June 24, 2016

Some claim tax reform raised taxes on the middle class by expanding the sales tax base.

Here are the facts: When the conservative reform majority was elected, it cut the sales tax rate 17% by repealing Governor Perdue’s sales tax increase. That reduction immediately saved lower and middle-income families $400 million annually.

Analyst John Hood explains that North Carolina is now collecting a lower percentage of retail sales in tax than before tax reform.

He also explains how booming revenue collections are the result of better income tax collections due to a stronger economy, not higher sales tax.

“Here’s the bottom line about the current revenue surplus: it isn’t primarily due to the sales tax, anyway. For the 2015-16 fiscal year to date, North Carolina’s sales-tax collections are up $225 million, or 4.3 percent, over the same period a year ago. The real driver is income tax revenue, which is up $915 million, or 10 percent. That upswing, in turn, is explained not by higher tax rates on income but instead by more people holding more jobs and receiving more taxable income.

In other words, the effective state tax rates on both sales and income are lower, on average, than they were before Republican lawmakers became the majority in Raleigh. State tax revenues are growing because the tax base — North Carolina’s economy — is growing.”

And Forbes reports on our improving climate for business, thanks to tax reform:

“First there is North Carolina’s historic tax reform act of 2013, which relieved the state of the dubious distinction of having the highest personal and corporate income tax rates in the Southeast. Aside from Florida & Tennessee, which do not tax income, North Carolina now has the lowest personal and corporate income tax rates in the region as the result of the tax changes signed into law by Gov. McCrory. Thanks to the tax relief enacted in 2013, individuals, families, and employers across the state get to keep more of their hard-earned income. Going into 2013, North Carolina had the 44th ranked business tax climate in the country on the non-partisan Tax Foundation’s business tax climate index. Thanks to the 2013 tax reform act, North Carolina went from only beating six states, to having the 16th best business tax climate in the nation.”

With the nation’s fastest growing economy, tax reform is working for North Carolina. Let’s keep the ball moving.