Good & Bad Tax Proposals Being Considered in North Carolina
With the recent appointment of the budget conference committee, North Carolina legislators continue to work to resolve differences between the House and Senate budgets plans. Among unresolved issues are a number of proposed tax changes. There are a number of positive changes being considered by lawmakers, such as cuts to personal income, corporate income, and franchise taxes. However, some changes have been proposed that represent bad tax policy and would cause the state to take a step back after the tremendously successful 2013 tax reform act.
Today, Americans for Tax Reform sent the following letter to North Carolina legislators assessing the various tax proposals being considered:
Dear Members of the North Carolina General Assembly,
On behalf of Americans for Tax Reform and our supporters across North Carolina, I write today to encourage you to keep North Carolina taxpayers in mind as you work through budget negotiations. In recent weeks, some proposals have been put forth that would build upon the successful 2013 tax reform plan, while some would move in the wrong direction and harm taxpayers.
One proposal that, if passed, would result in bad tax policy is the proposal to apply the state sales tax to advertising. Approval of this tax change would be a serious mistake. It is a principle of sound tax policy that business to business transactions should not be taxed. Applying the state sales tax to advertising would result in tax pyramiding and higher costs passed down to North Carolinians. North Carolina businesses would also be faced with onerous compliance costs.
Currently, no state applies the sales tax to advertising, and for good reason. One state, Florida, tried to impose an advertising tax and it was an unmitigated disaster. Because of Florida’s experiment with taxing advertising, the state lost 100 million in advertising revenue to neighboring states. Advertising purchases plummeted 12 percent in Florida, while rising 3 percent nationally during that same time. As such, Florida legislators repealed that misguided tax six months later.
While applying the sales tax to advertising is a proposal that should be rejected, several proposals have been put forth in budget negotiations that would help grow the state economy and build upon the successful 2013 tax reform package. Commendable proposals that would allow your constituents to keep more of their hard-earned income include reducing the income tax rate from 5.75 to 5.5 percent and raising the standard deduction to $18,500, which would save North Carolinians $3.1 billion over the next five years. Other proposals that would greatly benefit North Carolina employers and the state economy include the proposal to ensure the corporate tax rate falls to 3 percent and changing corporate tax apportionment to a “single-sales factor” formula, which would incentivize in-state investment and job creation. Legislators have also smartly proposed cutting the franchise tax on capital stock and tangible property.
Since 2013, North Carolina has been a national model for pro-growth tax reform. This year, the Tar Heel State has an opportunity to continue making itself more attractive to employers, investment, and new residents. Moving forward, Americans for Tax Reform will be working to educate your constituents on the tax proposals being considered in Raleigh and how their representatives and senators vote on these important matters. If you have any questions or if ATR can be of assistance, please contact Patrick Gleason, ATR’s director of state affairs at 202-785-0266.
Grover G. Norquist
Americans for Tax Reform