The chairman of the North Carolina Senate Finance committee said yesterday that he hopes to use the next legislative session to eliminate the state income tax. Instead the chairman suggests they replace the income tax with a consumption-based sales tax to make up for the lost revenue.
Currently, across the country there are seven states that do not have an income tax, and North Carolina could make it eight.
In an interview after the state Senate adjourned for the year, the committee chairman said “That’s the direction we’d like to go”. This past session was too short and the chairman stated that it was impractical to push this legislation through now. Instead he hopes to wait for the full session to try and start this new battle.
As of right now,
North Carolina’s income tax accounts for about 61 percent of state revenue, Rucho said. But the revenue stream has been choppy in recent years, given the impact of the recession. The uneven results on a year-over-year basis can play havoc with annual budget planning in a state that requires a balanced budget, and it’s something Rucho said he wanted to avoid.
The chairman continued,
“We want to get away from that and go to a more flat consumption-based tax on sales taxes, both goods and services, and in return, we’ll say, ‘We’ll go to zero with the income tax.’ And that’s something we think we can achieve. It just takes time to get there.”
North Carolina has already done a great job this legislative session trying to get taxes down. The Republican-dominated group cut personal income tax rates by nearly 2 percent and corporate rates have fallen by over 3 percent. But when looking at getting rid of the income tax all together, the legislature is not rushing it. They understand that they need to be cautious because it needs to be done in a way that can give businesses a higher level of confidence.