Perdue signs Budget - Here Come the Tax Increases!
North Carolina Governor Beverly Perdue signed the Budget bill (SB 202) into law. The bill includes increased income and sales tax rates. See this post from Enrolled Agent Brian Strahle.
NC Democrats Agree on Tax Increases
Democrats in the North Carolina House and Senate reached a compromise on tax increases yesterday. Briefly, the proposal would:
- Increase income taxes by 2%
- Increase sales tax by 1% (to 7.75% in most counties)
- Increase cigarette taxes by 10 cents per pack
- Increase beer, wine and liquor taxes
The income and sales tax increases are supposedly temporary, for a two year period. There are no additional sales taxes for certain services as contained in the earlier Senate proposal.
The only good thing I can say about this proposal is that at least the increased income taxes can be deducted for federal tax purposes (for those that itemize deductions). Additional sales taxes would not necessarily be deductible for those who deduct income taxes rather than sales taxes.
Governor Perdue's Tax Proposal
Yesterday North Carolina Governor Beverly Perdue revealed her proposed tax plan, which is designed to raise $1.6 billion in taxes. Here are some of the highlights:
Income Taxes
- Reduce individual income tax rates, except for a two-year "emergency surcharge" on single taxpayers with income over $500,000 and married taxpayers with income in excess of $1 million.
- Reduce the corporate income tax from 6.9% to 5.9% beginning in 2011.
- Increase the gross premium tax paid by insurance companies to 2.25%.
- Stop the corporate income tax transfer to the public school capital fund.
- Apply the franchise tax to limited liability companies.
- Repeal privilege license taxes.
Sales Taxes
- Increase state sales tax from 6.75% to 7.75% through September 2011. Then rate would then decrease to 6.5%.
- Tax warranties, installations, repairs and some personal services.
- Tax recreation and entertainment, such as movies, concerts and amusement parks.
- Tax more online sales, courier services, and storage fees.
- Tax luxury services such as chartered jets and cosmetic surgery.
- Increase cigarette tax by 50 cents a pack, to 85 cents.
- Increase taxes on alcoholic beverages.
Tax Credits
- Small business tax reduction
- Expanded college savings credit
- Create homebuyer's credit
Text of N.C. Senate Bill 202 - Tax Increases!
Senate Bill 202, among other things, contains many tax increases for us in the Tar Heel state, to wit:
- Increase top income tax brackets to 8.25% and 8.5% (currently 7.75%)
- Raise the State sales tax from 6.75% to 7%
- Apply sales tax to repairs, warranties, installation, movies, athletic events, amusement events/activities, courier and delivery services, and internet sales.
- Require Limited Liability Companies to pay a franchise tax.
- Increase the liquor tax by 1.5%.
You may wish to contact the following Legislators to let them know how you feel about this proposed law:
Representative Paul Luebke (Chair of the House Finance Committee)
(919) 733-7663
Senator David Hoyle (Chair of the Senate Finance Committee)
(919) 733-5734
If you don't support the bill, there's a petition to sign. Make some noise, people!
NC House Finance Committee Proposes Tax Increases
Despite criticism from members of both parties, the North Carolina House of Representatives' Finance Committee approved a proposed tax package yesterday. The proposal includes the following:
- Increase top income tax brackets to 8.25% and 8.5% (currently 7.75%)
- Raise the State sales tax from 6.75% to 7%
- Apply sales tax to repairs, warranties, installation, movies, athletic events, amusement events/activities, courier and delivery services, and internet sales.
- Require Limited Liability Companies to pay a franchise tax.
- Increase the liquor tax by 1.5%.
These and other increases would bring in an estimated additional $784 million in revenue for the next fiscal year.
Depressing to contemplate, indeed, but at least a 9 cent per six pack increase in the beer tax was defeated! At 53 cents per gallon, North Carolina still has one of the highest beer taxes in the nation. And that doesn't count the sales tax!
NC Income and Sales Tax Changes Considered
The North Carolina Senate Finance Committee is reviewing a plan to cut income and sales taxes while instituting new sales taxes on certain services.
For income taxes, the top rate would drop from 7.75% to 7.5%, while the lowest rate would decrease from 6% to 5.25%. The calculation of income taxes would also be made easier, using the federal adjusted gross income without having to make further changes to determine the NC taxable income. Credits would be allowed for charitable contributions and home mortgages, and the child tax credit would increase $25 to $125.
Corporate income tax rates, currently 6.9%, would be reduced over a two year period to 4.5%, but limited liability companies would be required to pay franchise taxes. The could be bad news for for LLC owners, would are currently required to $200 annually to the state for the privilege of operating the company.
And, to the benefit of professionals and other business owners, state and local privilege licenses would be eliminated.
Finally, the state sales tax would be lowered from 6.75% to 6.00%. Many counties, however, have local rates than are higher. Sales taxes would be instituted on heretofore untaxed services/items such as building repairs, extended warranties, and downloaded music and software.
