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Originally published: 2013-05-10 10:49:39
Last modified: 2013-05-10 10:50:28

NC Senate leaders outline tax reform plan

by Anna Oakes

More than 40 bills have become law since the legislature convened on Jan. 30, but the General Assembly continues to consider hundreds of proposals in the waning weeks of the 2013 session, including changes to state taxes.

On Monday and Tuesday, Senate President Pro Tem Phil Berger rolled out Senate leaders' plan for tax reform -- dubbed the Tax Fairness Act -- along with a website and promotional video billing the plan as "the largest tax cut in North Carolina history."

The proposal, which aims to reduce taxes by $1 billion in three years, has not yet been introduced as legislation.

In remarks earlier this year, Senate Republicans flirted with the concept of eliminating personal and corporate income taxes, but the plan presented Tuesday stops far short of that. Instead, it proposes a reduction of the personal income tax from 7.75 percent to 4.5 percent during a three-year period. It would also reduce the corporate income tax from 6.9 percent to 6 percent and reduce the franchise tax by 10 percent.

While reducing the combined state and local sales tax rate for most counties from 6.75 percent to 6.5 percent, the plan would expand the sales tax to include services such as haircuts, car repairs, legal services and accounting.

The plan calls for the elimination of the estate tax.

A Tuesday statement from the North Carolina Justice Center, a research and advocacy organization, said the plan raises several "red flags."

"One red flag is the surprising lack of details about how tax cuts will be offset by expanding the sales tax base enough to keep our vital services and infrastructure in place," it said. "The experience of other states and research shows that income tax cuts are not a good strategy for growth and put at risk the foundations for economic growth."

A proposal on the 2013-15 state budget has not yet been filed in the Senate; Sen. Neal Hunt, co-chairman of the Senate Appropriations Committee, said the proposal will likely be introduced next week.

The state fiscal year begins July 1.