RALEIGH, N.C. (WNCN) – North Carolina Senate Republicans unveiled a proposal Tuesday that would cut state taxes for individuals and businesses, saving the median family of four about $300 on their tax bill.
With the state having a surplus in six of the last seven years, Sen. Paul Newton (R-Cabarrus/Union) said the state can afford the cuts.
“We’ve come out of the pandemic recession far better off than most states. We have large cash reserves and we have yet another budget surplus,” he said. “The Republican philosophy when government takes too much money from the people is to give it back in the form of tax relief.”
The plan has several components.
The personal income tax rate would drop from 5.25% to 4.99%. In addition, the standard deduction would increase from $21,500 to $25,500 for those filing jointly. For single filers, the deduction would increase from $10,750 to $12,750. It also increases the child tax deduction by $500.
Using the example of a family of four with the median income of $54,602, they would save $325 on their state income tax bill under the plan.
Beginning in 2024, the bill would phase out the corporate income tax rate, which is currently 2.5 percent, eliminating it entirely in 2028.
In fiscal year 2026, the various tax changes would cost the state about $2.1 billion, according to an analysis by non-partisan legislative staff.
The proposal does not include tax forgiveness for businesses that received loans through the Paycheck Protection Program, which is something that got bipartisan support in the House.
Instead, businesses would be eligible for automatic grants up to $18,750 if they received assistance through one of the following programs: COVID-19 Job Retention Program, Economic Injury Disaster Loan Advance, Paycheck Protection Program, Restaurant Revitalization Fund and the Shuttered Venue Operators Grant Program. The state would use federal money to pay the grants.
The plan also does not include a tax break the House supported for people who paid taxes on their unemployment benefits during the pandemic.
“North Carolina offers the very best unemployment benefit in the nation, and that’s a job,” said Newton. “We would be not serving them well, nor serving our business community well, if we piled onto that and added an additional benefit and incentive to stay home.”
Gov. Roy Cooper (D) raised concerns about how far-reaching the proposal is. In his budget plan he announced in March, he did not propose any tax increases.
“We have a once in a generation opportunity to invest in our schools, quality child care, small businesses, community colleges, transportation, housing and tax cuts for families who really need it,” said Ford Porter, a spokesman for Gov. Cooper. “The last thing we need is more sweeping tax breaks for corporations and the wealthiest among us instead of investments in our hard-working families and communities.”
The proposal comes as lawmakers try to negotiate a budget, which they failed to reach an agreement on with Gov. Cooper two years ago.
Republicans in the House and Senate still have not agreed on how much the state should spend. House Speaker Tim Moore previously told CBS 17 they’re about $500 million apart from each other. A detailed budget proposal won’t be released until the two chambers agree on a spending amount.
Senate Democrats said with the recent surpluses and the infusion of federal money into the state during the pandemic, North Carolina has the opportunity to address long-standing concerns such as school construction, increasing pay and providing health coverage to more people.
Sen. Dan Blue (D-Wake) was critical of the Republican tax cut proposal, saying it should be more targeted.
“That has long-range implications,” said Sen. Dan Blue (D-Wake). “We have great needs that weren’t met. A lot of the stuff that we’ve been able to do over the last year we’ve been able to do because of the aggressive funding by the federal government.”
A Senate committee looked at the proposal Tuesday. There could be a vote on it in the full Senate in the next two weeks.