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Opinion Davis weighs in on budget debate

TAX REFORM - We have received a lot of feedback from citizens across North Carolina – constituents, businesspeople, our colleagues in the House, the governor – and, of course, those who write the editorial pages. While we believe the plan discussed in the Senate over the past few weeks is sound and fair economic policy, we must pass a bill that can receive broad support. So now we have a compromise plan for tax reform – one that addresses concerns about the impact of having a sales tax on food, prescriptions and services heavily used by working families.

Our compromise plan will simplify our 1930s Depression- era tax code, provide substantial tax relief to working families, make North Carolina more attractive for job creation and cut taxes by more than $1 billion in the first three years alone.

This plan will begin the process of eliminating the state personal income tax and eliminate the corporate income tax, business franchise tax, food tax and death tax – without expanding the sales tax on services. It will reduce the tax burden for the overwhelming majority of North Carolinians, including low income earners and retirees whose sole source of income is Social Security. It will close special-interest loopholes and remove unfair and complicated deductions, credits and exemptions at the state level. And it will protect vital state services like education, transportation infrastructure and public safety.

The Senate tax reform plan will:

  • Reduce the state personal income tax rate from the current maximum of 7.75 percent to 5.4 percent in 2014 and 5.25 percent in 2015;
  • Create a new zero percent state income tax bracket for all taxpayers, applied to the:
    - First $15,000 of income for those married filing jointly
    - First $12,000 of income for heads of household
    - First $7,500 of income for single filers
  • Phase out, then eliminate the corporate income tax by 2017;
  • Phase out, then eliminate the business franchise tax by 2018;
  • Eliminate local business privilege taxes in 2018;
  • Phase out, then eliminate the food tax by 2016; and
  • Eliminate North Carolina's death tax.

It does this without expanding the sales tax to services that are not currently taxed.

We have said from the beginning that elected officials should not be in the business of picking winners and losers through our tax code. Taxing mechanics and repairmen in order to give tax cuts to lawyers and lobbyists is not a fair policy.

For years, the Tax Foundation has noted North Carolina has the highest taxes in the Southeast. Their most recent report assigned North Carolina the 44th ranked business tax climate in the country. The Senate plan will make North Carolina one of the most business-friendly states in America.

High taxes are a big reason we've fallen behind. But voters elected us to change the direction of our state. This plan will help North Carolina compete for 21st century jobs while providing families with the largest tax cut in state history.

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