RALEIGH, North Carolina: North Carolina Republicans are considering eliminating the state income tax and increasing the state sales tax. On January 16, State SenatePresident Pro Tempore Phil Berger said that the Senate was looking into eliminating the personal and corporate income taxes and increasing both the rate and scope of the sales tax. One proposal advanced by Berger’s allies would end the 6.9-percent corporate income tax and the income tax, presently 7.75 percent for the highest earners, and increase the state sales tax to less than 8 percent from its present county-variable rates of 6.75 to 7 percent. The sales tax would apply to payments for presently exempt services, such as lawn care and car maintenance, and possibly for groceries, exempt for the past 15 years.
Republican Governor Pat McCrory indicated on January 24 that he was still receptive to eliminating the personal and corporate income taxes but cautioned that any decision he makes will be based on what is “realistic.” McCrory’s top budget adviser, businessman Art Pope, publicly opposed trading the income taxes for an increased sales tax on January 23, criticizing the scheme as unfair to senior citizens and “regressive.”
Supporters and critics of eliminating the income tax have cited studies by the pro-market John W. Pope Civitas Institute and the progressive NC Budget and Tax Center, respectively. The Civitas study found that eliminating the income tax in 2000 would have created as many as 378,000 more jobs and increased the personal income growth rate in North Carolina. In response, the Budget and Tax Center released a report highly critical of the plan, claiming that the Civitas study was based on false economic theories and that the proposal would be highly regressive by shifting the burden of taxation from wealthy to poor and middle-class North Carolinians.
North Carolina is one of 24 states with a Republican “trifecta,” Republican control of its governorship and both legislative chambers.