House GOP leaders release details of proposed tax overhaul plan
Republican leaders in the NC House released details of their tax overhaul plan
RALEIGH, N.C. (AP) - A tax code overhaul plan unveiled by
House Republicans puts them at odds with Senate counterparts on how many
transactions should be subject to North Carolina's sales tax.
The House plan released Thursday would expand the
combined sales tax to cover a few more items such as car and lawn mower repairs
and product warranties. The Senate would subject nearly every service to the
sales tax and eliminate exemptions on groceries and prescription drugs. The
House plan keeps both exemptions.
House plan author Rep. David Lewis says he's optimistic a
compromise with the Senate can be worked out. Senate leader Phil Berger says
failing to broaden widely the sales tax base prevents lower tax rates that spur
Gov. Pat McCrory says he's "encouraged" by the
House plan details
Details released Thursday by House Republicans about
their tax overhaul plan, with comparisons as applicable to the framework of a
Senate proposal released last week by Sen. Berger's office and the current law:
INDIVIDUAL INCOME TAXES:
Current law: Three individual income tax rates of 6
percent, 7 percent and 7.75 percent. There are standard deductions and personal
exemptions that can reduce a filer's tax bill.
House proposal: Reduces rate to flat 5.9 percent in 2014.
The standard deduction is essentially doubled for filers, while itemized
deductions are retained for home-mortgage interest and charitable contributions
and capped at $12,500 to $25,000, depending on filing status. The $100
per-child tax credit increases to $250 for most filers, $125 for the highest
Senate proposal: Reduces rate to flat 5.5 percent in
2014, 5 percent in 2015 and 4.5 percent in 2016. The current rate on the
lowest-income earners would be reduced from 6 percent to zero percent and
ultimately cover the first $15,000 of income by 2017. Most exemptions and
deductions are repealed but the child tax credit remains.
Also: Neither the House nor Senate plans would revive the
state's portion of the Earned Income Tax Credit, which is set to expire in
2014. Republicans in both chambers seek to eliminate North Carolina's estate
CORPORATE INCOME TAXES:
Current law: Corporate income tax rate of 6.9 percent.
Tax bills for multistate corporation calculated using complicated formula.
House proposal: Reduce income tax rate to 6.75 percent in
2014. Multistate corporation formula would be narrowed to cover sales only over
Senate proposal: Reduce income tax to 6 percent over
three years.. Multistate corporation formula ultimately would be narrowed to
cover sales only. Many credits would be eliminated.
Also: Business franchise tax rate of $1.50 per $1,000
would be decreased in both plans. The Senate plan would subject limited
liability companies to franchise taxes, too. The House would preserve film
production incentives and other low-income housing and R&D credits.
Current law: The combined state and local sales tax rate
paid by consumers in most counties is 6.75 percent. North Carolina subject more
than 30 services to sales taxes.
House proposal: Reduce combined sales tax to 6.65
percent. Sales taxes would be expanded to cover warranties and service
contracts and installation, repair and maintenance of tangible personal
property, including personal automobiles. The sales tax exemption for nonprofit
groups and prescription drugs and the exemption on the state's portion of the
sales tax on food all would remain in place.
Senate proposal: Reduce combined sales tax to 6.5
percent. The number of services subject to the sales tax would grow by another
100 or so. The sales tax exemption for nonprofit groups would be reduced and
those for food and prescription drugs would be eliminated.
House proposal: House has offered detailed legislation,
which could be heard as early as May 28 in the House Finance Committee.
Senate proposal: Senate hasn't yet offered a bill and is
still working on details, including concerns that some low- and middle-income
filers could pay more overall in taxes. Contents are unlikely to be inserted in
Senate state government budget bill expected to be debated and voted upon next
Gov. Pat McCrory: He's offered no specific plans but has
said he wants to lower income tax rates to levels competitive to those in
adjoining states. He'd be asked to sign any final proposal into law.
Sources: House and Senate documents, interviews.
(Copyright 2013 The Associated Press. All rights reserved.
This material may not be published, broadcast, rewritten or redistributed.)
Tuesday, March 11 2014 7:45 AM EDT2014-03-11 11:45:32 GMT
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