Sales tax would expand income taxes would fall in NC plan

  • Posted: Tuesday, May 7, 2013 11:59 a.m.
    UPDATED: Tuesday, May 7, 2013 3:42 p.m.

RALEIGH (AP) — Senate Republicans rolled out Monday evening the frame of their tax overhaul plan for North Carolina they say will cut income tax rates while expanding the scope of the sales tax.

Senate leader Phil Berger announced the release of a video and web site in which the Rockingham County attorney lays out some of the highlights of the plan. The video was designed as a preview as Berger and leaders of the chamber’s tax committee scheduled a news conference Tuesday to talk more about the details.

The unveiling of the chamber’s plan is a key moment in this year’s session because House and Senate Republican leaders and new GOP Gov. Pat McCrory have made tax reform a leading priority. Berger labeled the “North Carolina Tax Fairness Act of 2013” as the “largest tax cut in state history” at more than $1 billion. But expanding the sales tax will mean many citizens would have to pay more in sales taxes.

Democratic lawmakers and governors have talked over the past two decades about reworking the tax code to capture more consumer transactions and services while lowering income tax rates. But their efforts failed because they couldn’t work out details or interest groups put up roadblocks. Berger said he’s committed to making changes.

“Our current tax system can’t be fixed by nibbling around the edges,” Berger says in the video, recorded at an unidentified manufacturing plan in the state. “It’s time for something now.”

According to the web site and the video, the Senate Republican plan would reduce the top individual income tax rate currently at 7.75 percent to 4.5 percent over the next three years; it also would reduce the corporate income tax rate from 6.9 percent to 6 percent. North Carolina’s individual and corporate income tax rates are currently the highest compared to surrounding states. The web site said there would also be a zero percent individual income tax rate for the lowest-income residents.

The sales tax rate also would go down, but Berger didn’t give a percentage. The base combined state and local sales tax rate is currently 6.75 percent. He also didn’t give details about how the sales tax would be changed, but any plan is sure to increase the number of services subject to the sales tax.

“This plans expand the sales tax so everyone is treated fairly,” he says. “Everyone pays their fair share. No one get special breaks of special loopholes.” Berger added the plan will ensure “mechanics and lawyers are treated the same” and that “hairstylists and accountants (are) both taxed fairly.”

The web site for the plan ( ) allows viewers to type in their income tax information to see how they’d fair under the Senate plan.

Berger said the tax overhaul would create a more predictable revenue stream for the state.

House Republicans and McCrory haven’t rolled out their own plans. McCrory has said he would like to see income tax rates lowered to the rates of to those in South Carolina and Virginia to make North Carolina more attractive to companies seeking to expand.

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