2013 Tax Plan

HB 998: Tax Simplification and Reduction Act enacts several changes to North Carolina's tax system. Under the final plan, more than $600 million in revenue will be lost each year from what NC would raise if the changes were not made.

  • Replaces the three-tier personal income tax rate – 6% for lower incomes, 7% for middle incomes, and 7.75% for higher incomes – with a flat 5.75 percent tax rate by 2015. This change results in a greater benefit to the state’s wealthiest households.
  • Allows three itemized deductions: Mortgage Interest Deduction,  Property Tax deduction (these two are capped at a combined $20,000), and Charitable Contributions Deduction.
  • Social Security Income is tax exempt.
  • Expands the sales tax to some services.
  • Maintains the local food tax.
  • Ends the state Earned Income Tax Credit (EITC) that provides income support for low-income workers.
  • Cuts the corporate income tax rate to 5 percent by 2015 and possibly down to 3 percent by 2017, resulting in at least $374 million lost revenue. Maintains most corporate deductions and exemptions.

The NC Budget and Tax Center offers full coverage on the impact of the plan in BTC Reports, vol. 19, #6, August 2013. Below is a graph showing the impact of the tax plan across a variety of incomes taken from the publication. For additional and more recent analysis from the Budget and Tax Center on the continuing impact of the 2013 Tax Plan on the 2015-2017 state budget, see BTC Reports, vol. 21, #4, October 2015.

Voting for HB 998
Rep. Roger West (R)
Rep. Michelle Presnell (R)
Rep. Chuck McGrady (R)
Rep. Tim Moffitt (R)
Rep. Nathan Ramsey (R)
Rep. Chris Whitmire (R)
Rep. Mike Hager (R)
Rep. Hugh Blackwell (R)
Rep. Josh Dobson (R)
Rep. Jonathan Jordan (R)

Sen. Jim Davis (R)
Sen. Tom Apodaca (R)
Sen. Ralph Hise (R)
Sen. Warren Daniel (R)
Sen. Dan Soucek (R)
Voting Against HB 998
Rep. Joe Sam Queen (D)
Rep. Susan Fisher (D)

Sen. Martin Nesbitt (D)
Not Voting