The divide between legislative Republicans about how to revamp the state’s tax code became clear Thursday, as House leaders unveiled a dueling plan, calling it a more measured approach.
The House legislation (Read it here.) offers smaller income tax cuts in exchange for fewer new taxes on services. Supporters pledged it would give a break to all taxpayers but the numbers remain unclear. It contrasts greatly with a sweeping Senate proposal that some experts believe could leave many people with a tax hike, a point its supporters dispute.
“We think our tax plan is a lot simpler in terms of the expansion of the sales tax base,” said state Rep. David Lewis, a Dunn Republican leading the effort. “We think it makes sense to people.”
Backed by Speaker Thom Tillis, the House plan would trim the state’s income tax rate, which ranges from 6 to 7.75 percent, to a flat 5.9 percent. It also shaves the corporate tax rate from 6.9 to 6.75 percent and adjusts how it is calculated.
The Senate proposes much deeper tax cuts, pushing down the personal income tax rate to 4.5 percent and the corporate tax rate to 6 percent after three years. But the biggest difference between the two plans is how to pay for the cuts. The current state sales tax exemption on food and prescription drugs would remain in the House plan, while the Senate would tax both, in what amounts to a $1 billion tax hike.
To offset the loss of revenue from its cuts, the House would expand a new 6.65 percent sales tax to an assortment of alteration, repair, maintenance, cleaning and installation services, all of which are currently exempt. The Senate is considering going further by applying a 6.5 percent sales tax rate to more than 130 services, including professional services like physicians and attorneys, that aren’t currently taxed.