Following passage of HB 998 in the North Carolina House of Representatives on Monday night, the state senate is now taking up the historic tax reform plan and has amended it so that it provides even more tax relief to individuals, families, and employers in the Tar Heel State. The senate substitute to HB 998, which was passed out of the Senate Finance Committee yesterday, would phase out the state corporate tax and personal income taxes would be reduced further than the House plan. The Senate plan takes the state to a flat 5.25 percent personal income tax, down from the current top rate of 7.75 percent, while the House-passed plan sets the rate at a flat 5.9 percent.
The Tax Foundation has put together a helpful chart showing how the senate substitute compares to current law, the House-passed plan, and the original Senate proposal in terms of what they would do to NC's ranking on the State Business Tax Climate Index:
Ranked 44th in the nation on the non-partisan Tax Foundation’s business tax climate index, North Carolina has one of the least hospitable state business tax climates in the country. While the House plan would move the state up to 19th, the new senate compromise plan would result in an even bigger improvement, giving North Carolina the 6th best business tax climate in the country.
“North Carolina taxpayers are reaping the benefits of voting in a more taxpayer-friendly legislature that is doing what it was sent to Raleigh to do, which is improve the state’s outdated tax code and reduce the state's anticompetitive tax rates,” said Grover Norquist, president of Americans for Tax Reform.
The new senate plan will get a floor vote later today and is expected to pass. A conference committee will then be formed to work out the differences between the House and Senate plans so that a compromise plan can be passed out of both chambers by the end of the month and sent to Gov. Pat McCrory's desk.
“I applaud the senate for recognizing the onerous nature of the state’s current tax code and moving forward with a pro-growth plan that seeks to provide as much relief as possible to North Carolinians,” added Norquist. “The Senate plan, if approved, would rid North Carolina of the dubious distinction of having the highest income tax rates in the South. I applaud North Carolina legislators for leading by example and showing Washington and the rest of the country what real tax reform looks like.”