Senate aims to get tax rate to 2.49%, lower than all but the zeroes
(The Center Square) – North Carolina Senate Leader Phil Berger has said since January that he wants to return some of the state’s estimated $3 billion revenue surplus to taxpayers.
The Rockingham County Republican contends that cutting the state’s personal income tax rate would allow residents to “keep more of your hard-earned money” while ensuring North Carolina remains competitive with states like Florida, Texas and Tennessee, which have no personal income tax.
“Republicans in the Senate have a different idea than Democrats when it comes to tax policy,” Berger said Wednesday, unveiling legislation to further reduce personal income tax rates. “They would like to raise your taxes to fund a costly, big-government agenda. Senate Republicans would rather cut your taxes so you can keep more of your hard-earned money.”
Senate Bill 651, dubbed “Tax Relief for All,” would accelerate scheduled tax reductions that are set to reduce rates to 4.6% next year and to 3.99% by 2027. SB651 would take the rate to 3.99% in 2024, then cut the rate by 0.5% in 2025 and 2026, before reaching 2.49% in 2027.
“Our tax policy has proven successful, and we are excited to build on that success,” said Sen. Buck Newton, R-Wilson, who sponsored SB651 with Berger and Sen. Bill Rabon, R-Brunswick. “We believe this tax package will return a significant amount of money to taxpayers while still maintaining the needed revenue to run the state smoothly.”
North Carolina’s individual tax rate ranged from 6% to 7.75% a decade ago, but Republicans introduced a flat rate of 5.8% in 2014. The rate has since declined on a schedule to 4.75% this year. Republicans have also reduced the corporate tax rate to 2.5%, with further reductions to 2.25% in 2025, then to 2% in 2026, before going to zero in 2030.
The result has been a steady increase in economic investment that has made North Carolina one of the fastest growing and most attractive states for businesses, earning multiple awards for the best economy and top state for business in 2022.
Democrats have largely resisted the tax cuts, arguing the state should devote more funds to education, health care and other issues. That clash led to Democrat Gov. Roy Cooper regularly vetoing Republican budgets. He has signed the last two, and pressure is on for him to sign this year so that landmark Medicaid expansion can be implemented.
Cooper proposed a budget last month that would increase spending by 18%, though it included a tax cut for North Carolinians earning under $200,000 per year to 3.99% by 2027, while maintaining the rate at 4.75% for those above that level. Cooper also wants to keep the corporate tax rate at 2.5%.
House Republicans, meanwhile, approved a budget on Thursday that would cut personal income taxes to 4.5% next year, rather than in 2025.
Cooper lashed out at that proposal on Tuesday as lawmakers considered the measure in the lower chamber, though he hasn’t specifically addressed SB651.
“A budget that pushes extreme policy changes and more tax breaks for the wealthy over the basic needs of students and parents is wrong for our state and legislators should get back to the drawing board,” he posted to Twitter.
