Public Policy Update: Tax Modernization x 3

One of the top priorities of the Chamber for the legislative long session is tax modernization. The House and Senate both set out to tackle this daunting tax with the filing of three separate pieces of legislation. House Bill 998, Senate Bill 677, and Senate Bill 394 made their respective committee appearances on Thursday and are expected to be discussed in greater detail next week.

While all three plans deal with tax modernization, they all set about to reform North Carolina’s tax codes in different ways and to different degrees. The House plan sponsored by Rep. Lewis is the most cautious in its changes while Senator Rucho’s SB677 is the most comprehensive in its reform efforts. The final bill for consideration is Senator Clodfelter’s SB394, which has bipartisan support and is regarded as the middle ground of the three introduced bills.

I have outlined some of the key provisions of the legislation below. All of the bills are expected to be debated and discussed in committee next week. The Governor has already made it clear that he is more in favor of the moderate attempts at tax reform (HB998 and SB394). The Chamber will keep you up-to-date as discussion occurs next week. Please keep us informed of any concerns or comments you may have.

HB 998 (Lewis)

Sales Tax: The sales tax would drop from 6.75% to 6.65% in 2014.

Personal Income Tax: The income tax would fall to a flat 5.9%.

Corporate Income Tax: The corporate tax would fall from 6.9% to 5.4% over a five year span.

Estate Tax: The estate tax would be repealed.

SB 677 (Rucho)

Sales Tax: The sales tax would fall from 6.75% to 6.5% in 2015. This bill also would include the greatest increase in the taxation of services with 130 new services being taxed.

Personal Income Tax: Statewide the personal income tax would be 5.5% in 2014 and would continue to drop to 4.5% by 2016.

Corporate Income Tax: The corporate income tax would drop from 6.9% to 6% over the next three years.

Estate Tax: The estate tax would be repealed.

SB 394 (Clodfelter)

Sales Tax: The sales tax would drop from 6.75% to 6.5% starting in September of 2014.

Personal Income Tax: The personal income tax would have a flat rate of 5.9%.

Corporate Income Tax: The corporate income tax would drop from 6.9% to 5.95%.

Estate Tax: Shows no change to the estate tax.