Raleigh, N.C. – The state House of Representatives on Tuesday approved a constitutional amendment proposal for voters to decide in November whether to lower the cap on North Carolina’s personal income and corporate tax from 10% to 7%.
Senate Bill 75 Const. Amd. – Max. Income Tax Rate of 7% would protect taxpayers from future rate increases to continue North Carolina’s successful approach to attracting jobs and growing the state economy this decade.
“This puts on the ballot for all voters the chance to decide on a constitutional rate cap that would safeguard substantial tax relief and protect taxpayers from harmful rate increases,” said Rep. Jason Saine (R-Lincoln), a chairman of the House Finance Committee, during debate on the measure Wednesday.
Since 2011, North Carolina has a lower sales tax rate, income tax rate, and corporate tax rate under Republican leadership in the state General Assembly.
By contrast, North Carolina’s sales tax was raised in 2003, 2005, 2007, and 2009, under Democrat leadership.
If approved by voters, the state’s new income tax cap of 7% would take effect on January 1, 2019.
State House Speaker Tim Moore (R-Cleveland) said lowering the state’s income and corporate tax cap is essential to protect citizens against future tax increases by Gov. Roy Cooper, who sought to raise taxes in his 2018 spending plan:
“The governor’s budget proposal to raise taxes and still overspend into a $470 million budget deficit is an important reason North Carolina needs this constitutional amendment to protect taxpayers and maintain economic momentum,” said House Speaker Tim Moore (R-Cleveland).
Economic Success in North Carolina After Tax Reform
North Carolina has a record $2 billion savings reserve fund and a $356 million revenue surplus in 2018 following tax relief for families and businesses totaling more than $4 billion this decade.
Tax reforms accelerated the state’s job growth as an improved business climate produced top-tier economic rankings compared to the rest of the country. North Carolina was named the ‘Best State for Business’ by Forbes, the ‘Best State for Startups’ by Fit Small Business, and won the Prosperity Cup by Site Selection Magazine in 2017.
North Carolina passed 30 states in 3 years of the ‘State Business Tax Climate’ index by the Tax Foundation, moving from 44th to 11th in the national rankings for economic competitiveness since 2014. The state had the fastest technology job growth in the nation last year according to a study by the N.C. Technology Association.
North Carolina was 1 of 12 states with a unanimous ‘AAA’ credit rating from all three major rating agencies in 2017 and recently enacted a savings reserve requirement praised by Moody’s Investor Service to “improve the state’s financial flexibility and its ability to respond to future contingencies.”
Last year, Moody’s Analytics rating agency also named North Carolina 1 of 16 states prepared for an economic recession.
Tax Reforms Benefit Low-Income, Working North Carolinians
The state’s zero-tax bracket – also known as the standard deduction – will triple for married families by 2019, rising from $6,000 in 2011 to $20,000.
Over 1.5 million working, mostly low-income North Carolinians – 30% of all tax returns – will not owe any state income tax by 2019.
According to the state Department of Revenue, 354,326 working adults will be removed from the income tax rolls by 2019 as a result of Republican-led tax relief for low-income families.
The tripling of the zero tax bracket for married families will produce a 23% increase in North Carolinians whose earnings are exempt from state income tax by 2019.
Last Decade: Four Tax Increases in Six Years
In 2003, the Democrat-led state General Assembly passed a $729,950,000 “temporary” sales tax increase.
In 2005, Democrat legislators approved a nearly $1 billion extension of the previously “temporary” sales tax increase.
In 2007, North Carolinians paid another sales tax increase of nearly half-a-billion dollars as the Democrat-led General Assembly continued to enact and maintain higher sales tax rates every other year.
In 2009, the state General Assembly passed its fourth sales tax increase of the decade, extracting a nearly $2 billion sales tax hike from North Carolinians.
“North Carolina tried two approaches to our state’s tax climate and economic attractiveness,” Speaker Moore said. “Higher taxes and wasteful spending resulted in massive debt and teacher pay cuts, while lower taxes and smarter budgeting produced rapid economic growth and education investments.”
“Constitutional amendments require a high threshold of support and voter approval, but protecting taxpayers is of immense and immediate importance to families and businesses in North Carolina.”
North Carolina Maintains Spending Priorities
North Carolina has the third fastest rising teacher pay in the U.S. over the last five years, according to the left-leaning National Education Association. The ranking doesn’t include the fifth consecutive teacher pay raise averaging 6.5% provided to educators in 2018.
North Carolina advanced 10 spots in national teacher pay rankings over four years, from 47th to 37th, following significant raises provided by the state General Assembly since 2014.
The state has spent more than $360 million on disaster relief since 2016 and raised state employee pay “with a plan that will make North Carolina a leader in terms of living wages for public employees,” according to the executive director of the State Employees Association of North Carolina (SEANC).
Correctional officers are receiving a fourth consecutive pay increase in 2018, for example, increasing the average salary of a maximum security correctional officer over $9,000 by 2019.
The 2018 state budget spends an additional $700 million per year on K-12 public education. North Carolina spends over a billion dollars more on education annually since Republicans gained control of the state legislature in 2011.
North Carolina ranks 5th in the country for per-student spending on public colleges and universities. A statewide ConnectNC bond to build new STEM facilities on university campuses is investing nearly $2 billion into higher education, with a cash flow reaching $40 million per month by 2019.
Learn more at www.speakermoore.com.