Recently the North Carolina House and Senate passed a version of H.B. 998 which reforms the state income tax code. There are some revenue raisers in the bill – an elimination of the sale tax holiday and sales tax increase on electricity, service contracts, and movies, with the following income tax rate reductions.
Personal Income Tax:
- Reduces and simplifies the 3-tiered state personal income tax from the current maximum rate of 7.75% and minimum rate of 6% to 5.8% in 2014 and 5.75% in 2015.
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Increases the standard deduction for all taxpayers, applied to the:
- First $15,000 of income for those married filing jointly
- First $12,000 of income for heads of households
- First $7,500 of income for single filers;
- Retains the state child tax credit and increases it for families making less than $40,000;
- Offers a $20,000 combined maximum deduction for mortgage interest and property taxes;
- Makes charitable contributions fully deductible;
- Protects all Social Security income from state taxes.
Corporate Income Tax:
- Reduces the corporate income tax from 6.9% to 6% in 2014 and then to 5% in 2015 – a 29% rate reduction.
- If the state meets revenue targets (i.e. if tax revenue grows due to a growing economy), the corporate income tax will drop to 4% in 2016 and 3% in 2017.
Other Highlights:
- Caps the state gas tax;
- Eliminates North Carolina's death tax;
- Preserves the sales tax refund for nonprofits.
A more detailed comparison can be found at http://charlottechamber.com/clientuploads/publicpolicy/PDFs/TaxReformComparison.pdf
