Source: Associated Press
Democratic legislators and advocacy groups are calling for the blocking of North Carolina’s planned elimination of its corporate income tax, a policy pushed for and supported by Republicans, the Associated Press reported.
Opponents of the policy argue that companies benefitting from operating in the Tar Heel state should also pay their fair share for access to necessary public services.
At 2.5%, North Carolina already has the lowest corporate income tax rate of the 44 states that have such a tax, according to the Tax Foundation. New Jersey has the highest at 11.5%.
In Gov. Roy Cooper’s recently released budget proposal, he calls for legislation in both chambers that would keep the state’s current corporate rate. Republicans in the legislature passed a budget law in 2021 that will phase out the corporate income tax by 2030, beginning with a reduction down to 2.25% in 2025 (the last year of Cooper’s budget proposal).
According to the North Carolina Department of Revenue, corporate income tax collections made up around 5% of the state’s $27 billion in total collections during the 2020-21 fiscal year. Corporations do have additional taxes they are responsible for on top of the income tax.
State Sen. Lisa Grafstein (D-Wake), a sponsor of a bill that would keep the rate where it currently is, said at a news conference outside the legislature that the money from collected from the corporate income tax is necessary in order to “address deficiencies in public education, affordable housing and health care,” according to the Associated Press.
“It would mean dollars to make sure that every person, no matter the race, no matter the ethnicity, receives a sound basic education, access to job training, and can drink safe water and breathe clean air,” said Cassandra Stokes with the North Carolina Black Alliance. Representatives of the North Carolina Association of Educators and N.C. Budget & Tax Center also spoke at the news conference.
Ten years ago, North Carolina’s corporate income tax rate was 6.9% and Republicans, who credit individual and corporate tax reductions for North Carolina’s status as one of the best places to live and work in the U.S., have talked about accelerating the phase-out passed in 2021.
While Republicans in the General Assembly might love the idea of completely eliminating the corporate income tax, North Carolina voters of all stripes overwhelmingly oppose it, according to a poll conducted by State Innovation Exchange (SiX) and the NC Budget & Tax Center in December 2022.
According to the poll, 85% of liberals, 83% of moderates and 68% of conservatives said that eliminating the corporate income tax is an ineffective economic path.
Cooper and Democrats in the General Assembly could have a fight on their hands, depending on whether or not Republicans – who have a majority in both chambers – decide to prioritize letting corporations avoid paying their fair share or if they want to actually address the real problems facing North Carolina.