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1 Elizabeth Malm & Scott Drenkard, North Carolina Considers Impressive Tax Reform Options 1 (2013)

handle is hein.taxfoundation/ffdhdxz0001 and id is 1 raw text is: June 7, 2013 No. 373 North Carolina Considers Impressive Tax Reform Options By Elizabeth Maim & Scott Drenkard Introduction This week, the Finance and Appropriations Committees of the North Carolina House of Representatives approved legislation that would significantly reform the state's tax system. House Bill 998 would reduce individual and corporate income taxes while broadening their bases, in addition to lowering the combined state-local sales tax and expanding the tax to some services. These changes move North Carolina away from income taxation and towards consumption taxes in an effort to increase future economic growth and make the state more rate-competitive with its neighbors. They would also reduce distortions and waste associated with a complicated and non- neutral tax code. The legislation will move to the House floor and, if passed, would be sent to the Senate where comparable legislation has been considered. Last month, Senate Republicans debuted their plan, which is now being considered by the Senate Finance Committee as Senate Bill 677. This proposal contains similar elements but is much more robust than the House plan because it more comprehensibly broadens the income and sales tax bases in addition to addressing the economic issues associated with taxing business inputs. Both the House and Senate legislation would dramatically improve North Carolina's ranking on our State Business Tax Climate Index. The state ranked 44th in business tax friendliness in our 2013 Index. Had the House plan been in effect, the state would have ranked 19th. If the Senate plan were in place, the state would have ranked 13th.