House GOP leaders release details of proposed tax overhaul plan - WSFX - FOX Wilmington, NC

House GOP leaders release details of proposed tax overhaul plan

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Republican leaders in the NC House released details of their tax overhaul plan Republican leaders in the NC House released details of their tax overhaul plan

RALEIGH, N.C. (AP) - A tax code overhaul plan unveiled by House Republicans puts them at odds with Senate counterparts on how many transactions should be subject to North Carolina's sales tax.

The House plan released Thursday would expand the combined sales tax to cover a few more items such as car and lawn mower repairs and product warranties. The Senate would subject nearly every service to the sales tax and eliminate exemptions on groceries and prescription drugs. The House plan keeps both exemptions.

House plan author Rep. David Lewis says he's optimistic a compromise with the Senate can be worked out. Senate leader Phil Berger says failing to broaden widely the sales tax base prevents lower tax rates that spur economic growth.

Gov. Pat McCrory says he's "encouraged" by the House plan details

Details released Thursday by House Republicans about their tax overhaul plan, with comparisons as applicable to the framework of a Senate proposal released last week by Sen. Berger's office and the current law:

INDIVIDUAL INCOME TAXES:

Current law: Three individual income tax rates of 6 percent, 7 percent and 7.75 percent. There are standard deductions and personal exemptions that can reduce a filer's tax bill.

House proposal: Reduces rate to flat 5.9 percent in 2014. The standard deduction is essentially doubled for filers, while itemized deductions are retained for home-mortgage interest and charitable contributions and capped at $12,500 to $25,000, depending on filing status. The $100 per-child tax credit increases to $250 for most filers, $125 for the highest wage earners.

Senate proposal: Reduces rate to flat 5.5 percent in 2014, 5 percent in 2015 and 4.5 percent in 2016. The current rate on the lowest-income earners would be reduced from 6 percent to zero percent and ultimately cover the first $15,000 of income by 2017. Most exemptions and deductions are repealed but the child tax credit remains.

Also: Neither the House nor Senate plans would revive the state's portion of the Earned Income Tax Credit, which is set to expire in 2014. Republicans in both chambers seek to eliminate North Carolina's estate tax.

CORPORATE INCOME TAXES:

Current law: Corporate income tax rate of 6.9 percent. Tax bills for multistate corporation calculated using complicated formula.

House proposal: Reduce income tax rate to 6.75 percent in 2014. Multistate corporation formula would be narrowed to cover sales only over four years.

Senate proposal: Reduce income tax to 6 percent over three years.. Multistate corporation formula ultimately would be narrowed to cover sales only. Many credits would be eliminated.

Also: Business franchise tax rate of $1.50 per $1,000 would be decreased in both plans. The Senate plan would subject limited liability companies to franchise taxes, too. The House would preserve film production incentives and other low-income housing and R&D credits.

SALES TAXES:

Current law: The combined state and local sales tax rate paid by consumers in most counties is 6.75 percent. North Carolina subject more than 30 services to sales taxes.

House proposal: Reduce combined sales tax to 6.65 percent. Sales taxes would be expanded to cover warranties and service contracts and installation, repair and maintenance of tangible personal property, including personal automobiles. The sales tax exemption for nonprofit groups and prescription drugs and the exemption on the state's portion of the sales tax on food all would remain in place.

Senate proposal: Reduce combined sales tax to 6.5 percent. The number of services subject to the sales tax would grow by another 100 or so. The sales tax exemption for nonprofit groups would be reduced and those for food and prescription drugs would be eliminated.

WHAT'S NEXT:

House proposal: House has offered detailed legislation, which could be heard as early as May 28 in the House Finance Committee.

Senate proposal: Senate hasn't yet offered a bill and is still working on details, including concerns that some low- and middle-income filers could pay more overall in taxes. Contents are unlikely to be inserted in Senate state government budget bill expected to be debated and voted upon next week.

Gov. Pat McCrory: He's offered no specific plans but has said he wants to lower income tax rates to levels competitive to those in adjoining states. He'd be asked to sign any final proposal into law.

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Sources: House and Senate documents, interviews.

(Copyright 2013 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.)

 

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