One could almost hear the ghost of former Senate Finance Committee Chairman Bob Rucho haunting the halls of the State Legislative Building yesterday. The former chairman might have been having fits of envy as Conservative Reformers in the NC Senate rolled out possibly the biggest tax reform and reduction package in state history.
Though the numbers are still being crunched, initial reports from the non-partisan Tax Foundation indicate that the legislation, once fully implemented, will vault North Carolina into the top 5 of the group’s State Business Tax Climate rankings.
When you consider the mess liberal policies had once made of North Carolina’s tax climate, reaching the top 5 after being ranked 44th in 2013 is just one more feather in the cap for the conservative Reform Majority!
To summarize the most significant changes in the legislation:
Personal Income Tax (PIT)
- The PIT rate is reduced from 5.25% to 4.99%.
- The PIT standard deduction was raised from $21,500 to $25,000 for families.
- The child tax deduction was expanded to cover families making up to $140,000 and increased $500.
Corporate Income Tax (CIT)
- The 2.5% CIT rate is phased out starting in 2024.
- The CIT rate will be 2% in 2024, 1.5% in 2025, 1% in 2026, 0.5% in 2027, and is finally eliminated in 2028.
- Two of the three franchise tax base calculations are eliminated.
- The legislation’s changes stop penalizing businesses based in North Carolina when they make significant capital and property investments in the state.
But the neatest trick might be how the legislation handles the deductibility of PPP loan expenses.
As others have noted, “allowing” businesses that didn’t make any money in 2020 to deduct expenses associated with PPP loans doesn’t do much to help struggling businesses that made no money. (But it does help businesses that made money and received a PPP loan in 2020.) The Senate Plan addresses this by creating a new grant program out of federal American Rescue Plan funds that gives businesses that received a PPP loan a grant equal to 7.5% of the value of the PPP loan.
Then the Senate plan goes a step further – and expands that grant program to cover not only businesses that got PPP loans, but another 200,000 businesses that received loans or grants through any of the following programs: the COVID-19 Job Retention Program, EIDL Advance, Restaurant Revitalization Fund, or the Shuttered Venue Operators Grant Program.
This legislation provides a big tax cut for working families, plus long-term tax relief and short term assistance for North Carolina businesses.
No wonder liberal big spenders are scared to death of opposing this piece of legislation.