New Paper Analyzing Further North Carolina Tax Reform This Session

June 16, 2015

We have a new report up on a recent bill proposed in the North Carolina Senate that would continue to build on the state’s successful 2013 tax reform. From the report:

In recent months, the North Carolina House has responded to calls from Governor Pat McCrory to renew tax incentive programs with a bill that allocates $45 million to Job Development Investment Grants (JDIG).[4] On June 10th, the Senate responded with a bill that makes changes to the existing tax incentive scheme, but also includes numerous broad-based reforms as well.

The broad-based reforms in the Senate package include:

  • a reduction in the individual income tax rate from 5.75 percent to 5.5 percent by 2016,
  • the reinstatement of federal deductions,
  • an increase in the standard deduction from $7,500 to $9,250 by 2020,
  • a decrease in the franchise tax rate from 0.15 percent to 0.1 percent,
  • a reduction in the corporate rate to 3 percent by 2017, and
  • moving the state to a single sales factor corporate tax apportionment method.

Revenue offsets in the Senate package include: an expansion of the sales tax base to manufactured and modular homes, aircrafts and boats, and purchases for nonprofit organizations that currently enjoy an exemption.


In whole, the approach the Senate has adopted is a noteworthy continuation of the positive tax reforms in the North Carolina tax code over the past few years. While the plan incorporates costly economic development incentives and also includes geographical redistribution in the local sales tax code, those gripes take a back seat to robust reforms in the individual, corporate, and franchise tax systems.

Check out the full report, including how the plan would improve North Carolina’s State Business Tax Climate Index ranking, here.

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