The tax bill signed into law this year is fiscally irresponsible and bad for our state, but lawmakers could improve the situation by repealing part of the corporate income tax cut and paying for the rest by closing ineffective tax breaks that only benefit certain companies.
The corporate income tax cuts in the final tax plan are one of the biggest reasons why the state will have less revenue to invest in our roads, schools, and communities. The tax plan cuts the corporate income tax rate to 5 percent by 2015, from the current rate of 6.9 percent, and will reduce annual tax revenue by around $217.9 million in fiscal year 2014-2015 alone.
Meanwhile, the tax plan does little to rid the state’s tax code of costly and wasteful tax breaks that only help certain corporations or industries. More than $325 million in corporate tax breaks are embedded in the state’s tax code, according to the NC Department of Revenue, but only around $29 million were eliminated under the plan. Ending these often-ineffective tax breaks could help pay for the costly corporate income tax rate cut but lawmakers continue to pass up this opportunity.
But, even closing these tax breaks wouldn’t pay for the corporate income tax rate cut from 5 percent to 3 percent. That rate cut, which would reduce annual revenue by more than $423 million, will go into effect if tax revenue meets a certain target, which is actually below existing tax revenue projections.
It’s time for Gov. McCrory and legislators to face the fact that they passed a tax bill that is fiscally irresponsible, providing corporate income tax cuts at the expense of public schools, healthcare services for the elderly, and other important public investments. Policymakers should repeal the rate cut from 5 to 3 percent and close costly corporate tax breaks to pay for the remaining tax cuts in the tax plan.