NC House gives first approval to tax reform plan, final vote Mon - WECT TV6-WECT.com:News, weather & sports Wilmington, NC

NC House gives first approval to tax reform plan, final vote Monday

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The state House on Friday gave initial approval to a plan to reform North Carolina's tax code The state House on Friday gave initial approval to a plan to reform North Carolina's tax code

RALEIGH, N.C. (WECT/AP) - House Republicans are moving forward what they call another step toward tax reform in North Carolina with legislation that would lower income tax rates and subject more services to the sales tax.

The House tentatively approved Friday in a 72-32 vote a tax plan that GOP legislators argue would put more money in the people's pockets and encourage job creation. The bill would cost $1.7 billion cumulatively over the next five years.

"Tax reform is not an event, it is a process," said House Speaker Thom Tillis in an email news release.  "During our first session in the majority, Republicans in the House began that process by providing more than a billion dollars in sales tax relief.  Today, we took another major step in that process by passing a comprehensive tax reform package that will provide across-the-board tax relief for North Carolinians."

In the same release, the Speaker's office said House Bill 998 eliminates North Carolina's three-tiered personal income tax bracket system (with rates currently at 7.75%, 7% and 6%) and replaces it with a flat 5.9% personal income tax rate. Under the plan, every tax filer would see a reduction in their personal income tax liability. The plan increases the child tax credit from $100 to $250 for families making less than $100,000.  The bill provides a $25,000 combined maximum deduction for mortgage interest and property taxes, while deductions for charitable contributions remain unlimited.  Social Security benefits are not taxed under the plan.

The measure also cuts business taxes, reducing the franchise tax by more than 10% and shrinking the corporate income tax from 6.9% to 5.4%.

Democrats argue the changes would result in more overall taxes for nearly all tax filers and benefit the rich. They tried unsuccessfully to amend the bill so that the highest wage earners would pay more income taxes and the earned income tax credit that's supposed to expire would stay in place.

Click here to see the bill.

Click here to see the analysis of the impact the plan will have on state revenue in future years.

A final House vote is expected Monday.

Copyright 2013 WECT. Material from the Associated Press was used in this report.

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