Sen. Brock’s proposal would further reduce corporate, income taxes
By Josh Bergeron
SALISBURY — It’s not quite as drastic as the title suggests, but a bill moving through the state legislature would sharply slash corporate and personal income taxes by hundreds of millions of dollars.
Senate Bill 325, also known by the title “Billion Dollar Middle Class Tax Cut,” would reduce taxes by roughly $839.6 million by the 2021-2022 fiscal year. Contained in the bill are cuts to corporate and personal income tax rates, increases in standard deductions and other changes. It passed the Senate earlier this month and now sits in the House rules committee for further consideration.
Among the three primary sponsors is a familiar name for Rowan County residents — Sen. Andrew Brock, R-Mocksville. Sen. Tommy Tucker, a Republican from Union County, and Sen. Jerry Tillman, R-Archdale, are also primary sponsors. Sen. Tom McInnis, a Republican who represents a portion of Rowan County, is a co-sponsor.
Asked recently about the tax cut bill, Brock said “it should be a welcome bit of tax relief.” He said it’s been well received by “job creators from Murphy to Manteo.” Brock said legislators would still be taking care of the state’s needs while continuing to cut taxes.
“No other state has tackled tax reform like we have,” Brock said.
Specifically, Brock’s bill would reduce the personal income tax rate from 5.499 percent to 5.35 percent. For married couples, filing jointly, the standard deduction would increase from $17,500 to $20,000. The standard deduction would increase from $14,000 to $15,000 for a head of household and from $8,750 to $10,000 for single filers and those who are married and file taxes jointly. The changes would take effect in 2018.
In Brock’s bill corporate taxes in 2018 would decrease from 3 percent to 2.75 percent. In 2019, the rate would further decrease to 2.5 percent.
Under the proposed tax cuts, state government would generate $323.7 million less revenue in the first budget year, according to the General Assembly’s Fiscal Research Division. That amount would jump sharply the following year and continue climbing in following years.
The Fiscal Research Division found budget shortfalls would occur after the tax cuts, the Raleigh News and Observer reported. Starting in 2021, the budget gap would be about $600 million.
“Actually what we’re doing is guarding against that,” Brock said when asked about potential future budget holes.
Republicans in the state legislature hope to entirely eliminate income tax and increase the state’s reliance on sales tax, Brock said. Following the Great Recession, North Carolina experienced budget shortfalls because of a system based on income tax, he said.
He said taxes on services “guard against wild swings in the budget process.”
He added that revenue from the tax cut bill meets all growth projections and would allow for teacher raises.
Brock questioned how Democrats could be against tax cuts for middle-class families, but there’s another way to frame proposed cuts, according to Gov. Roy Cooper.
“Governor Cooper believes tax cuts should be targeted to support middle-class families, not the wealthy and corporations who didn’t even ask for them,” Gov. Cooper said this month in a prepared statement. “Under the Senate Republican tax plan, millionaires will receive a tax cut 60 times the size of what working families would get. Those are the wrong priorities.”
For the “Billion Dollar Middle Class Tax Cut” to become law, the State House will need to pass the measure. It can either receive Cooper’s signature or receive a veto and, perhaps, an override from members of the General Assembly.
As it makes its way through the State House, Rep. Harry Warren said he would prefer to see results from leaving tax rates at their current level before making further changes. Instead of further tax cuts, Warren raised the possibility that legislators would spend some of its surplus to take care of the state’s “pressing needs instead.”
Warren said his position doesn’t mean he will vote against the bill. He said the bill could change as it moves through the House committee process.
“When it comes before me, I’ll have to look at it then and see what it says at that time,” he said. “I am glad to see, though, that North Carolina’s economy is doing great.”
Contact reporter Josh Bergeron at 704-797-4246