State of the Week: NORTH CAROLINA
By SBE Council at 7 April, 2017, 12:25 pm
Is More Tax Relief on the Way?
by Raymond J. Keating-
Small Business Policy Index 2017: North Carolina ranked 14th among the 50 states.
SBE Council’s “Small Business Policy Index 2017” ranks the 50 states according to 55 different policy measures, including a wide array of tax, regulatory and government spending and performance measurements.
Small Business Tax Index 2016: North Carolina ranked 11th among the 50 states.
SBE Council’s “Small Business Tax Index 2016” ranks the states according to 25 different tax measures. Among the taxes included are income, capital gains, property, death, unemployment, and various consumption-based taxes, including state gas and diesel levies.
Another Round of Tax Relief Would Boost State’s Competitive Position
In recent years, North Carolina has stood out for its achievements in terms of implementing pro-growth, pro-small-business tax relief and reform. And additional relief is a possibility this year.
In terms of what’s already been accomplished, North Carolina’s corporate income and capital gains tax rate declined from 6.9 percent to 6 percent in 2014, 5 percent in 2015, 4 percent in 2016, and 3 percent in 2017.
The personal income and individual capital gains tax was reformed effective for 2014, with three tax rates of 6 percent, 7 percent and 7.75 percent being replaced with a 5.8 percent flat tax. That rate then declined to 5.75 percent in 2015, and now stands at 5.499 percent.
It also must be pointed out that the state’s death tax was killed off in 2013, and North Carolina carries a relatively low property tax burden.
On April 4, 2017, the State Senate voted in favor of a tax relief package, featuring a reduction in the personal income and individual capital gains tax rate to 5.35 percent in 2018, and the corporate income and capital gains tax rate would decline in 2019 to 2.5 percent.
This would further improve the state’s competitive position. But what is the outlook for it becoming law?
In an April 3 story, WRAL.com reported: “Although the measure is all but certain to pass the Senate, its fate beyond that point is less sure. House Republicans have submitted their own plan for a substantially more modest tax cut, while Gov. Roy Cooper has expressed support for middle-class tax cuts but not for additional corporate cuts.”
Of course, it’s critical to understand that tax relief that enhances incentives for starting up, building, and investing in businesses is tax relief that helps everyone in the state.
Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council.
Keating’s latest book published by SBE Council is titled Unleashing Small Business Through IP: The Role of Intellectual Property in Driving Entrepreneurship, Innovation and Investment and it is available free on SBE Council’s website here.