state online retailers and service providers, Rep. Szoka said Thursday.
S.B. 557 also makes changes to the definitions of holding companies for franchise tax purposes.
Senate Bill 578 Reduce Franchise Tax/Expand Film Grants passed the state House on Wednesday to continue pro-growth tax relief for North Carolina’s job creators by lowering the franchise tax rate from $1.50 to $0.96 over a two year span.
S.B. 578 further eliminates the 55% of appraised value method used to determine a corporation’s franchise tax base, effective after January 1, 2021.
Finally, S.B. 578 eases eligibility for awards from the Film and Entertainment Grant Fund by reducing the qualifying expense thresholds required for the program.