North Carolina Institutes Tax Code Changes

[Buffy]

Welp......

I guess the flat tax fans are going to have a chance to see how their theories work.

If North Carolina's economy is on fire in five years, maybe other states will follow.

If they have been absorbed into an economic black hole and gone back 80 years, probably not.

http://money.cnn.com/2013/08/08/pf/t...iid=SF_E_River

The state has taken a very big first step in overhauling its tax code -- enacting its first major reform in 80 years.

The change, signed into law last month, creates a modified flat tax system, with a single income tax rate, an increased standard deduction and fewer tax breaks, as well as the elimination of the personal exemption and a $50,000 deduction for small business owners. It also repeals the state's estate tax.

"It's fairly radical in relation to other states," said Kathleen Thies, senior state tax analyst for the tax publisher CCH.

Quiz: How many pages in the U.S. tax code?

The overhaul has been lauded by Republicans, who dominate the state's legislature. They see the changes as a way to attract more business to North Carolina and create jobs.

The big hope: The new economic activity will compensate for the estimated $2.4 billion revenue loss over the next five years as a result of the reforms.

But the overhaul -- which represents a scaled back version of earlier proposals -- has been heavily criticized by many, mostly liberals. They contend its tax cuts will disproportionately benefit the rich and the revenue loss will cut into government services.

Starting in 2014, the individual income tax rate will be 5.8%, and then it will fall to 5.75% in 2015. Those rates are down from the 6%, 7% and 7.75% rates currently in effect.

The standard deduction, meanwhile, will more than double -- to $7,500 for singles, from $3,000; and to $15,000 for married couples filing jointly, from $6,000.

The corporate income tax will also be reduced in 2014 to 6% from 6.9%. It will drop to 5%in 2015. And if revenue growth targets are met, the rate could go as low as 3% thereafter.

Related: States with sweetest corporate tax breaks

For several reasons, North Carolina's reform strays from a pure flat tax system, which would simply apply one tax rate to income and wages, one to business income and a standard deduction for everyone.

Instead, the Tar Heel state's tax overhaul still allows for several tax breaks on top of the standard deduction. Among them: charitable contributions, a child tax credit and a joint deduction for mortgage interest and property taxes.

That combined real estate deduction, however, is capped at $20,000. That could reduce the value of those tax breaks for anyone who's now paying at least a 4% rate on a $400,000 or $500,000 mortgage or for someone who owns multiple properties, according to CPA Rollin Groseclose, who is based in Asheville, N.C.

North Carolina's tax overhaul also strays from a pure flat tax system because individuals still must pay taxes on their investment income, which will continue to be treated as ordinary income.

Lastly, the reform did very little to expand the list of services subject to the state sales tax, noted Groseclose, who is on the board of the North Carolina Association of CPAs.

The independent association, which didn't advocate for any particular proposal, has been calling for a modernized tax code that is less dependent on personal and corporate income taxes, which can be volatile.

[Xantavia]

What jumps out at me is that corporate tax has the potential to drop to almost half of that of an individual. If it does drop to 3%, I wonder what the excuse will be for the lack of job creation, since in Illinois at least, the high corporate tax is the only reason businesses aren't hiring.

[Buffy]

What jumps out at me is that corporate tax has the potential to drop to almost half of that of an individual. If it does drop to 3%, I wonder what the excuse will be for the lack of job creation, since in Illinois at least, the high corporate tax is the only reason businesses aren't hiring.

It is interesting. Advocates would argue (I think, I wouldn't consider myself completely fluent on their perspective) that this is what businesses assert - give us lower taxes and we will create jobs. Since it starts out at one percentage, and goes lower based on certain benchmarks getting hit, it's exactly what argue in favor of.

One thing that would concern me would be businesses creating shell corporations in NC to take advantage of lower taxes, but they having no actual jobs attached to them. Just like a P.O. box or something. I'm not sure how that would work, but it is the type of thing that would concern me that could be taken advantage of.

[mallister]

http://www.wwaytv3.com/2013/08/13/nc...er-gun-factory

[Pirian]

http://www.wwaytv3.com/2013/08/13/nc...er-gun-factory

Business has been booming massively in the past year and a half or so in NC. The problem with a lot of it is that there isn't enough skilled labor, so the jobs are being filled by people outside of NC, so unemployment (that is made up mostly by unskilled labor) isn't dropping much yet

[Buffy]

Business has been booming massively in the past year and a half or so in NC. The problem with a lot of it is that there isn't enough skilled labor, so the jobs are being filled by people outside of NC, so unemployment (that is made up mostly by unskilled labor) isn't dropping much yet

Well, the theory would be that unskilled demand will pick up shortly as ancillary needs pick up? Things like lawn care, baby-sitting, fast-food employees, general cashier work, janitors, etc? I'm thinking of moving to Charlotte cause they have 1300 IT jobs listed on Dice.com and the Virginia Beach area only has 130.

[Pirian]

Well, the theory would be that unskilled demand will pick up shortly as ancillary needs pick up? Things like lawn care, baby-sitting, fast-food employees, general cashier work, janitors, etc? I'm thinking of moving to Charlotte cause they have 1300 IT jobs listed on Dice.com and the Virginia Beach area only has 130.

Charlotte is GREAT for entry/non-graduate degree/low level positions. Metlife alone is going to be filling upward 1300 position alone with an average salary of 60k in Charlotte (they're creating around 1200 jobs in Cary at an average salary of 110k) within the next 2 years.

[archibaldcrane]

If corporations want to hire more, they only have to dip into their historically high cash reserves, or maybe dip into their all-time high corporate profits in order to further invest in their businesses.

If you believe a single fucking word about corporate taxes being too high as the reason companies aren't hiring, you are quite frankly at this point, completely fucking retarded.
http://cdn.theatlantic.com/static/mt...37.51%20PM.png
http://graphics8.nytimes.com/images/...tt-blog480.jpg
Corporations are too busy chasing the next quarter's profits to keep their stock price high to give a shit about anything else. Getting their taxes cut helps that goal. Expanding their business will hurt the next quarter's numbers, even if it's the correct long-term strategy they don't give a fuck.