Tue May 7, 2013
N.C. GOP Leaders Unveil Plan To Cut, Expand Taxes
"The largest tax cut in North Carolina history." That's how Republican state senate leaders describe the tax plan they unveiled Tuesday. But that plan also expands the sales tax to many more services.
Senate leader Phil Berger said the GOP plan will cut more than $1 billion in taxes. It reduces the personal income tax, corporate income tax, business franchise tax, and sales tax rates.
In a video about the plan, Berger raised a question that you might have right now:
"So how do we pay for these tax cuts? It's simple. We hold the line on spending," Berger said.
Not just holding the line, but pushing it back. The Republican plan cuts spending by about $3.5 billion over the next four years.
And his claim about cutting the sales tax is a bit complicated. Yes, the rate goes down a quarter cent to 6.5 percent. But you'd be paying that rate on about three times as many services, like haircuts, car repairs, and attorney's fees.
"They are going to try to tax consumption pretty darn universally," said Matt Gardner, director of the left-leaning Institute on Taxation and Economic Policy. "And that means taxing a lot of things that low-income families buy that aren't subject to the sales tax right now."
Gardner said the proposal would hit poor and middle class families hardest. They spend a bigger share of their income on those kinds of goods.
But the director of policy for the right-leaning Civitas Institute said those families could benefit from the proposal. Brian Balfour said it would make the state more business friendly, which could lead to more jobs.
As of now, North Carolina has one of the highest tax burdens in the Southeast.
"So I think working to lower that rate significantly makes us much more competitive for job creation and economic growth," Balfour said.
The proposal would gradually cut the top personal income tax rate by about three percent, the corporate income tax rate about one percent, and the business franchise tax rate by 10 percent.
Catawba College Political Professor Michael Bitzer said it's an ambitious plan.
"In conjunction with the budget, with voter I.D., with a lot of other big-ticket items that Republicans campaigned on, this is probably going to be the most controversial and biggest hurdle that they're going to have to try and get through if they want these things to be implemented starting next year," Bitzer said.
He said the fight over the tax proposal will really heat up once the Republican senators behind it reveal all the new services the sales tax would cover. They haven't filed a bill yet with all the details.