This week the Senate passed a roughly $1 billion tax cut proposal that would provide relief to the overwhelming majority of North Carolinians – with the most dramatic reductions going to middle class and working families and job-creating small businesses.
The Billion Dollar Middle Class Tax Cut Act would continue Republican-led efforts to reform, simplify and cut state taxes – making our tax climate the most competitive in the region and among the most competitive in the nation. Beginning in 2018, the proposal would:
- Lower the personal income tax rate from 5.499 to 5.35 percent, keeping North Carolina’s rate one of the lowest in the Southeast.
- Increase the amount of income exempt from income tax, by raising the standard deduction for all North Carolina taxpayers as follows:
|Married, Filing Jointly||$17,500||$20,000|
|Head of Household||$14,000||$15,000|
- Provide additional tax relief for families with children by converting and expanding the existing child tax credit into a progressive child tax deduction for families earning less than $120,000 per year:
|Family Income||Deduction per Child|
|Less than $40,000||$2,500|
|$40,000 – $59,999||$2,000|
|$60,000 – $79,999||$1,500|
|$80,000 – $99,999||$1,000|
|$100,000 – $119,999||$500|
|Greater than $120,000||$0|
- Increase the amount of mortgage interest and property tax deductions and eliminate the marriage penalty for itemizers. And those who itemize would continue to be able to claim unlimited charitable and medical deductions.
- Simplify and reduce the franchise tax on small businesses by cutting what is effectively a statewide property tax on small businesses and creating a flat $200 tax on the first $1 million of a business’s net worth.
- Reduce the corporate income tax rate from 3 percent to 2.75 percent in 2018 and to 2.5 percent in 2019, continuing the business tax reforms that have helped create more than half a million new jobs since Republicans took control of the state legislature in 2011.
- Move to market-based sourcing to end tax penalties on service-based businesses for hiring workers and making infrastructure investments in North Carolina.
The bill would move North Carolina closer to the goal of phasing out state income taxes by removing about 94,000 additional families from the tax rolls. And it would make all families of four earning less than the federal poverty level of $24,600 completely exempt from state income taxes for the first time.
Under this plan, 99 percent of taxpayers would pay less or pay no state personal income taxes – and the bulk of the tax cut would benefit middle class and working families earning less than $50,000 per year. Our previous tax cuts led to a booming North Carolina economy and helped generate 500,000 new jobs, and we hope Gov. Cooper will enthusiastically support this billion dollar middle class tax cut.