RALEIGH, NC – When the N.C. Senate unveiled a tax overhaul plan last week, some reactions were predictable. Cedric Johnson of the left-leaning NC Budget and Tax Center said it would “promote neither shared economic opportunity nor prosperity,” while the right-leaning Americans for Prosperity said it continued a “proven path to prosperity.”
But after more study, as well as the announcement that the Senate budget proposal would bake in the tax proposals, even conservative groups cannot fully agree on what will promote economic growth.
David R. Burton, a senior fellow with the Heritage Foundation said the Senate proposal was a mixed bag economically.
“It has some pro-growth and some anti-growth elements,” Burton said. “The corporate rate reductions will definitely have a positive impact.”
Donald Bryson, state director for Americans for Prosperity, agreed that the tax cuts were the most attractive part of the plan, along with changes to the franchise tax, which he called a disincentive for businesses to invest in new equipment, since it taxes investments whether they generate a profit or not.
The Senate plan would cut the franchise tax by one-third and raise the minimum tax from $35 to $200 for the 2017 tax year, meaning more small businesses would avoid the tax altogether.
“It’s a very, very positive thing for North Carolina businesses,” said Bryson.
But there is less agreement on the plan to increase in the standard deduction, which the plan would raise from the current $15,000 to $18,500 by 2020 for married taxpayers who file jointly.
Burton says increasing the deduction will have little economic impact, since it does not change the incentive for taxpayers to work or invest.
But Bryson disagrees. He thinks increasing the deduction will be great for North Carolinians.
“It’s a larger tax cut for lower-income individuals,” said Bryson. “Whenever anyone has more buying power within the economy, that’s a good thing for economic growth.”