The Chamber was pleased to see HB 998 (tax reform) pass the North Carolina House and Senate on Wednesday, July 17. The bill will now head to the Governor for his signature. The Chamber recognizes that this bill is not a final solution and will continue to advocate for the continued modernization of North Carolina’s tax law. The Governmental Affairs Task Force and Chamber Board identified tax modernization as a top priority for the General Assembly’s Long Session and have been working to advocate for change during the session.
The bill will work to lower the personal and corporate income tax, which the Chamber believes will make North Carolina more competitive in the attraction and retention of business. Further details on the legislation can be found below.
The Chamber is now waiting and watching for the budget to appear. We will keep you up-to-date on the happenings in Raleigh.
Tax Reform Proposal Highlights
Personal Income Tax:
- Reduces and simplifies the 3-tiered state personal income tax from the current maximum rate of 7.75% and minimum rate of 6% to 5.8% in 2014 and 5.75% in 2015.
Increases the standard deduction for all taxpayers, applied to the:
- First $15,000 of income for those married filing jointly
- First $12,000 of income for heads of household
- First $7,500 of income for single filers;
- Retains the state child tax credit and increases it for families making less than $40,000;
- Offers a $20,000 combined maximum deduction for mortgage interest and property taxes;
- Makes charitable contributions fully deductible;
- Protects all Social Security income from state taxes.
Corporate Income Tax:
- Reduces the corporate income tax from 6.9% to 6% in 2014 and then to 5% in 2015 – a 29% rate reduction.
- If the state meets revenue targets (i.e. if tax revenue grows due to a growing economy), the corporate income tax will drop to 4% in 2016 and 3% in 2017.
- Caps the state gas tax;
- Eliminates North Carolina’s death tax;
- Preserves the sales tax refund for nonprofits.