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North Carolina: Proposed Tax Overhaul Wins Kudos

  • Jun 10, 2013 | Gail Cole

 Lawmakers in Raleigh, North Carolina, are working on BIG tax reform.

North Carolina lawmakers in both the House and the Senate are working on reforming the state's tax system.  While both plans have supporters and detractors, overall it is agreed there is a need for change.

On Friday, June 7, 2013, the House of Representatives passed the Tax Simplification and Reduction Act (HB 998) in a 72-32 vote.

The House plan seeks to:

  • Replace the state's three-tiered personal income tax bracket system with a flat personal income tax rate of 5.9%;
  • Cut corporate income tax from 6.9% to 5.4%;
  • Dramatically reduce the franchise tax;
  • Expand the state sales tax to include many services;
  • Lower the combined state and local sales tax from 6.75% to 6.65%.

Meanwhile, senators are still debating SB 394, which was introduced in mid March. The Senate plan, called "Lower Tax Rates for a Stronger NC Economy," would also establish a flat personal income tax, lower the sales tax rate, and expand the sales tax to many services. Under the Senate plan, the combined state and local sales tax rate would drop from 6.75% to 6.5%.

Last week, the non-partisan Tax Foundation noted that "North Carolina's tax system is in need of reform." North Carolina is currently ranked 44th (out of 50) overall in the Tax Foundation's State Business Tax Climate Index. Under the Senate Plan, NC would move to 13th and become "the most business-friendly [state] in the region." Under the House Plan, North Carolina would be the second most business-friendly state in the region and move to 19th in the national ranking. In short, the Tax Foundation approves of either plan.

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North Carolina State Rates

photo credit: IcaWise via photopin cc

Sales tax rates, rules, and regulations change frequently. Although we hope you'll find this information helpful, this blog is for informational purposes only and does not provide legal or tax advice.
Gail Cole
Avalara Author
Gail Cole
Gail Cole
Avalara Author Gail Cole
Gail began researching and writing about sales tax in 2012 and has been fascinated with it ever since. She has a penchant for uncovering unusual tax facts, and endeavors to make complex sales tax laws more digestible for both experts and laypeople.