McCrory, Legislative Leaders Announce Tax Deal

Gov. Pat McCrory and Republican legislative leaders have completed a tax deal after several weeks of negotiations.

McCrory, House Speaker Thom Tillis and Senate leader Phil Berger made the announcement Monday in the House chamber of the old Capitol building.

The package still will have to be voted on by the full House and Senate before it can go to McCrory's desk for his signature. Republicans have comfortable margins in each chamber, so passage is likely.

The bill will reduce both individual and corporate income tax rates, but not raise the sales tax.

Chances for a deal looked uncertain two weeks ago when the Senate passed another version of a tax proposal, but negotiations picked up last week.

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Tax Reform Proposal Highlights

Personal Income Tax:
• Reduces and simplifies the 3-tiered state personal income tax from the current maximum rate of 7.75% and minimum rate of 6% to 5.8% in 2014 and
5.75% in 2015.
• Increases the standard deduction for all taxpayers, applied to the:
o First $15,000 of income for those married filing jointly
o First $12,000 of income for heads of household
o First $7,500 of income for single filers;
• Retains the state child tax credit and increases it for families making less than $40,000;
• Offers a $20,000 combined maximum deduction for mortgage interest and property taxes;
• Makes charitable contributions fully deductible;
• Protects all Social Security income from state taxes.

Corporate Income Tax:
• Reduces the corporate income tax from 6.9% to 6% in 2014 and then to 5% in 2015 –
a 29% rate reduction.
• If the state meets revenue targets (i.e. if tax revenue grows due to a growing economy), the corporate income tax will drop to 4% in 2016 and 3% in 2017.

Other Highlights:
• Caps the state gas tax;
• Eliminates North Carolina’s death tax;
• Preserves the sales tax refund for nonprofits.