What will the new tax bill mean for North Carolina? N.C. State University economist Mike Walden explains the major elements of the bill and what effect they’ll have on people and businesses.
“The biggest changes will be reductions in tax rates that both individuals pay as well as corporations. The individual income tax rate is eventually going to be lowered to 5.75 percent. It’s going to be a flat rate for every level of taxable income.
The corporate income tax rate, which is already a flat rate, will go eventually from 6.9 percent now to 5 percent.
Now the standard deduction, that’s the amount of money that individuals can take and subtract from their income and therefore not be taxed – that’s going to go up. So, that’ll save taxpayers some money.
But for the first time, homeowners are going to face limits on how much they can deduct for their home mortgage interest as well as for their property taxes.
Now not as many changes to sales taxes than … has been discussed. It is going to expand to a few services.
And I think the motivation for all of this is to try to make North Carolina more attractive to income earners, versus individual income earners as well as business income earners.
Now the economic evidence on that is across the board. So, we’ll have to wait and see.
There is some consistent evidence that suggests that lower corporate income tax rates do contribute to attracting more businesses here and, therefore, generating economic growth.
Now one concern that’s been expressed is that it looks like this tax bill will mean that North Carolina will not have as many revenues in the future as they would have had under the current previous plan. And therefore there’s a question about where changes might be made in state spending.