The Senate Finance Committee is currently debating and will likely vote on the Senate leadership’s new version of the House tax plan passed on Monday evening. This plan is an extremely costly one that provides huge tax cuts to North Carolina’s wealthiest residents and profitable corporations. The fiscal analysis provided with the tax plan shows that more than $1 billion in revenue would be lost each year once the plan is fully implemented. And, the cumulative impact over the next five years is equivalent to one-fifth of today’s budget. This means cuts on top of the drastic cuts enacted over the last several years.
The Senate tax plan makes radical changes to the state’s tax system and includes cutting the personal income to a flat 5.25 percent rate (with a zero percent bracket in place of standard and itemized deductions and the personal exemption), eliminating the corporate income tax, eliminating the estate tax, as well as eliminating the franchise tax, among others. The plan hikes sales taxes primarily through ending or reducing many non-profit and business sales tax exemptions. Furthermore, the plan eliminates the local sales tax on food but gives local governments the option to reinstate the tax.
A preliminary analysis of the plan shows that wealthy taxpayers will benefit handsomely from this tax plan. Nearly 50 percent of the net tax cut (combining changes to the personal and corporate income, sales, franchise and privilege taxes) would go to the richest 1 percent of North Carolinians. Meanwhile, the cuts to available revenue at the local level and at the state level mean that local governments will likely bring back the local sales tax on food, which makes the tax plan less beneficial to low- and middle-income households.
Simply put, this tax plan is not tax reform but rather a plan that gives major tax cuts to the wealthiest individuals and profitable corporations. This plan does not promote economic opportunity for all North Carolinians and will undermine the core foundations of our economy.