Yesterday, Representative Szoka and other leaders of the House Finance Committee filed House Bill 356, “The Tax Reduction Act of 2017,” calling for another round of tax cuts for North Carolina’s families and businesses. This comprehensive legislation builds on the historic tax reforms that have stimulated the state’s rapid economic growth since 2013.
Representative Szoka is lead sponsor of the legislation and chairs the House Finance Committee.
House Bill 356 would once again increase North Carolina’s “standard deduction,” this time to $9,250 for individual taxpayers and $18,500 for married couples (filing jointly). This is up from last year’s standard deduction of $8,750 and $17,500, respectively.
When you do your taxes each year, the “standard deduction” is the dollar amount that reduces the amount of income on which you’re taxed. Put another way, any income you make below the “standard deduction” is protected on the front-end from being taxed by the government. A higher standard deduction is nice for everyone, of course, but it especially benefits hard-working taxpayers at the lower-end of the wage scale. The higher the standard deduction, the less of your income is taxed; sometimes it’s referred to as “the zero tax bracket.”
For some historical perspective, when the legislature was last under Democrat control, the standard deduction was a mere $3,000 for individual taxpayers and just $6,000 for married couples (filing jointly). Democrats taxed all your income over that amount; this latest Republican tax reform proposal more than triples the state’s zero tax bracket.
“The House tax plan for 2017 continues the good work that has been done over the last few years,” said Representative Szoka. “Because of responsible budgeting and spending, and job growth spurred by solid economic policies, North Carolina is projected to have a budget surplus of over a half billion dollars. The House’s tax plan incentivizes good paying manufacturing jobs and continues to lower personal income taxes, setting the stage for increased economic growth.”
The income tax relief in House Bill 356 is expected to save taxpayers $64.5 million in the 2017-18 fiscal year and $124 million in the 2018-19 fiscal year.
House Bill 356 also allows North Carolina companies to invest more in their workforce and equipment by tax exempting major manufacturing machinery, helping the state attract large employers and compete with regional neighbors who offer job creators the same tax relief. The tax reform is expected to save North Carolina businesses $50.8 million per year.
Finally, House Bill 356 continues North Carolina’s commitment to tax relief and reform by simplifying the franchise tax, letting companies with extensive operations in North Carolina reinvest more money, and providing $85 million in tax relief per year.
“During my time serving North Carolinians, I have heard time and again that we need to be the most competitive state for manufacturing,” said Representative Susan Martin, Representative Szoka’s House Finance co-chair. “Advanced manufacturing provides high-paying jobs that often locate in rural communities with a greater economic multiplier effect than most.”
“In 2015, we made major changes to our tax laws to attract manufacturing jobs to our state, and it’s time to do more and make North Carolina a national leader in high-tech jobs,” continued Representative Martin. “North Carolina remains one of only a few states to levy a tax on manufacturing machinery. We are proposing to remove a major impediment to our state’s economic growth, so job creating manufacturers in North Carolina can grow and invest tax savings in employment and wages.”
- North Carolina Republicans have cut taxes for families and businesses by over $4.5 billion in the last five years, and the state reported a $552 million budget surplus in February 2017.
- In 2011, General Assembly leaders resisted demands from then-Governor Perdue to permanently install a $1 billion annual sales tax increase. State taxpayers enjoy a lower and consistent 4.75 percent sales tax rate on all their purchases under Republican leadership, in addition to significant income tax reductions.
- Despite being handed a $3 billion budget gap for the 2011-12 fiscal year, North Carolina General Assembly budget writers also provided nearly half a billion dollars in small business tax relief.
- North Carolina’s estate tax – also known as the “Death Tax” – was repealed January 1, 2013.
- Beginning in January 2014, the individual income tax fell from a top rate of 7.75 percent to a simplified, single 5.8 percent rate. Along with lowering rates, a larger standard deduction of $7,500 of income for singles and $15,000 for married filers was created.
- In 2015 the North Carolina General Assembly cut personal income taxes for the second time in three years. Starting in 2017 North Carolina’s personal income tax rate dropped from 5.75 percent to 5.499 percent and the standard deduction increased by $500.
- North Carolina’s corporate tax rate – formerly highest in the southeast at 6.9 percent – was reduced to 6 percent in 2014, 5 percent in 2015, 4 percent in 2016 and 3 percent in 2017. Among states that have a corporate tax, North Carolina now has the lowest in United States.