News: CJ Exclusives

Look for more tax reform in 2017

Lawmakers offering few details, but lower rates and an expanded tax base are on the agenda

As legislative Republicans return to Raleigh, additional tax reforms will be on their agenda.

The 2017 session opens in earnest Wednesday, and the leaders of the House and Senate have said they want to continue the pace of tax reform, including lowering personal income taxes and spreading the sales tax base across more areas. Precise details of the shape and scope of those goals have yet to be worked out.

“We will take a look at all kinds of tax issues, and we’re still in the reforming stage on taxes, still looking at spreading the base out on the sales tax, still lowering personal income tax rates,” said state Sen. Jerry Tillman, R-Randolph, who chairs the Senate Finance Committee.

There will be “a couple of other tax items that will be on the agenda for sure,” he said without elaboration.

In the 2016 short session, House Bill 3 proposed a number of constitutional amendments including one that would have lowered and capped the state personal income tax rate from 10 percent to 5.5 percent. Although the Senate approved the package, it did not come to a vote in the House.

“I don’t think there will be a constitutional amendment [in 2017] on the tax issues. I don’t think we’ll need to have one on the issues that I’m talking about,” Tillman said. “Personal income taxes aren’t subject to constitutional mandates one way or another. I don’t see a constitutional issue with tax reform.”

Tillman said the Republican-controlled General Assembly has increased the standard deduction for tax filers (aka the “zero tax bracket”) “significantly,” and reduced other rates as well.

“I don’t know how much further we can go, but we’ve got to have offsetting sales taxes when we go in that direction. You cut just a fraction off of the personal income tax [and] that takes a big hunk of money,” Tillman said.

“I think we’re always looking at the tax code to address issues, to make sure that we are being competitive for job growth, and that we’re doing things that will be beneficial for working families in North Carolina,” said state Rep. Nelson Dollar, R-Wake, the chief budget writer in the House.

“I’m sure that there will be additional discussion on tax relief. In terms of the form of that relief, what size package that might be, or what parameters might be looked at, I’m sure there will be considerable discussion about that,” Dollar said.

There are “a range of options” on tax relief to choose from, Dollar said.

While he said he doesn’t have “a firm handle on” what direction the House might go on the personal income tax, “I think there’s a lot of ideas on the table that would be up for discussion.”

Tax reform was a central part of the welcoming addresses delivered by both Senate leader Phil Berger, R-Rockingham, and House Speaker Tim Moore, R-Cleveland, on Jan. 11 when the 2017 session convened.

The state tax base has grown because Republican policies have expanded the private sector, spurring investments that have put more people to work and increased revenues, Moore said.

“While sustaining our small businesses with tax relief and regulatory reform, North Carolina is also cultivating core industries that can sustain investment in our rapidly changing economy,” Moore said.

“To keep growing we must maintain our commitments to tax reform and relief, pass balanced budgets, and cultivate a work force that is career-ready in an increasingly innovative world,” he said.

During his session-opening remarks, Berger noted that not long ago the state’s economy was burdened with the highest taxes in the southeast, and one of the worst tax climates in the nation.

“Now, as a result of our nationally recognized tax cuts and tax reform, North Carolina businesses and citizens pay billions of dollars less in taxes. Our state now boasts the best tax climate in the region, and the 11th best nationally,” Berger said.

“We’ll continue to look for ways to reduce the tax burden on families, small businesses, and other job creators, helping them keep more of their own money,” Berger said. “Let me be clear: We will not, under any circumstances, return to the failed tax-and-spend policies of the past that gave us the mess we inherited in 2011.”