A bill that would change the state constitution to lower the cap on the income tax rate is scheduled for consideration by the House Rules committee today. Senate Bill 75, which was approved by the Senate last year, would amend the constitution, dropping the “rate of tax on incomes” that can not be exceeded from 10% to 5.5%.
The amendment would need to be approved by a vote of the people in this November’s election.
The current personal income tax rate is 5.499%, and is scheduled by previously passed law to drop to 5.25% in 2019. The current corporate income tax rate is 3%, and set to fall to 2.5% next year.
A couple of these myths need to be addressed:
Myth: such a cap will “handcuff” future legislatures for revenue options
Fact: future legislatures would still be able to increase the personal income tax rate by 0.25 percent, and double the corporate income tax rate, under the new cap. Some estimates say such a move could generate an additional $1.3 billion in revenue. If that isn’t enough to satisfy some future legislature’s insatiable desire to spend our money, there are many other revenue options to raise revenue, such as the sales tax, excise taxes, and countless other targeted taxes and fees. And there is always the option of reining in spending – but of course that is the idea that Leftists shall never consider.
Myth: the income tax cap will hamper the legislature’s ability to raise sufficient revenue during a recession
Fact: during a recession, of course, the best thing to do is to cut spending. But absent that, income taxes are not a good way to raise revenue quickly, because they don’t take effect until the following tax year. Also, the corporate and personal income taxes are more volatile and thus unreliable during a recession. Moreover, thanks to prudent fiscal planning, the state has built up a reserve of $1.8 billion to help soften the blow of a recession, so there should be little need for additional funding sources.
Finally, the NC Justice Center laughably claims that an amendment subject to voter approval would “threaten North Carolina’s democratic process.” Let that sink in.